ERP System Implementation can be a nightmare if proper implementation strategy is not followed. There are various critical success factors in implementation of ERP. A Proper methodology must be adopted to implement the ERP. It is fact that 50% implementations fail.
A successful ERP systems implementation will help the organization to get accurate, real-time information about daily operations which will help companies to reduce operational costs by 23% and administration costs by 22%. Reference : — (Aberdeen Group)
When Implementing ERP, always remember that success can be seen by measuring Time, Cost and Quality with the baseline. Therefore it is important to first know the baseline or define the baseline, so that actual can be measured to ensure we are going on the right track.
ERP Implementation remained my core during my career. Be it in house ERP Development or implementation by external vendor. There has always been challenge, but to ensure the success I spend more time in Planning and before the Implementation. So my ERP Implementation strategy is below;
Change Management and ERP System Implementation
When deploying an ERP solution across the entire organization, you need to address the change management before even selecting the vendor and ERP. I mentioned in stakeholder analysis, you will get to know the potential barriers while initiation and planning this project.
Most difficult part of change management is eliminating barrier preventing employees from using new ERP.
But this can be avoided by clear communication and proper training which will help to develop the digital competencies. But when typed it looks good, but in reality it is hard. Therefore, Change Management Plan will be the first step. Before even ERP Selection.
Initiate the ERP implementation Project
Before planning it is important to initiate the project and then prepare the project charter with high level requirements, high level budget, high level risk and so on. Take formal approval before initiate. And define the scope, select the ERP and ERP vendor and then move to planning.
Objective and Scope
It is important to define the objectives. What organization want to achieve by implementing the ERP. This will be considered as high level requirement. To define the scope it is important to understand the requirements of Organization and the Stakeholders (including top management, users and even in some cases customers and vendors). As a PMP I have been following below steps which helped me to avoid confusion during the execution (Implementation);
- Prepare Scope plan by expert judgement and by meeting with the stakeholders.
- Collect requirements by interviews, discussion with focus groups, document analysis, understanding existing process and by using best practices. This will help to make a formal documents of Requirements called “Requirement Traceability Matrix or RTM“
- Once RTM is ready then you can define the Scope by analyzing the requirement documents and workshops. This will help to get the ERP Implementation Scope Statement. Scope statement will help to identify what will be in scope and what will be out of scope. And then the final scope statement will help to submit the RFP (Request for Proposal to the ERP Vendor)
- ERP can be a big project. A Phased approach is always recommended. Creating WBS ( Work breakdown structure) using the defined scope will help to complete the project within defined time and budget. WBS can be created in coordination with ERP vendor by understanding their implementation methodology. However ERP Selection, Vendor Selection and Formal approval has to be part of WBS.
During this stage you will be able to identify the Stakeholders and Risks. Make sure to create a register for all what you identify during this and update them when you make detailed plan as mentioned in point # 3.
ERP System and Vendor Selection
Once scope is defined, and you understand the Business Processes and Requirements in depth, then it is time to look for the appropriate ERP which will be fit for use and fit for purpose and the Vendor who will implement it.
Firstly you will need to evaluate the ERP. Usually vendors help you to get demonstration of ERP where you can ask for the features based on the requirement documents. Don’t consider big names only, look for all the alternatives. Which Tier of ERP (1,2 or 3).
ERP selection has to be based on the size of company, the revenue, the features and the level of automation company is expecting. Just remember, the size of ERP shouldn’t be bigger than the size of company and vice versa.
First list all the ERPs that you think can be best fit for your organization based on ERP Scope Statement. Then shortlist the top 5.
Make sure to do the Process mapping and do the gap analysis to see where company will need to compromise on features and where company will need to reengineer the business processes. In most of the cases vendor will do this.
In most of the cases it is not the ERP system that leads to failure but the vendor. While selecting ERP make sure that the Vendor, who will implement the ERP must have good experience and success rate.
Evaluating Vendor is important, Usually ERP consultant will help you on that. However, it is always good the talk to the existing customers of vendors too and understand the challenges that they faced.
Credibility of Vendor is most important aspect. Moreover, availability of Vendor in local region is also an important factor.
Plan ERP System Implementation
You must now spend time to prepare an ERP Implementation Plan. Now vendor is selected, ERP is selected. High level budget is selected based on the Proposal submitted by the Vendor.
