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What is ERP Implementation?

ERP Implementation Detailed Guide

Definition of ERP Implementation

ERP Implementation is the process of installing, configuring, and customizing ERP System and integrating it with different departments across the company such as production, finance, sales, operations, human resource, and so on.

What is ERP Implementation Life Cycle?

ERP Implementation Life Cycle is the structured process of planning, deploying, and customizing an ERP System within an organization to meet specific business requirements within a predefined timeframe. It involves various processes such as defining the project scope, identifying stakeholders, creating a project plan, customizing the system to meet the company’s needs, and providing training & support.

ERP implementation is a broader concept that includes a range of activities such as installing your chosen Enterprise resource planning software, migrating your old data to the new system, configuring & customizing your new system for your unique business needs, and training employees to use it in a logically progressive manner.

The ultimate goal of the implementation is to facilitate decision-makers with a future-proof system to manage all business units from a centralized location, have a bird’s eye view throughout the business operations, and make strong data-backed decisions. With a properly implemented system, the employees and management will no longer find themselves juggling multiple applications for information.

Stages of ERP Implementation

Stages of erp implementation methodology

1. Planning & Discovery

This is the initial stage in the implementation process. It includes setting up a cross-functional team of employees to pen down specific objectives to achieve and laying out a project plan. The company may also consult with external consultants who have specialized experience, skills, and expertise in implementation.

 

The goal of this stage is to identify areas of business operations that can benefit from ERP implementation. It also involves gathering information from all levels across the organization and creating a detailed implementation plan that outlines the timeline, budget, and resource requirements.

 

The primary duty of the Project Team will be:

  • To ensure the implementation process is going according to the plan.

  • To ensure end-users have the required knowledge to operate the software independently.

  • Make sure that critical business data is stored inside multiple repositories.

  • Assisting the employees with any issues they may have with the ERP. 

 

2. System Design

The design stage is the second step of the ERP implementation process. This step involves developing a detailed design of the new system with an intimate understanding of current business processes. The Project Team collaborates with the various stakeholders to define data structures and the look and feel of the new system. They also outline the steps involved in deploying the new system.

During this phase, a greater emphasis is given to Gap Analysis. It is the process of identifying differences between the current and desired state of the organization. Functional gaps, communication gaps, data gaps, and process gaps, are some of the criteria used.

  • The Project Team will gather information from the previous phase and create a detailed plan for the implementation
  • The Design phase requires input from all the stakeholders
  • The Project Team should create detailed documentation outlining system configurations, and data migration plans
  • The Project Team can also use a Project Management Tool to design a thoughtful design plan

 

3. Development & Customization

Deployment is the phase at which the ERP goes live- either concurrently across the entire company or partially across certain departments. In this phase, it is important to communicate to all stakeholders about the new system to gather their opinions, feedback, and suggestions.

After deployment, the Project Team closely monitors the new system for any discrepancies and closely interacts with the ERP Vendor for any issues that they might have. For a successful ERP implementation, it is important that the new system is carefully planned and deployed to get the most out of it.

Here are some tips for effective company-wide deployment of the ERP:

  • ERP implementation is a major undertaking. Support of senior management is critical for successful implementation.
  • A detailed plan should be in place with a list of tasks to be completed and a budget.
  • Employees, customers, and vendors should be communicated with and taken into confidence
  • The company can also employ an external consultant to train its employees to use the system.

 

4. Company-wide Deployment

Deployment is the phase at which the ERP goes live- either concurrently across the entire company or partially across certain departments. In this phase, it is important to communicate to all stakeholders about the new system to gather their opinions, feedback, and suggestions.

After deployment, the Project Team closely monitors the new system for any discrepancies and closely interacts with the ERP Vendor for any issues that they might have. For a successful ERP implementation, it is important that the new system is carefully planned and deployed to get the most out of it.

Here are some tips for effective company-wide deployment of the ERP:

  • ERP implementation is a major undertaking. Support of senior management is critical for successful implementation.
  • A detailed plan should be in place with a list of tasks to be completed and a budget.
  • Employees, customers, and vendors should be communicated with and taken into confidence
  • The company can also employ an external consultant to train its employees to use the system.

 

5. Bug Testing & Reporting

ERPs are complex and integrate data from different departments. Testing is an essential step in the implementation process to identify potential errors, defects, malfunctions, and performance issues even before they impact business operations. The test results are typically documented and recorded in the system so that the Project Team can communicate with Vendor Support for corrective actions.

The company can deploy various testing methods such as unit testing and system testing. Unit testing is the testing performed on individual modules of the ERP to ensure they are working correctly. In contrast, system testing is performed on the entire system as a whole.

Here are some ways to effectively tackle bugs in the new system:

  • When an employee comes across a bug in the system, he/ she should pen down the process to reproduce it again
  • The employee should record additional information such as operating system, browser, and ERP version information
  • Optionally, the employee should take a screenshot of the bug for better visualization and understanding
  • The Project Team should flag the bug depending on its severity. For example Major bug, Minor bug

 

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6. Employee Training

Employee training is a crucial part of the success of the implementation process. This phase involves making employees comfortable with the new changes, explaining the importance of adopting the new system, and providing them with training and support so that they can efficiently use it.

When adequate training is provided to the employees to use the new system, they can become efficient in their work. Ultimately, it can result in a significant productivity boost for the organization. Properly trained employees are less likely to commit errors or mistakes that can cause a significant loss to the organization.

