10 ERP implementation best practices
February 8, 2024
The growing demand for transparent and efficient business processes is forcing more and more companies to implement ERP solutions. However, not all implementations go smoothly. ERP failure often involves business process disruption, time or budget overruns, or employee resistance. While each company handles ERP failures differently, they do happen for a reason.Â
So how to set up your ERP implementation project for success? Here, we explore the most common reasons for ERP failures and provide recommendations to avoid unnecessary costs and prevent disruptive issues.Â
ERP failure stats
of ERP transformation projects end with time and cost overruns
McKinsey
of ERP transformation projects have a negative ROI
McKinsey
of companies experience operational disruption when deploying ERP
Third Stage Consulting Group
Common ERP implementation risks
- Unclear business requirements lead to enterprise resource planning scope expansion/uncertainty and poor technology choice.
- Poor alignment among stakeholders regarding project objectives, priorities, and implementation strategies result in subpar project execution, lack of timely support, and budget allocation issues.
- Lack of C-level buy-in leads to ERP project delays, insufficient budgeting, or project cancellation.
- Lack of organization-wide change management results in project delays, cost overruns, and eventual ERP abandonment.
- Poor project planning & unrealistic expectations (timeframes, budget, deliverables) lead to cost and time overruns.
- Insufficient data quality & data migration management cause poor decisions and high compliance risks.
- Unsatisfactory user training and support, insufficient onboarding strategy & lack of user feedback give rise to resistance to change and low ERP adoption rates.
- Lack of necessary ERP skills results in project delays and budget overruns.
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10 ERP implementation best practices
1 Assemble a strong project team
Having all the right people to implement your ERP solution is crucial for the project’s success. Here are the specialists we recommend you include in your ERP implementation project team:
ERP executive sponsor
ERP executive sponsor
Some companies reduce the executive sponsor’s role to contract signing. However, strong executive sponsorship can contribute to the ERP project’s success by prioritizing its implementation among other company projects.
Subject matter expert
Subject matter expert
A professional with advanced knowledge in the industry/domain/business process who helps bridge the gaps between the project team and end-users.
Project manager
Project manager
A project manager is an internal specialist who works with the executive sponsor to form the project's vision and conduct day-to-day project management.
Implementation partner
Implementation partner
The implementation partner is responsible for delivering the ERP to the company’s environment. The ERP implementation team can consist of multiple specialists depending on the project scope. It can include a project manager, a business analyst, a solution architect, a UX/UI designer, developers, DevOps engineers, QA engineers, DBAs, and support engineers.
Change management committee/agent
Change management committee/agent
A person or a team that oversees organizational changes, creating and executing a change management strategy in line with project requirements. They are critical intermediaries between the implementation partner, executive sponsor, project sponsor, and the rest of the company, especially during the ERP deployment and post-go-live support.
Functional team members
Functional team members
Employees from different departments who will use the ERP software daily and can help discover functional ERP requirements.
Superusers
Superusers
ERP software users with leadership skills who will drive ERP adoption and communicate its value to their colleagues. While they become helpful post-implementation, companies should involve them in the project from the early stages to help them gain the necessary knowledge and skills.
2 Define ERP requirements & KPIs
To steer the ERP implementation project in the right direction, companies need clearly defined and documented business requirements and a measurement system to monitor the ERP’s ROI down the line.
To gather the full scope of requirements, you need to:
- Elicit key requirements from stakeholders with user stories, brainstorming sessions, business process diagramming, surveys, and one-to-one meetings
- Assess the company’s current technology landscape
- Outline key business workflows to automate, optimize, or eliminate with to ERP implementation
- Outline key business workflows to automate, optimize, or eliminate with to ERP implementation
- Document comprehensive business needs and requirements
- Once you refine the business requirements, you need to correlate them to ERP functionality and identify particular key performance indicators each module can bring.