Now the time has come to prepare a detailed plan. Which will integrate all the sub plans that include;
Scope Management Plan
Though we have already discussed this in Point # 1, but it was done before selection of vendor and selection of ERP. Now we have better idea; what selected ERP can do and what it can’t. Therefore, we reconsider scope definition and will define it.
Now scope and requirements has to be aligned with what can be achieved. ERP must meet core requirement that must have already been considered during the ERP selection. But now those which are not in scope will be taken to out of scope section and RTM to be updated and discussed with those who gave the requirements initially.
Finally, WBS has to be created and each Unit has to be assigned a Cost and Time as mentioned in other plans.
Schedule Management Plan
Time is major factor that increases the cost of Implementation. When WBS is created each work unit can be assigned a time which means the duration that WBS Unit and related tasks will take.
Duration can be calculated using various methods. I have always used PMO method (Pessimistic, Most likely and Optimistic) once duration is assigned to task then the duration can be placed to a date to get the Schedule.
This will help us to get exact duration of the Project and to prepare the Project Schedule. Where CPM (Critical Path Method) will be evaluated where all the tasks are aligned in sequence.
Project Schedule will be a Gantt Chart where Actual Vs Planned can be seen for the following;
- Start Date of Implementation.
- Start Date of Each Task
- Duration of Each Task
- End Date of Each Task
- Total Duration of the Project
- End Date of Project
Cost Management Plan
Cost is one of the key factors, when Implementing ERP, make a note that Quotation or proposal submitted by vendor is not the ERP Implementation Cost, there are various other elements to be consider.
Each Work break Structure has a cost. Where time is already allocated to the WBS element now the cost has to be allocated to that unit as well.
When calculating Cost make sure that you calculate cost of complete implementaiton including Software License, additional software, Hardware (Upgrade or New), Consultancy cost, maintaince cost and cost of each WBS.
This means that any change in scope or duration will have great impact on the cost. Therefore, cost must be defined in detail.
Quality Management Plan
Quality doesn’t mean the expensive ERP. Quality means that the ERP system should be fit for use and fit for purpose. If it meets the both aspects then you can consider it meets the Quality requirements.
In general ERP is a centralized system which must automate and improve the business processes. It must improve the operational efficiency. it must provide the insight of the operations on real-time. All Quality requirements must be listed when defining the scope and when taking the requirements. A user can help you to define his process related requirements, but a good understanding of business processes, and meetings with Management will help you to understand the Quality Requirements.
During the lifecycle of Implementation you need to ensure that the Quality of the Implementation is as per the baseline, therefore it is important to define the Quality Requirements in Quality Management Plan.
Resource Management Plan
Planning for resources can never be ignored. There can be various resources required for the ERP Implementation. Requirements Documentation, Quality Requirements, Risk Register and Stakeholders plan will help to understand what resources are required. Existing Project Documents will by used to prepare the Resource Management Plan.
Though external ERP Implementation team will be from vendor but having an Internal ERP Implementation team organized will be critical success factor. So this plan will help to make the Human Resource Hierarchy ad Team Charter.
All other resources needs to be categorized based on technology and human factors.
Communication Management Plan
Being an ERP Implementation expert and an IT Project Manager, I spent 90% of my time in communcation with all the stake holders. Be it vendor, management or users.
It is important to understand the communication requirement. Who should be informed, consult anted, discussed etc.
This plan will include the communication requirements of each stakeholder. Communication Channels and the Communication Technology.
It will help to understand the frequency of meetings, the updates of project reports and the method of communication. Not everybody needs every information, therefore it is important to plan before the execution.
Risk Management Plan
There is no project in the world which is free from the risk. As mentioned in 1st Point. Identifying the risk and making a risk Register is important. Risk can be identified at any time, but making a register will help to avoid and mitigate the risk.
Unknown risk can also be considered and contingency reserves must be separated for that.
Costing a Risk will help to successfully complete the project.
Stake Holder Management
There can be always a case that a person suddenly comes and says no one discussed with me about ERP Implementation. Can we ignore him? I have answer to this.
It is important to identify all the stakeholders during the planning. Right from the initial discussion till the project is completed.
Once the stakeholders are identified then we must do two things.
- Do a force field analysis. Where you need to see who is against the ERP Implementation and who is in favor.
