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ERP Implementation: The 5-Step Methodology You Need To Go Live Without A Hitch

ERP implementation. Two words that make even the most seasoned business leaders sweat. And it is completely understandable — the stakes are high and the fear of failure is natural. Thirty-three percent of businesses go over budget when implementing their ERP system and fifty-eight percent go beyond the planned timeline.

With an undertaking this complex and daunting, it is imperative to break the process into smaller pieces. If you can get ahead of challenging obstacles with a thoughtful planning process, you can tackle each piece calmly and methodically, saving yourself substantial headaches later. In this article, we will share the five-step methodology that will allow you to complete your ERP implementation on time and within budget.

What is an ERP implementation?

Enterprise resource planning (ERP) implementation is the process of planning and deploying ERP software to improve a company’s operations. You can think of an ERP like the central nervous system of a business, connecting all of its most important functions. Essentially, an ERP combines financial management software with other core tools — like customer relationship management (CRM), marketing automation platforms (MAP), and inventory management — into one tidy package.

Our 5-step process for successful ERP implementation

1. Want to nail your ERP implementation? Start with value planning.

Before you can get to implementing your ERP, it is important to make sure that you have done the groundwork to make it a smooth process. It may be tempting to skip ahead for the sake of speed, but you will want to measure twice and cut once when it comes to ERP systems. We strongly recommend you begin with value-planning and selection, by which we mean uncovering the high-level requirements you will use to select your software.

Start out by mapping your workflows and processes in great detail (either in a document or a flow-chart), then identify areas of inefficiency to target with your ERP software. Often, changes in technology are triggered by larger organizational changes, like a merger or a spike in growth. Ask yourself: What exactly are you trying to achieve by changing your ERP platform? What are the shortcomings with your current technology and processes preventing you from achieving it?

You can also go about this by listing out your pain points — that is, the shortcomings of your current process. Pain points can be operational, technical, or strategic. Here are a couple of examples of pain points:

  • Your leads and opportunities are tracked in a spreadsheet, so you need to manually copy all those data points into your finance system before you can create a sales order.
  • You are trying to do end-to-end reporting, but your data's sitting in three different systems. You spend enormous amounts of time pulling together your pipeline and your sales reports or your profitability reports to do forecasting. It is challenging to do efficient resource planning because you do not know what is in the pipeline, how busy your current people are, and how much capacity you need to create to be able to meet your demand.

When you are value-planning, it is helpful to think a bit like an architect of your future technology environment. First, you need to decide what (if anything) you want to keep from your current setup. For example, your CRM, your operational system(s), and/or your financial system. You will also want to consider how much you want to lean on ERP modules versus standalone systems.

By making a clear link between the strategic direction you want to take your business and the technology that can enable those changes, you will avoid an ERP mishap that happens all too often — an unexpected mismatch between the functionality you need and the software you are about to implement.

2. Selection — how to pick the right technology to set your team on the right track.

During the ERP selection process, you will want to document your business and your requirements in greater detail than in the value-planning phase. This will allow you to express your important requirements to software vendors when you are doing product demos, so vendors will show you the features and capabilities that are most important to your organization. If you are not careful about briefing vendors about what problems you are trying to solve, you may receive very generic product demos. Though on the surface, a product may look enticing, once you peel away the layers of detail, you might find it cannot handle certain processes as well as you assumed.

The more specificity you have in your requirements during your selection phase, the more certainty you will have that your ERP system will meet your requirements upon purchase. You will also go into implementation knowing what functionality gaps you will have to cover through customizations.

For example, let's say you have a construction business that employs both union and non-union labor across many countries with different currencies. Since rates are so highly varied, dollar-based reporting may not be as effective for the organization as hours- or units-based reporting. This would be a non-negotiable requirement — to be able to track productivity and efficiency on a unit basis. You will want to ask the vendor to show you if this is possible out of the box, and if not, how expensive and labor-intensive the customizations might be.

Want a deeper dive on how to pick the right ERP for your business? Read this comprehensive guide on ERP selection.

3. Budgeting — beware of hidden costs.

It is important to understand exactly what your ERP implementation project will cost at the outset. And it is not enough to assume that the quote from your vendor covers all of it. Your quote will include software costs and base implementation costs, but there are often hidden costs to your organization that you need to think about. For example, you may need to backfill key roles to release your people so they can focus on the implementation — this means you need to add the cost of additional headcount to your ERP project. You may also need to invest in new infrastructure if you need to upgrade the specs on your computers because you did not have the minimum requirements to host or run your new ERP product.

Only a minority of vendors provide training and change management services, so most of the time it will fall on a company to perform these functions. You may need external services of another consulting firm to bridge the gap. Another item that is often lost in the details is producing documentation. Some vendors will provide documentation of project methodologies, but others will assume that you are creating your own training content for your current and future employees.

Take the time to think through the life cycle of the implementation and note any potential costs upfront. That way, you can be deliberate about managing any trade-offs and prioritize the most important costs.

4. Program implementation — measure twice and cut once.

You have officially signed on the dotted line. What comes next? It is important to realize that a lot of vendors’ implementation methodologies are focused on standing up the technology platform, not necessarily navigating you through the organizational transformation you are about to enact.

Some vendors will provide guidance for process redesign, but these materials usually assume that you are going to adopt the standard process in the system. If you deviate from the standard process with your own customizations, your team has to come up with that process design. Ask yourself if you can accept the standard process as the system performs it, or if you need to truly make a change so that it works for your organization.

A classic example is accounts payable with approvals workflows. Many ERP systems come with one level of approval out of the box, so that you can have a designated supervisor perform invoice approval. However, let's say your company needs to do two sets of approvals — for instance, by material dollar amount and by company hierarchy. This functionality might require some custom logic.

In addition to a design process, you will also need governance structures to prioritize and approve whether proposed changes are going to be handled by the project or not. The right project management techniques (and criteria for scoping and de-scoping aspects of the project) will make these decisions a lot quicker and simpler to make. Be sure to plan and document a work breakdown structure, what and who the resources are, and effort estimates.

It is best to have a steering committee or decision-making body who can prioritize, approve, or reject these design items based on level of effort, hard costs, and/or benefit to the business. Whether that is a virtual forum or a committee that meets regularly, this group of individuals should be tasked with understanding how the project interacts with day-to-day business activities and making deliberate decisions about tradeoffs to people’s time and attention.

Bear in mind that there will be trade-offs as you are getting close to a critical point in the implementation timeline. There may just be more work than available hours. It is also important to think about what criteria to prioritize for a go-live versus what could feasibly wait until later.

5. Governance and sustainability — planning for tomorrow and beyond.

ERP implementation is only the beginning of your journey. You are not necessarily going to have it perfected on day one, but the project will grow with you as your business evolves.

Here is a list of questions to revisit regularly as your business evolves:

  • How are you going to keep the software growing with your business changes over time?
  • Do you need to have a maintenance contract with your vendors?
  • How will you measure your ongoing return on investment (ROI)?
  • Do you have enough internal capacity, or do you need to hire outside help?
  • Do you need a system administrator?
  • Will you need ERP upgrades over time?

Parting wisdom

Want to be part of the forty-two percent who stick to their budget while implementing a new ERP? While it may be tricky to pull off, this group is proof that it is possible. It is easy to get overwhelmed by a project as large and complex as an ERP implementation, but with a thoughtful planning process and steadfast follow-through, you can make yours a success. And remember you do not have to go it alone — if you are planning an ERP implementation, Citrin Cooperman can help.

Want a concise PDF summary of the steps of ERP implementation? Download here. 

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