Accounting & financials
Gross profit margin, return on sales, net profit margin, operating cash flow ratio, current ratio, working capital, current accounts receivable, current accounts payable, average invoice processing cost
Manufacturing and distribution
Production volume, downtime, costs, equipment effectiveness, capacity utilization, defect density, return rate, on-time delivery, and inventory turns
Human resources
Absenteeism rate, overtime hours, training costs, employee productivity, job satisfaction, cost per hire, recruiting conversion rate, employee turnover rate, the average length of employment
Inventory & order management
Inventory turnover rate, days/weeks on hand, stock-to-sales ratio, sale-through rate, rate of return, product sales, current and pending orders, orders completed for a day, canceled and returned orders
Supply chain management
Purchase order cycle, lead time, supplier availability, supplier quality rating, shipping time, loading time, transportation costs, carrier performance, number of shipments
Customer relationship management
Close rate, the average value of deals, upsell rate, sales cycle duration, customer lifetime value, customer acquisition cost, net promoter score, abandonment rate
3 Get executives’ buy-in
C-suite executives allocate the project's budget and should endorse ERP implementation across the company. However, what if they do not fully understand its functionality and value? The most common challenges project managers face when securing executive management's buy-in include the following:
Challenge
Solution/selling point
Lack of understanding of ERP value
Gather as much documentary evidence (research of trustworthy consultancies, case studies, expert guidance, etc.) to advocate the ERP implementation process Present ERP advantages in a visually appealing way so that C-suite managers won’t get confused by lengthy text or complex infographics Calculate TCO and prove ERP financial viability by explaining with numbers, timelines, and estimates how the ERP software could help mitigate existing issues and increase the bottom line
No adequate financing for the ERP project due to competing IT initiatives
ERP projects are expensive and risky, so to get top management’s support, you have to present them with tangible benefits, which can be challenging to formulate on your own. Therefore, it is a good practice to bring in a third party, like experienced ERP consultants, who can present ballpark estimates for ERP implementation benefits.
Executives’ skepticism about the ERP technology
Schedule one-on-one presentations of ERP benefits between the ERP project advocates and the C-suite. Informal meetings can also trigger conversations about action plans, vendors, and timelines and help accelerate decision-making.Â
4 Find a reliable implementation partner
To choose the right ERP tech partner to implement and support ERP software, you must rely on a clearly defined framework. Here’s what you should factor in when researching and selecting a qualified candidate:
Experience
Choose a vendor with hands-on experience in the implementation of the on-premises and cloud-based ERP systems within your industry and ask for client references and case studies to validate it. When a vendor has a deep understanding of unique requirements, specific processes, challenges, and regulations in your industry, they can make effective decisions about your project’s functional scope and integrations.
Partnership certification
When implementing an ERP platform, the tech partner will be an intermediary between you and the ERP platform vendor. Therefore, the candidate’s level of certification reflects how swiftly they can get in touch with the vendor and how quickly they can arrange for any software-related issues/requests to be addressed. Â
Common values
Look for a vendor whose values are compatible with your company’s and make sure they do their best to meet your specific requirements instead of simply pushing you towards the product they resell.
Implementation framework
Opt for a vendor with a proprietary implementation methodology and best practices based on years of experience with ERP solutions.
Technology expertise
Choose a partner with a relevant skill set and deep technical knowledge about out-of-the-box ERP software or custom ERP technologies.
Training & support
Since you will most likely need post-launch support to ensure a smooth transition to ERP, choose a partner who can provide the required optimization and training services.
5 Create an ERP implementation plan
You need a solid project plan to keep the project on time and budget, minimize operational disruption, and maximize the ERP’s business value. Below we share a typical ERP implementation life cycle, but take note that steps can vary depending on each company's needs and objectives:
1
Analysis
- Analyze business processes, workflows, and technology environment
- Elicit business goals, needs, and expectations from key stakeholders
- Define functional and non-functional requirements for the ERP system
2
Design & technology selection
- Conceptualize the ERP solutionÂ
- Design ERP architecture
- Define the integration scope
- Choose an optimal technology stack
3
Planning
- Define the initial ERP scope with the stakeholders
- Outline project timeframes, budget, deliverables, resources, and a risk management strategy
4
Customization/Development
- Build/configure/customize ERP software
- Integrate ERP with the current systems
5
Testing
- Functional testing
- Usability testing
- Performance testing
- Compatibility testing
6
Deployment
- Deploy the ERP solution to productionÂ
- Migrate data from corporate applications to the ERP system
7
Rollout
- User acceptance testingÂ
- Conduct user training and onboarding
8
Post-launch support
- Manage performance issues
- Troubleshoot emerging issues
- Perform security and system updates
- Fine-tune the ERP platform
6 Manage the change properly
The introduction of ERP significantly changes the company’s established business processes. To increase user adoption and overall ERP implementation success, you have to manage the impact of these changes with an organizational change management strategy closely aligned with company goals, digital strategy, and corporate culture.
