Imagine this: You’ve invested $112 million over 30 months to upgrade your legacy business applications and create an integrated ERP environment. When you launch, unforeseen issues prevent you from processing orders. You aren’t able to fill $100 million in orders even though you have the inventory in stock. Your quarterly earnings drop 19% and your stock price drops 8%.
This isn’t a hypothetical nightmare scenario. It actually happened to The Hershey Company when it implemented its ERP system.
Through our implementation and project rescue work with countless clients, we’ve learned a few common signals that foretell when an ERP project is going off track. Here are some of the early warning signs to watch for — and the actions you can take to get back on track.
1. The Project Doesn’t Have Clearly Defined Milestones and Deliverables
Complex projects like ERP software implementations consist of hundreds — sometimes thousands — of individual activities and tasks. To execute everything properly, you need a plan that includes high-level goals and key project performance indicators. Pemeco breaks down large implementation projects into 13 phases and 14 key milestone deliverables.
Start by defining your strategic milestones, success metrics, and how you will measure results. If the project committee or managers can’t objectively measure progress, there’s an elevated risk that the project will fail to meet key delivery requirements.
2. Clear Decision-Making Criteria Are Missing at Crucial Project Phases
We regularly see companies work through a complete project plan only to discover that key performance targets were missed along the way.
In the case of Hershey’s, critical system integrations didn’t work. But the team didn’t know until after it cut over to its new systems and processes. Proper tracking of specific performance criteria could have saved the company from losing 19% in quarterly profits.
Every ERP software implementation project must have clear, specific, and objective criteria for when to exit one phase and enter the next. These criteria can be defined by ERP implementation managers and approved by the project steering committee — the group of executives responsible for guiding and supporting ERP implementation. If Hershey’s had proper testing and test validation criteria to ensure the integrations worked, it could have mitigated several costly mistakes.
3. Business End-Users Aren’t Able to Use the System
One of the ultimate measures of an implementation project’s success is the extent to which business users adopt and embrace the new processes. If key employees aren’t using the system, something is wrong — and your company won’t realize the benefits of the new system and processes.
To increase use, make sure your end-user teams get adequate training. Without proper training, employees might reject the system and revert to old processes. If the system is bad enough, they may even resign and ensure that adoption and process adherence are audited.
For system training to be effective:
- Make training targeted at day-to-day work.
- Include measurable outcomes.
- Report training outcomes to the project steering committee.
4. The Project’s Scope Isn’t Clearly Defined
If your project doesn’t have an explicitly detailed scope, you risk “scope creep”.
It’s a common issue — in one survey, the Project Management Institute found that 52% of projects experienced scope creep, or uncontrolled changes to the project plan. Without a clearly defined scope, companies face the very real prospect of having requirements incrementally added to the project, expanding timelines and budgets.
To avoid scope creep, we recommend:
- Establishing a clear project charter tied to measurable business value.
- Defining the project scope based on the project charter.
- Requiring any material scope changes to be approved through a change-order process with a business case.
5. The Project Doesn’t Have Sufficient Testing
Many vendors and ERP implementation consultants promote rapid deployment methodologies. They do this by shortening implementation times by cutting out phases of implementation. And testing is often one of the first phases on the chopping block.
In contrast, we recommend that you provide lots of time for testing with clearly defined testing phases, deliverables, and phase entry and exit milestones.
We suggest you test your ERP software in three phases:
- The conference room pilot:First, your core team members ensure that the ERP software can handle the most common business use cases.
- The departmental pilot: Next, all of the organization’s business processes should be tested, including the less common ones.
- Integrated pilot and user acceptance testing: Finally, test the system in a true “day-in-the-life” scenario with deployed security roles, interfaces, and other technical requirements.
Find Trusted Partners for Your ERP Implementation
ERP systems are critical, but implementation is high risk. If done poorly, you may spend more than you need to, waste employee time, and lose revenue. There is no magic formula for successful ERP system implementation, but a good process can go a long way, and a trusted implementation partner can help.