Common ERP Implementation Challenges and How to Avoid Them

Enterprise Resource Planning (ERP) systems really transform businesses’ abilities to run efficiently and make informed decisions based on available data. ERP systems consolidate finance, HR, supply chain, sales, inventory, and customer management systems. Making all of these systems removes previous barriers to faster, more informed decisions.

Implementing an ERP system requires an excellent amount of planning and strong leadership. An organization’s failure to adopt user controls, unrealistic goals during the implementation process, poorly constructed plans, or mistakes during implementation is what often prevents an organization from enjoying the returns on its ERP investment.

This blog addresses challenges businesses come across when implementing ERP systems and provides solutions to these challenges. Understanding the major challenges businesses face during ERP implementations and learning how to address these challenges is a great way to increase the probability of successful ERP implementations.

1. Lack of Clear Planning and Strategy

Most failures in ERP implementation can be attributed to lack of planning. Business requirements and desired outcomes are most frequently missing at the start of the implementation.

An ERP system affects the way an organization functions. The lack of system implementation planning results in delays, increases in cost, and confusion in teams.

How to Avoid It?

Before choosing an ERP solution, businesses need an implementation strategy that identifies the following elements:

• Business goals
• Project boundaries
• Schedules
• Estimated costs
• Needed materials
• Success metrics
• Plans to manage risks

A good implementation plan provides clarity to all those involved in the implementation process about their target and their role in the project.

2. Choosing the Wrong ERP System

Choosing the ERP software that best fits an organization is one of the most challenging tasks in the implementation process. The reasons most organizations throw caution to the wind and go with an overly popular solution are if it fits their budget or is recommended by another organization.

The same solution that fits one organization may not cut it for another. There are several variables that factor in such as the organization's size, the industries they operate in, and the intricacy of their business operations.

How to Avoid It?

Businesses should not hasten selecting an ERP system. The following aspects should guide the selection process:

• Functionality tailored to the industry specifics
• Scalability for anticipated business growth
• Integration ability
• Ease of use
• Level and quality of the vendor’s support
• The total cost to the business

Stakeholders from all company departments should be involved during the selection process to ensure the chosen ERP meets company-wide requirements.

3. Poor Data Migration and Data Quality Issues

Data migration can be one of the most protracted and complicated steps during an ERP system implementation. Companies can store decades of information in various systems, spreadsheets, and databases. ERP implementations require data to be accurately collected and prepared.

After implementation, poor data quality can have a negative impact on business operations. Incorrect records, missing and outdated data, and incorrect data formats will lead to reports being inaccurate, and ultimately poor decisions being made.

How to Avoid It?

Data migration strategies need to address the following:

• Evaluate existing data; assess quality, record duplication, and data standards.
• Remove duplicates and obsolete data.
• Standardize data formats.
• Migrated data should be tested.
• Develop a data governance policy.

Data migration must be organized to eliminate problems. It is pointless to migrate problems to a new platform. Data must be cleaned and organized before migration to the new ERP system.

4. Resistance to Change Among Employees

Existing workflows are almost always shifting during an ERP implementation. Therefore, employees become accustomed to a certain way of doing things. Change resistance is normal as employees become accustomed to a certain process.

Change resistance can be attributed to employees being disrupted at work, having a lot of new software that is complex to learn, and seeing no benefit to the new software.

How to Avoid It?

Successful ERP implementations frequently rely on effective change management. To successfully implement an ERP system, companies must:

• Disclose the rationale behind the selection of the ERP system
• Describes the expected benefits of the system
• Offer progress reports
• Include instructor-led training
• Welcome feedback

Distributing the ownership of the implementation to the prospective users also helps to control resistance.

5. Inadequate Training and User Support

An employer can spend a lot of money on ERP systems, hoping to improve business efficiency. However, all that money can go to waste if the employees are not adequately trained on the ERP systems. Training the employees should be the focus of the business, not the implementation.

Training ensures efficient business operations, and the absence of training can cause low adoption, incorrect system usage and frustration for users.

How to Avoid It?

A successful ERP training program should consist of:

• Department based training
• Demonstrations
• Documentation and manuals
• Post launch support
• Opportunities for employees to learn on a continuous basis

Once deployed, the training for the ERP system must not stop. Employees must be offered continued assistance until they become fully familiar with the system.

