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How to prepare a company for an ERP implementation
07-Dec-2020
In this article, NFP consultant Robert Mallaliev shares his thoughts on accurate approach to an ERP-system implementation that helps to avoid mistakes during the process and provides the best solutions to project management to customers.
Today the role of digital transformation is important. Its impact on industries and global economics is advancing with seven-league steps. Business owners and companies' executives are keen to have a digital copy of their business. The key idea behind it is that digital copy has a wide range of capabilities: tools for monitoring and analysis of current organization's financial status, work units performance and front-office. And it is only a part of opportunities of what we call Digital Twin.
For a manufacturing company, digital twin is a tool built on ERP-system. To implement an ERP-system is a strategic solution that allows organizations to reduce costs, increase the performance and mitigate operational risks.
The process of an ERP implementation is extremely complex and time-consuming. A lot of difficulties and pitfalls that we come across during the realization process may increase the project cost significantly. And it is high likely that it would affect negatively on ROI measures of the project and on financial targets of the entire business. To avoid this kind of issues, a customer should act as a risk manager of the project, estimate possible risks and prepare his/her company for innovational changes.
In this article you will find out about an approach to an ERP-system implementation that allows avoiding the most common mistakes and will help the customer manage a project in the most professional manner.
A competent approach at the beginning will make the entire project successful.
There is a common Russian proverb — 'The way you meet the New Year it is the way you will spend it.' And this is true for a project management. To have a project ran as smoothly as possible, it is necessary to carry out a thorough preliminary work that could allow a project-manager to have a clear vision of how this project will be performed and who is responsible for certain decisions.
As a first and important step, we should assign a competent project-manager — the one with appropriate skills and knowledge and with an aim of successful implementation of an ERP-system.
After we have built a team, we should go into details of staff and an entire project KPI. Significantly important you should set achievable goals and to record the criteria of successful realization of the project. Otherwise, it would be difficult to draw up a charter and technical requirement, because without them no one will be satisfied with the results.
Before drawing up a charter, it is important to consider the purpose of it. This document should describe the core of the project, its comprehension and purpose. It is also required to add in a charter a preliminary alignment of roles and duties, to describe goals, to determine the key stakeholders and credentials of project-manager.
Before running a project, it is necessary to evaluate and consider the possible risks that can happen in the project's course.
Today the role of digital transformation is important. Its impact on industries and global economics is advancing with seven-league steps. Business owners and companies' executives are keen to have a digital copy of their business. The key idea behind it is that digital copy has a wide range of capabilities: tools for monitoring and analysis of current organization's financial status, work units performance and front-office. And it is only a part of opportunities of what we call Digital Twin.
For a manufacturing company, digital twin is a tool built on ERP-system. To implement an ERP-system is a strategic solution that allows organizations to reduce costs, increase the performance and mitigate operational risks.
The process of an ERP implementation is extremely complex and time-consuming. A lot of difficulties and pitfalls that we come across during the realization process may increase the project cost significantly. And it is high likely that it would affect negatively on ROI measures of the project and on financial targets of the entire business. To avoid this kind of issues, a customer should act as a risk manager of the project, estimate possible risks and prepare his/her company for innovational changes.
In this article you will find out about an approach to an ERP-system implementation that allows avoiding the most common mistakes and will help the customer manage a project in the most professional manner.
A competent approach at the beginning will make the entire project successful.
There is a common Russian proverb — 'The way you meet the New Year it is the way you will spend it.' And this is true for a project management. To have a project ran as smoothly as possible, it is necessary to carry out a thorough preliminary work that could allow a project-manager to have a clear vision of how this project will be performed and who is responsible for certain decisions.
As a first and important step, we should assign a competent project-manager — the one with appropriate skills and knowledge and with an aim of successful implementation of an ERP-system.
After we have built a team, we should go into details of staff and an entire project KPI. Significantly important you should set achievable goals and to record the criteria of successful realization of the project. Otherwise, it would be difficult to draw up a charter and technical requirement, because without them no one will be satisfied with the results.
Before drawing up a charter, it is important to consider the purpose of it. This document should describe the core of the project, its comprehension and purpose. It is also required to add in a charter a preliminary alignment of roles and duties, to describe goals, to determine the key stakeholders and credentials of project-manager.
Before running a project, it is necessary to evaluate and consider the possible risks that can happen in the project's course.
Risk-management allows us to prevent a failure before we start the implementation
Risk of staff sabotage
The embedded ERP-system depends on the users thus the major risk here is their rejection to use it. There are many reasons for that, but firstly it can be staff incompetence, fear of innovation, and passive attitude to something new.