- Put them in power/interest matrix and ensure that people having high power and high interest must be managed closed.
The ERP Implementation Consultant needs to ensure that the Scope is further divided into detailed scope. Which will help to understand
Now Integration of all the Plans is important to have a Complete Project Management Plan.
Once the Plan is completed then a formal approval is required.
Always remember, don’t start the execution until Plan is approved. Remember, this is not a software Installation. ERP implementation is Business Process Reengineering.
Expectation of ERP System Implementation
Once all the Plans are ready and formal approval is taken from the project sponsor. Now it is time to engage the resource and start the project. Execution will be as per the plan typical execution will have following stages;
ERP Implementation by Phase
Depending upon the size of organization and size of operations it can be decided what approach to be adopted. WBS and WBS dictionary will help during execution, so Each work package to be taken and implemented which will be part of each phase.
as ERP has various Modules, each modules to be implemented by phase, but it is important to consider that masters are updated to avoid any data mismatch.
There are two types of data.
It is important to take the requiremnts about the transactions too, whether historical data has to be captured or not.
While execution firs the master data has to be updated which include;
- Employees Master
- Users (Access Rights and Priviledges)
- Supplier Master
- Customer Master
- Products Master (Item, Category, Brand)
- Location Master
- Company Master
- Financial Master
- Other Master
Here it is important to understand that what existing systems are being used by the company where ERP is being implemented. Data Migration can be done in various various. Usually this is done using import export tool. But, I have implemented an integration tool which helps databases to update other databases for masters and transactions.
The Integration can help to keep existing system and new systems synchronized till implementation is completed.
Instead of running parallel systems for data entry, little more can be spend to enable the integration and synchronization. This will help organization to lead to success.
Users have been working in a different system, they have been used to a user interface. New Interface is not only the change that they will see, change in business process will also impact them. Therefore, formal training to be conducted for each department and to explain them about change of Business Processes and Change of User Interface.
One of the key aspect of ERP System Implementation training. Which means that Users must be given the new Interface with dummy data understand in depth functional and technical aspects. Then they can ask for the support in case they are unable to understand any aspect. This will clear confusion of users and will help to smooth operations once we go Live.
ERP Vendor will complete his job might ask you that we are ready to go live, but before going live ensure that all the testing has been done. All the errors during data migration, staff training and transaction migration is addressed and resolved.
I will recommend to conduct the below testing ;
- Functional Testing : Input the data and see that the output is correct as per desired. I will recommand to enter each master and each transaction at least once by yourself and once by each Department.
- Performance Testing : ERP System is not only about the Software, it is about Server and Network Infrastructure too. Ensure that it can handle the workload. This can be done using automated tools and by asking users to access and conduct test transactions.
- Technical Testing : Backup and Restore testing should be done and then the user access rights testing.
- Workflow Testing : Test entire process at least once where multiple departments are involved. For example Sales Order process where procurement, finance and logistics are involved. The entire workflow must be tested.
Testing can be a tiring job, but to safeguard the business it is important to do these testing.
ERP Vendors always have their own methodology, but we need to ensure that we have our own roll-out strategy.
Remember, once you go live , you can’t go back to old system, because it will become a big disaster. Therefore ensure that Training of each user is completed and they are well aware of the new system and the changes.
Go live means switching off the old system and switching on the new system. Where users have not to use the old system anymore. Neither to access the reports or to do the transactions. Though this is debatable but it is always good not run the parallel systems.
Support and Maintenance
Once implementation is completed it will take at least a month to address all new issues, therefore Support and Maintenance team from vendor must be available. Internal Support team must be available to address the issues instantly. A support ticket system must be available for user to log the complain instantly. Which will help to measure the success rate.
ERP Implementation is not a small project. Therefore, it is important to celebrate the success.
Celebrating successful implementation ensures all team members know their work is valued and that we’ve touched our customers’ lives. The first way I celebrate is to thank all team members for the effort they put into the project. But that’s just a start. Sometimes we get together to eat a cake or have a dinner as the project was a bit stressful.
You have read this article because you must be an ERP Consultant or a Project Manager who is planning to implement ERP. Ensure to read the leadership manifesto to involved your team properly in the ERP Implementation Project. Develop your soft skills to ensure you lead this project o success.