Well, this might be a straight-away question. Let us first discuss—what leads to an ERP system failure?
ERP covers a broad range of features- seamless finance, sales and order monitoring, inventory and warehouse management, customer relationship management, and more.
Your enterprise resource planning system is crucial for your business, so it deserves dedication and care even post-implementation.
Everyone talks about switching from traditional/legacy systems to ERP, but no one mentions all the work, time, and resources it will take even after the installation.
Why do ERP Systems fail?
Recognizing the Warning Signs of ERP Failure!
It is likely to happen when useful processes in the ERP system are missing or using obsolete or multiple technologies, which hampers business efficiency.
We at Aktiv have been serving ERP customers for 5+ years with a collective industry experience of 20+ years. In our urge to help businesses suffering from system/process failures, we have always heard horror stories like:
“The system that was supposed to make us better, but we experienced the other way around.”
“It’s been a year past install, and we still don’t have everything working.”
“The ERP system was a disaster. We went more than six months without being able to generate a P&L.”
Every business requires ERP differently.
With growing business comes ERP tangles; it would only get worse if not untangled at the right time.
A company handling manufacturing would require Admin, Sales, Purchase, Warehouse, BOM, Planning, Production, and Accounting modules.
On the other hand, a retail business chain would seek- Procurement, Accounting, Supply Chain, HR, Sales, and CRM modules.
Also, let’s not discard the possibilities of business expansion or ever-changing business needs.
Once upon a time, your business was limited to a single location, which now has outgrown your ERP requirements and even ERP modules that your business functions on.
To eliminate the outgrowing business issues, generally, any company would install/integrate new ERP modules. And the loop won’t stop here.
Top Five Warning Signs of ERP System Failure
- Running on Multiple ERP Software:
Every ERP set up require separate databases and servers to function. ERP implementation requires an expensive mix of hardware (for on-premise), software, and skilled personnel. If that is so, chances are high; as a business owner using multiple ERPs, you will be encountering massive infrastructure and people costs.
“Not my Problem” Vendor Syndrome is common when vendors pass their software issues off to other software systems. Also, let’s not forget the training efforts and costs that comes with every ERP implementation.
Tips: Cure in the Cloud!
Re-inspecting your IT infrastructure and looking for ways to opt for cloud-based ERP can mend ways towards a simpler and less costly ERP environment. Try to reduce the number of ERP instances you have, or moving your business functions to an all-rounding ERP solution is highly recommended.
- ERP Modules Integration/Compatibility Issue:
A common side effect of having multiple ERP solutions is software/system compatibility issues. E.g., internally in a manufacturing business, everyone knows you’re dealing with the same suppliers. No one group across the organization would know what others are up to. Still, no one can prove it because the systems are not connected or well-integrated due to compatibility issues to share that kind of information.
Tips: Make sure your business processes are reduced to as few as software/systems to avoid versioning, compatibility, or regional issues.
- Changes take too long to reflect across all the systems:
Suppose you want to make significant changes across your business functions like- updating reordering rules. In that case, decision-makers will go through the list of modules or functions affected by the change, inventory forecast methods, and sales cycle and manually update it. It is always a bugaboo for organizations suffering from ERP overload.
Tips: Make your testing cycle stronger.
- Running on Traditional Systems:
Even if they can be upgraded, outdated systems still run-on architectures that fail to meet modern demands. It will only add in the complexities and costs of disparate functions scattered across an enterprise and the expense; it can’t even be calculated.
Tips: Go for ERP solutions that are flexible and adaptable to newer trends and requirements. If required, take proper consultation from ERP experts before choosing one.
- Lack of Alignment of the ERP system and Business
Being in the ERP industry for a long time, we have encountered cases where most customers chose ERP solutions by considering their tech benefits. They often forget to evaluate existing and future business requirements.
Tips: Consider hiring experienced ERP service providers and let them assess and prepare a comprehensive understanding of your business model. Try to evaluate the present and future needs and propose a requirement-driven approach to align ERP system capabilities.
Now you might be able to answer the question raised earlier- Has your ERP turned into an out-of-control Octopus?
The Bottom Line
ERP change is complex, and it doesn’t happen overnight. There are no one-size-fits for all. For big enterprises consolidating ERP systems or having multiple ERPs, instances might be the way out, but SMBs with a specific business requirement might not follow the same.
For some businesses, leaving legacy systems isn’t the way out due to mergers and acquisitions. For some, moving to a single solution for their business means facing heavy customizations.
One can’t list the pitfalls as ERP Challenges look different for every business type, domain, and size.
But it is better to at least recognize these warning signs as not knowing hurts your business processes, budget, time, and resources.
It is always recommended to consult ERP experts to end suffering and get the most out of your ERP system. Whether choosing ERP or implementers, define your selection criteria, budget, timeline, organizational requirements, and future plans.