6. Poor Communication Between Teams

Several teams tend to be involved when implementing an ERP, including IT, finance, operations, HR, and even management. Working in silos doesn't help either, and a lot of the time, people end up configuring systems incorrectly. This happens when the groups don't communicate enough.

If the finance team doesn't communicate their reporting requirements well enough, then the ERP system may not have the necessary configuration to provide financial data.

How to Avoid It?

Organizations can develop communication by:

• Scheduling project meetings
• Having clear reports
• Assigning tasks related to the project
• Creating an environment to enable collaboration between project and non-project employees

Assigning employees to an ERP project team makes sure the project is viewed from different business units.

7. Unrealistic Expectations

Most businesses believe ERP systems will resolve their business operational issues once the systems are implemented. However, ERP software is a tool that automates and supports the improvement of business processes. It does not resolve issues such as efficiency and ineffective business practices.

Ultimately, overestimating expectations leads to a false understanding of the achievement of project success.

How to Avoid It?

Assuming an organization understands the following:

• ERP system benefits take time to materialize
• Employees take time to adapt
• Adjustments may be required to the Processes/procedures
• Constant improvement is expected

The implementation of an ERP system is more of a journey than a one-time event that is graded as either successful or unsuccessful.

8. Budget Overruns and Cost Management Problems

Customization, training, data migration, and consulting services all add to the uncertainty of project costs. The budget also includes ongoing service and maintenance. The project expenses may exceed expectations.

Unexpected costs create a strain on business finances. Cost overruns slow down project completion.

How to Avoid It?

To develop an accurate budget, companies must recognize the following costs:

• Adoption of a software license
• Implementation
• Training
• Data migration
• Any potential integration costs
• Future maintenance work

Earmarking a 'rainy day' budget for unexpected costs can also help cushion the financial effects of spending.

9. Excessive Customization

A lot of businesses try to adjust a bought ERP system to the full extent of their company's activities. Customized systems can provide extra features, but once you've reached a certain level of customization, systems can become complex and expensive to manage and maintain.

Highly customized systems can also make future upgrades more difficult.

How to Avoid It?

Businesses should try to improve existing procedures before they resort to extensive modifications to their enterprise resource planning (ERP) systems.

A more effective approach is:

• Use standard features of ERP systems
• Customize only as a last resort to meet a critical business need
• Follow best practices in the industry
• Exhaust the configuration options before considering custom development

Balance helps maintain flexibility and long term usability of a system.

10. Weak Leadership and Project Management

Since ERP affects the entire organization, leadership is critical. Without leadership, a project may not get the necessary resources, may not have decision-making authority or may not have adequate direction and strategy.

Dark projects may lead to unmet deadlines, unclear ownership of tasks, and the failure to implement the project.

How to Avoid It?

Organizations should:

• Create teams with assigned project managers
• Assign responsibilities
• Keep track of the progress of the project as it is being completed
• Resolve problems as they arise
• Maintain involvement of management

Effective leadership pulls a project together and relates it to the overall needs of the company.

11. Integration Challenges

A modern business has many different software systems for customer management, payroll, e-commerce, analytics etc. Integrating these systems with an ERP platform first requires a technical effort.

Without proper integration, there may be data discrepancies and inefficiencies in the business activities.

How to Avoid It?

Prior to implementation, companies must consider integration requirements and select an ERP solution with ample integration capabilities.

Some best practices are:

• Document existing systems
• Thoroughly test integrations
• Use reputable integration tools
• Check system performance post deployment

12. Insufficient Testing Before Launch

Failure to adequately test an ERP system can result in an array of downstream issues. Faults noticed post implementation disrupt business processes and compromise customer service.

How to Avoid It?

Extensive testing involves the following:

• Functional testing
• Data accuracy testing
• User acceptance testing
• Security testing
• Performance testing

Each of the testing categories listed here should be performed by employees from different departments to confirm the system meets the requisite functional needs.

Conclusion

The correct implementation of an ERP system can change the way a business runs by improving many aspects, including the efficiency and clarity of the business, and the quality of the decisions made by the business. There are many key components that make an ERP software successful.

If poor decisions are made regarding employee selection, replacements, or company communication, the result can be user rejection of the new system, slow company adoption, loss of user trust regarding data integrity, and company project failures. In order to succeed, all employees must be part of the overall company effort, alongside management, and led by the company executives.

An ERP implementation is more than just a company-wide technology integration. It is a collaborative company effort to manage and run the core business services.