It is in the interests of a project-manager to have a meeting with future users of ERP-system in advance and explain the benefits of using this program.
After implementation there is a need to hold training for a staff and key specialists should take a skill upgrade course. Without proper training, it is no use to expect that they will handle a new program themselves, so this is up to project-manager.
It is in the interests of a project-manager to have a meeting with future users of ERP-system in advance and explain the benefits of using this program.
After implementation there is a need to hold training for a staff and key specialists should take a skill upgrade course. Without proper training, it is no use to expect that they will handle a new program themselves, so this is up to project-manager.
Unrealistic expectations
In case you do not understand the goals of ERP implementation, you can never evaluate what are its benefits for your organization. High expectations have a negative impact on emotional and financial status of customers. The increasing figures of rate of return, free cash flow and sales do not depend on implementation project and its coherency, but firstly on quality of management decisions. ERP-system is only an assistant in developing a competent and effective management.
Lack of formal business-processes
It is impossible to embed an ERP-system if there are no formalization and optimization of the business-processes across the organization. ERP implementation is going to be a pain in a neck and cause heavy financial losses in case you have no idea who is responsible for what, what are processes steps and who are on behalf of running each of them. As a result, the efficiency of an ERP-system will be quite low.
And because this kind of work is highly labor-consuming, it is reasonable to address it to a team of qualified specialists. In a quite short time they will carry out the entire task. For this purpose we offer a business-process optimization.
It is an obvious advantage when the formalization of business-processes is performed by the same organization or even a team that is working on ERP implementation. Then we can expect an effective collaboration that will reflect on the quality of the implementation project in a positive way.
We should consider that there is no need to prevent and foresee any risk that we may encounter during the realization process. We can tackle all major issues at the stage of project planning and before the actual realization.
Let's take a look at information we should include in project-management plan:
The next step is to develop a technical requirement — the key document in the process of ERP implementation.
If you decide to embed an ERP-system, then you should start this process with developing a technical requirement. It seems obvious, but many managers think this is expensive and demanding practice, thus not obligatory. Such a statement is far from truth, because technical requirement allows to record goals and tasks of the upcoming project and protects legally both customer and contractor against clause breach.
Usually, contractor is about to develop a technical requirement after a preliminary survey of the company. Then both parties come to an agreement on this document. They can make amendments, add new conditions, and then attach technical requirement to the service agreement.
We should pay more attention to the preliminary stage of the project than to the process of the implementation itself. Because at this stage we develop a roadmap of the project that will guide us through the entire process. And the more accurate is your roadmap, the faster and concrete results you can achieve by the end of the project.
You can find the additional information on ERP implementation on our web page.
And because this kind of work is highly labor-consuming, it is reasonable to address it to a team of qualified specialists. In a quite short time they will carry out the entire task. For this purpose we offer a business-process optimization.
It is an obvious advantage when the formalization of business-processes is performed by the same organization or even a team that is working on ERP implementation. Then we can expect an effective collaboration that will reflect on the quality of the implementation project in a positive way.
We should consider that there is no need to prevent and foresee any risk that we may encounter during the realization process. We can tackle all major issues at the stage of project planning and before the actual realization.
Let's take a look at information we should include in project-management plan:
- Preliminary plan on budget, deadlines and project description is a starting point of the realization. It describes a company's investment plan, tasks deadlines and major terms of running a project.
- Plan on requirements management — a description of how project stakeholders' requirements are going to be collected and analyzed.
- Plan on change management — major theses on the actions in case of extra customer or contractor's requirements.
- Plan on data relevance management — it is important that project should be carried out coherently and by the unified registry. This plan describes methods and means of risk mitigation when customer and contractor refer to different versions of the same document. It can lead to losing of trust and ending of cooperation.
- Plan on project integration management — a description of budget governing, which people to involve in the project and so on.
The next step is to develop a technical requirement — the key document in the process of ERP implementation.
If you decide to embed an ERP-system, then you should start this process with developing a technical requirement. It seems obvious, but many managers think this is expensive and demanding practice, thus not obligatory. Such a statement is far from truth, because technical requirement allows to record goals and tasks of the upcoming project and protects legally both customer and contractor against clause breach.
Usually, contractor is about to develop a technical requirement after a preliminary survey of the company. Then both parties come to an agreement on this document. They can make amendments, add new conditions, and then attach technical requirement to the service agreement.
We should pay more attention to the preliminary stage of the project than to the process of the implementation itself. Because at this stage we develop a roadmap of the project that will guide us through the entire process. And the more accurate is your roadmap, the faster and concrete results you can achieve by the end of the project.
You can find the additional information on ERP implementation on our web page.
Robert Mallaliev
Сonsultant at NFP
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