Here are four essential features of successful training programs irrespective of the training methods you implement:

  • Collect feedback from trainees and the implementation team to improve the entire training session.
  • Start multiple communication channels, including vendor support teams that allow trainees to solve their doubts instantly.
  • Create role-based training programs that can be customized based on the user’s learning curve.
  • Include tech-savvy people in the training session who help low-level users during the initial days. 

 

Avoiding the Most Common Blunders in Implementation of ERP

1. Not Setting Up a Project Team

ERP implementation requires a team of professionals with adequate skills and experience. Not having a dedicated team to look after the complex implementation process can cause failed implementation.

2. Not Anticipating Potential Risks & Challenges

ERP implementation is a time-consuming and complex task. It requires the cooperation of different stakeholders for effective implementation. Failing to anticipate the potential risks and challenges can lead to delays, increased implementation costs, downtimes, and loss of business opportunities.

3. Excluding the Key Stakeholders

Excluding key stakeholders from different levels of the organization can lead to poor implementation. The key stakeholders include the executive leadership (CEO & CFO), departmental heads who are responsible for the day-to-day activities, and the IT Staff which is responsible for setting up the systems and configuring the IT infrastructure.

4. Lack of Project Roadmap

Project Roadmap is a high-level overview of the project’s goals, and strategic objectives, and a visual representation of what is expected to happen during a course of time. Not defining a clear project timeline can cause chaos. Different employees may work on the same process, leading to a lack of productivity and inefficiencies.

5. Not Training the Employees

Your employees must be trained to effectively use the ERP. However, the lack of proper training can lead to poor performance, downtimes, errors, increased costs, and missed opportunities.

5 Key Factors to Measure the Success of EPR Implementation

Key Factors to Measure the Success of EPR Implementation

A successful ERP implementation should result in cost savings in different aspects of the business operations such as production, inventory management, and sales & marketing. Comparing the pre-implementation costs with post-implementation costs can be an effective way to measure monetary savings.

ERP implementation should bring efficiency to various processes in numerous departments. The organization needs to track performance improvements in different areas of operations such as procurement, quality management, and customer support (CRM).

The organization needs to compare the accuracy of the data pre and post-implementation. It can use various methods such as data profiling, and data validation to assess the quality of the data and track any improvements.

Another measure of the success of ERP implementation is actual user adoption rate. To access the user adoption rate, the organization can track the number of active employees using the new system.

Return on Investment (ROI) is a mathematical formula that denotes the profitability of an investment. An increased ROI may indicate the effectiveness of ERP implementation.

How Long Could ERP Implementation Take?

There is no one-size-fits-all answer to this question. The actual time an ERP implementation could take varies on different factors such as the size and complexity of the business, and the scope of your existing systems. For example, a company operating at an international level may take several years for ERP implementation, whereas a small business operating at a city level may take merely two months.

Implementing the ERP with your existing systems can be a challenging task. Your organization will need to leverage the experience of the Project Team and ERP Vendor to effectively address these challenges.

ERP Implementation Strategies

1. Establish Key Performance Indicators (KPIs)

Different businesses may have different objectives such as lowering manufacturing costs, reducing inventory stock-out situations, and fixing marketing and distribution issues. In order to gauge the new system’s success, these objectives need to be clearly defined and written down.

2. Clean Up & Rationalize Data Before Migration

Many companies migrate their entire historical data to the new system which may not be a rational decision. Before migrating your data to the new system, consider whether you really need that decades-old customer order information. Adopting a new ERP system is an opportunity to clean up and rationalize your old data.

3. Communication with All Stakeholders

In order to ensure that everyone is on the same page, there is a need for effective communication with all stakeholders such as management, employees, suppliers, and shareholders.

4. Leverage a Balanced Approach

Companies need to strive for a balanced approach between customization and standardization to customize the complex system for your use case and leverage the standard functionalities.

5. Continuous Improvements

ERPs need to be regularly updated and maintained to adapt to the changing business requirements and effectively use them to achieve short-term and long-term business objectives.

Related ERP Articles

FAQs

Development & Customization is the most difficult phase in the ERP implementation. Integrating your existing systems with the ERP can be a difficult and challenging task. Your existing systems may have been using a different data format, and architecture and lack clear documentation.

If you wish to avoid ERP implementation delays, you will need to develop a solid and realistic estimate of the timeline during the Planning & Discovery phase. Many ERP projects fall behind schedule because their project planning lacks a strong and realistic timeline.

Cloud ERP is installed on the vendor’s server whereas the On-premise ERP is hoisted on the company’s own IT infrastructure. Thus, the implementation steps for both these ERPs vary in certain degrees.

The cost of ERP may vary. It depends on different factors such as the size and complexity of your company, the number of modules required, training and support costs, and so on.

Return on Investment (ROI) is calculated by comparing the total cost of ownership to the net benefits of ERP obtained or expected to be received from the ERP. In short, ROI is a measure of profitability that is calculated by dividing the net profit by the cost of investment.

To measure the Return on Investment (ROI), your company will have to quantify both the tangible benefits and costs of ERP implementation. After quantifying the benefits and costs, divide the Net Income by the Total Cost of Investment, and multiply it by 100.

Merely implementing ERP is not enough. Your company will need a dedicated team of professionals who can promptly address any technical issues that may arise in the future to ensure minimal disruption. Additionally, ERPs require regular updating as part of their post-implementation maintenance. These updates contain the latest patches, and bug fixes that fix performance issues and security vulnerabilities.

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