Enterprise Resource Planning systems have exploded in popularity in recent years as organizations try to gain control over their businesses, realizing that to truly succeed, they need to view the business holistically, as an integrated system, focusing on the sum of the parts.

These systems bring with them obvious complexity, as the organization moves towards setting up one common database of data, to be drawn on by all areas of the business. Understandably, this change in technology structure brings with it huge potential savings, including but not limited to:

  • elimination of duplication of data storage, work tasks, etc.
  • everyone focusing and using one source of data
  • improved security features
  • greater access to real time information, often not requiring the extra work to turn the data into information

Although these gains are significant, the greatest gains are often non-technology related, as the business streamlines its business processes during project implementation.

This all sounds great and if so, what would keep companies from moving into the ERP generation?

If we set aside the staggering cost of these systems (which will naturally limit small companies from making this technology change), implementation failure rates are absolutely staggering. Some quote them to be in the 70% – 80% range. This not only results in wasted financial resources, but can effectively shut a business down, causing irreparable harm to the business’ relationship with its customers.

So why then do companies so often fail at implementation? The biggest reason is their mistaken perception that these implementation projects are all about technology. They are not, they are about a change in the companies fundamental business processes, a process I like to refer to as a “corporate heart transplant”. These companies are in effect changing most things about the way they conduct their business. As a result, there is often a large amount of new tasks to be done, tasks that are not often seen as a direct benefit to the person doing the extra work, but are absolutely essential when looking at the big picture for the organization. Therefore, change management becomes a critical success factor in the project, one that is often overlooked by the companies entering this huge change.

In summary, I think it is important to go into the ERP world with one’s eyes wide opened. Despite the huge risk to the business by failing at ERP implementation, the potential benefits to the business are astronomical, and can often yield a quick competitive advantage once implementation is complete.

Category: Supply Chain Management

Author: Keith Carruthers

Keith is a Supply Chain and Operations specialist who knows the nuts and bolts of what drives business. His primary area of subject matter expertise involves the leveraging of both domestic and international supply chains, and he has become well known over the past decade as a global sourcing expert. Over the past twenty-five years, Keith has held significant leadership roles in several organizations, primarily in the manufacturing sector. Keith has recently been lecturing at Dalhousie University’s Rowe School of Business, and is a Ph.D. (Supply Chain) candidate at the University of Hull, Hull U.K. In 2014, Keith was a recipient of the SCMA Codère scholarship in support of advanced research in Supply Chain Management.