When working on the change management strategy, you should:
- Plan how to communicate the necessity of change across all organizational levels.
- Identify fundamental changes to systems, processes, organizational structure, roles, and responsibilities, and center your communication and training efforts around them.
- Conduct a change readiness assessment by analyzing how well the company handled past changes and assessing change fatigue from previous initiatives.
- Set up two-way communication to support end-users and monitor user activities, feedback, support and change requests to identify problems and user resistance at early stages. Â
- Ensure all employees understand the change strategy and the reasons for ERP implementation.
7 Set a realistic budget & timeline
Budget adherence
Timeline adherence
Data source: Panorama Consulting Group — The 2022 ERP Report
The infographics show that many projects end up with budget and time overruns due to unrealistic estimations, among other things. Therefore, companies should carefully establish budget and timeline limits to mitigate this issue. Here are the major factors that influence ERP implementation’s cost and timeline:
- ERP functionality
- Customization requirements
- Number of integrations
- Data migration and quality management
- Software licensing costs
- Number of users
- Infrastructure costs
- Implementation team
- Quality assurance and testing
- User training and onboarding
- Support level
- Business process reengineering
- ERP upgrade and maintenance
- Security and data backup
8 Ensure data quality
The information gathered by ERP becomes automatically accessible across different corporate systems and departments, which means poor data quality in one functional area will affect the whole company. The consequences of poor data quality can be disastrous, so before getting into ERP adoption, the company should put their business data in order. However, this can become a project on its own, especially when your data culture is not mature.
To ensure only high-quality data gets into the ERP software solution, you have to set up a solid data quality management framework, which implies:
- Establishing consistent data definitions and formats across all systems
- Ensuring consistent data practices across the organization
- Adopting master data management tools and methodologies
- Automating data quality management
9 Set up an employee training program
Implementing an interactive and user-friendly ERP system does not guarantee employees will use it. You should provide an ERP training program to prepare workers for the introduction of new software and business workflows, bridge any skill gaps, and help them be more efficient at their jobs.
An effective training program contains the following steps:
- Assessment of training needs through skill gap analysis, employee interviews, surveys, and workflow observations
- Setting clear and measurable training goals for individuals, departments, and different user roles
- Selection of an employee training method (self-learning, coaching, eLearning, on-the-job learning, etc.) based on current needs and the analysis of past training methodologies
- Creation of training content for different user roles, including ERP advocates, super users, and new employees
- Training program monitoring to determine its effectiveness and user knowledge and skill acquisition
10 Conduct a post-implementation review
The implementation project doesn’t end as the ERP solution goes live, as providing high-quality and timely post-launch support is critical to its long-term success.
To create an ongoing ERP support plan, you have to take into account the following:
- Business process improvements from the ERP implementation based on the KPIs and metrics defined at the project’s start
- Implementation failures, both anticipated and not, and how they were resolved
- Possible enhancements and pending issues to resolve with post-implementation support or future releases
- The total cost of acquiring and implementing an ERP solution, the current total cost of ownership, and the solution’s ROI
- End user feedback
The benefits of successful ERP implementation
Improved collaboration
ERP implementation minimizes the risk of data duplication and inconsistency through data standardization and centralized storage. Role-based access enables seamless real-time data sharing and improves interdepartmental collaboration.
