Enterprise resource planning (ERP) is business process management software that allows an organization to use a system of integrated applications to manage the business and automate many back office functions related to technology, services and human resources. ERP software integrates all facets of an operation including product planning, development, manufacturing, sales and marketing in a single database, application and user interface. It provides an integrated view of core business processes, often in real-time, using common databases maintained by a database management system.
Enterprise resource planning (ERP) systems are huge investments of money, resources and time. And while a successful ERP implementation can help your organization streamline workflow and cut costs, a poorly planned and implemented ERP rollout can severely cost organizations, in terms of lost productivity and delays.
Let us look at the top 5 common challenges which organizations face while implementing ERP.
1. Reengineering / Organisational Change
ERP implementation produces significant changes in an organisation’s conventional business model and its day-to day practices. It requires organisation to reengineer their key business processes in fundamental ways, overhauling old methods of conducting business, redefining position responsibilities, and restructuring the organization. Organisation need to change its process as per ERP system and customize the system according to their needs. Due to this modification, the total implementation cost may be increase and the customisation cost is greater than their implementation cost. Due to increasing cost, organisation try to continue their system “AS IS” and try to reduce their customisation cost as much as they can, and try to maintain future upgrade expenses. An ERP system that is not flexible may force an adopter to change their business processes to fit the ERP system model. This requires a re-engineering of steps needed to complete business tasks and retraining of employees and business partners, sometimes even customers. As we all know, people inherently do not like change, and this will create resistance and delays for any organisation.
2. ERP Software Implementation Goals
Another challenge is setting well-defined measurable goals and objectives for your ERP implementation. Without goals, your implementation is sure to be directionless. This can lead to even more challenges and frustration. These goals need to be defined at the outset of the project. You also to need to put a process in place for adding to or changing these goals. Understand each team member’s goals and departmental needs by the end of the ERP implementation. Always work with your goals in sight, but understand that needs could change throughout the implementation process. Many projects, not just an ERP implementation, have failed because proper goals were not established. If the goals are not well defined, projects are delayed and thus experience cost overruns.
It is difficult to know where integrating systems in an organisation can gain a competitive advantage and where it will hinder the organisation’s workflow. This becomes even more complicated when different business divisions view each other as competition, or good old fashioned office politics gets in the way. Decision makers often don’t know fully what the ERP system is capable of when they’re planning the system.
Organisations need to identify the nature of the integration and how it affects the entire business. Before integration of the system, functional department analyses the whole system integration and tries to find mistakes and bugs in the application, that was made by other department. If they find any error, they need to correct them before it affects the other department. With the tight integration, error in real time affects the one business units to other entire business units. For example if production department made an error in the bill of materials, it could not affect only on the operation in the production department but also on the inventory department, accounting department and others.
4. Cost and Time
Plenty of time and effort needs to be invested into ERP implementation before it actually starts yielding results. It’s impossible to implement complete ERP system at once, because ERP system comes in modular fashion and its implement phase by phase. The main problem with ERP system is that it is very common to have customisations of ERP depending on the specific requirements of the business and they takes a long time. The implementation cost depends on the customisation cost. If system customisation increases as per the company requirements then the implementation cost also rises. Cost Overheads will result, if requirements are not properly discussed and decided during the planning phase.
5. Training Employees
Continuously Training and updating the employees on ERP is one of the most important challenge. Without appropriate training almost 30 % to 40% of frontline workers are not capable to handle the needs of new system. For example, Company gives only some weeks of training and then put their employees into job which is totally wrong as they still don't know the complete working of their ERP system. ERP system is much more complex as compare to other computer application.ERP system demands appropriate training. Hence Appropriate training is very essential during and after the implementation. The staff should be comfortable in using the application or else, it will backfire, with redundant work and functional inefficiencies. Kevin Herrig, president and CEO of GSI, an ERP software specialist with a primary focus on Oracle's JD Edwards products said "If you don't make training and frequent communication with users a top priority, you will end up owning a very expensive version of Excel." A lack of proper training is one of the most common reasons that ERP projects fail.
ERP solution is revolution of the manufacturing and service industries. Through ERP system, organisation integrate their different units.ERP system help them of their speedily flow of smooth information across the industries. Even though this system bring several benefits of the company, but also bring sometime problem, when its not implement properly. ERP systems is so much complex, they are not simple software, they also affect on the business process itself. Proper implementation requires appropriate planning and their execution and should take care of above challenges while implementing ERP system.
Melissa Lim, Co-Founder and Marketing Director of BiTSBi.com, a Singapore-based ERP software tech startup, advocates data-driven success for SMEs while championing change in traditional businesses and helping organisations in South East Asia take advantage of digital technologies to increase productivity and automate redundant work processes.