There’s no doubt that an Enterprise Resource Planning system (ERP) can bring immeasurable benefits to a manufacturing company. As the backbone of any organization, ERPs play a crucial role in keeping all back office operations running smoothly.
However, it can be easy to underestimate the time, effort and resources needed to successfully implement and maintain an ERP. Analysts have found that roughly 75 percent of ERP projects fail. Time and time again, businesses have been led astray by common misconceptions about ERPs. The result? Costly mistakes and lasting damages.
Unfortunately, no company is immune to the devastating impacts of an ERP failure. Here are a few famous examples of what can happen when an ERP implementation doesn’t go as planned.
- In 2000, Nike lost $100 million in sales after a failed supply chain project. The company was hit with a series of lawsuits and also saw a 20 percent dip in its stock.
- Right before Halloween in 1999, Hershey’s couldn’t deliver on $100 million worth of chocolate because the company’s ERP implementation failed. The stock dropped by eight percent due to the operational disaster.
- A buggy ERP implementation left nearly 27,000 University of Massachusetts students unable to register for classes or collect financial aid checks back in 2004.
The good news is that ERP failures can be avoided. Use the lessons learned from ERP failures of the past to ensure a brighter implementation future.
Lesson No. 1: Expect Extended Timelines and Plan Accordingly
A successful ERP implementation doesn’t happen overnight. In fact, nearly 59 percent of ERP projects end up taking longer to implement than originally projected, according to a report from Panorama Consulting Solutions. One of the biggest mistakes IT executives within the manufacturing space make when it comes to ERPs is relying on a new system to perform functions by a certain date. Rushing to meet deadlines should never be part of the implementation plan, so remain flexible when it comes to the project timeline.
Not only is it critical to plan for additional time to get a new or upgraded ERP system running properly, but it’s important not to underestimate the time needed to properly maintain it going forward. ERPs are not a one-time investment — as a business grows, so does the increased complexity of its ERP. Make sure you’re prepared to handle the time and resources needed to provide continual IT support and maintenance for an ERP.
Lesson No. 2: Set Realistic Budget Expectations
An ERP can be a very powerful tool for your business, and with that comes increased costs. ERPs require massive amounts of time and labor, as well as additional costs in the form of licensing, maintenance, development and hardware fees. Underestimating how much an ERP will cost your business can be detrimental.
Considering the fact that 74 percent of ERP projects experienced costs overruns in 2016, accurate planning and evaluation are key. To ensure the implementation process is smooth and cost efficient, benchmark against the ERP deployments of similar organizations and ensure your scope is as comprehensive as possible. It’s also important not to overlook the smaller costs that may come up along the way, such as staff training, bug fixes and data conversion.