Cost reduction
ERP software can significantly reduce administrative and operational costs by automating time-consuming manual data entry and repetitive processes (e.g., payroll and invoicing). Additionally, as ERP integrates other business software, companies can spend less on user training since they have to interact with a single system.
Smart decision-making
With quick and easy access to systematized business data and analytics insights, ERP users can better plan and budget improvements and forecast business trends, timely identify growth opportunities, detect bottlenecks and inefficiencies, and act accordingly.
Increased productivity
A correctly implemented ERP solution automates repetitive and error-prone activities. It also enables employees to focus on their core tasks and accomplish them quicker.
Data security & compliance
ERP software helps control and limit access to business data, so that employees can only see the information they need and are allowed to. Moreover, organized and easily searchable data simplifies compliance with multiple data-related requirements.Â
Business growth
A well-implemented ERP platform can quickly scale and integrate with new software systems, supporting core workflows as the business grows.
3 success stories of ERP implementation
90%
manual tasks automated
ERP system for a repair and maintenance service company
We implemented a full-scale ERP solution based on Odoo to automate the customer’s core business processes. ERP adoption resulted in a 50% reduction in purchase order approval time and 100% accelerated work order management.
-10%
DevOps cost
ERP/LMS solution for an eLearning company
Itransition implemented an Odoo-based ERP/LMS suite to help a US eLearning company streamline administrative functions, including student data entry, enrollment, and scheduling. Â
+21%
sales growth
Software suite for a UK furniture manufacturer
Itransition implemented the CRM/ERP system to help the customer transform back-office workflows and pioneer new ways of customer engagement, such as a VR-based kitchen design experience.
90%
manual tasks automated
ERP system for a repair and maintenance service company
We implemented a full-scale ERP solution based on Odoo to automate the customer’s core business processes. ERP adoption resulted in a 50% reduction in purchase order approval time and 100% accelerated work order management.
-10%
DevOps cost
ERP/LMS solution for an eLearning company
Itransition implemented an Odoo-based ERP/LMS suite to help a US eLearning company streamline administrative functions, including student data entry, enrollment, and scheduling. Â
+21%
sales growth
Software suite for a UK furniture manufacturer
Itransition implemented the CRM/ERP system to help the customer transform back-office workflows and pioneer new ways of customer engagement, such as a VR-based kitchen design experience.
90%
manual tasks automated
ERP system for a repair and maintenance service company
We implemented a full-scale ERP solution based on Odoo to automate the customer’s core business processes. ERP adoption resulted in a 50% reduction in purchase order approval time and 100% accelerated work order management.
-10%
DevOps cost
ERP/LMS solution for an eLearning company
Itransition implemented an Odoo-based ERP/LMS suite to help a US eLearning company streamline administrative functions, including student data entry, enrollment, and scheduling. Â
+21%
sales growth
Software suite for a UK furniture manufacturer
Itransition implemented the CRM/ERP system to help the customer transform back-office workflows and pioneer new ways of customer engagement, such as a VR-based kitchen design experience.
Minimize the ERP failure risk with a trustworthy partner
Implementing a new ERP system is a great digital transformation opportunity. Well-implemented ERP software helps expand legacy systems' limited functionality and improve existing processes. However, an ERP implementation project is risky like any other resource-intensive project, so rely on well-defined best practices to reduce potential risks. To lower the risk of failure and get the most out of the ERP system, you can turn to Itransition’s ERP expert team to guide you through this journey. Â
Mitigate ERP project risks with Itransition
FAQs
Which is the most challenging phase in ERP implementation?
When implementing an ERP solution, the most challenging part is preparing end users and functional groups for introducing new software, which requires strong project management and support from senior leadership.
How long does an ERP implementation take?
Configuring and customizing a platform-based ERP takes 3+ months, while a custom solution can take a year or more depending on software complexity, business objectives, and the needs of a particular organization.
How can you prevent ERP implementation delays?
To minimize the risk of ERP project timeline overruns, manage your expectations, achieve maximum alignment between leadership, managers, and potential users, and share the project responsibility with an experienced implementation partner.
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