Published in The Nation on June 1st, 2011
By Peter Theisen
Deploying a new enterprise resource planning (ERP) system is a big job. It's not only that many users are involved, but it's also like open surgery on the spine of your business, leading to a lot of risks when it's switched on and "goes live".
In many cases, the role of data entry is reallocated from accounting and finance to the sales and operations departments, which sometimes leads to resistance within your workforce.
Due to the high pressure of the "going live" phase, people are usually more than happy when the system is stabilised and they can turn their focus back to their day to day jobs. You can literally hear the big sigh of relief running through the organisation when this difficult project is finally closed and normality returns.
However, even though the company might have succeeded in "going live" without any significant business interruption, in most cases, the goal has still not been achieved. Launching a new system is not a definition of success. Achieving real business benefits, such as revenue gains, cost savings or increased process compliance; the things that justified investment in the project in the beginning - this is success.
I have seen three areas where companies usually fall short of realising the full potential of a new ERP system:
Obsolete processes
During the ERP implementation, everybody is busy making the new system and its respective processes work. This means providing the system, migrating he data and preparing people to use the new application. Even though, after going live, many processes are automated, people often continue to run related paper-based processes. It may be that they don't trust the data from the new system, or they are just reluctant to stop these processes because no one has given them authority to do so.
Full use of the new system
Often, there is not enough time to conduct all the change management that is needed before going live, because the focus is on avoiding business interruption rather than process compliance. As a result, people may not use the system fully, or may work around the designed business process. For instance, Purchase Orders may be entered into the system after the goods have been received, just so that invoices can be paid.
Correct data entry
New ERP systems often mean that data entry is moved from finance and accounting to operations. Furthermore, to achieve better reporting the company may need to capture more information than before. Users are often not aware of the impact of incorrect data entry. As a result, the quality of data entering the system may be low and management reports turn out to be meaningless.
As a result of all these things, it's important that companies take a step back after the ERP implementation and close the loop. By "closing the loop" I mean completing the deployment in all its aspects, to ensure that the system is being used as planned and obsolete processes are eliminated.
Here is what you can do:
- Deploy process and data governance dashboards. Remember: "What you can measure, you can manage". These dashboards will give you an indication of where the system is not being used correctly so that you can take action and retrain people.
- Clean up your process landscape. Set up a cross-functional team (typically process champions or key users) to identify areas where processes have become obsolete due to the ERP deployment. This team needs to report to a member of the senior management team because the issues it identifies may be cross-functional.
- Set up continuous-improvement processes. Once set up, the continuous-improvement team will identify improvement opportunities on micro-level, such as how the new system can deliver more functionality; how use of the system can be increased, and how the business processes can be made even leaner. This cross-functional team should meet at least once a month to review the process and data-governance dashboards and assign and track actions to turn improvement ideas into reality.
Therefore, don't move to the next project immediately after your ERP deployment. The complexity of ERP implementations means there will normally be a lot of value to be realised in the first six months after going live. I have seen companies that were worse off in the initial phase after ERP implementation. However, most of them quickly turned the situation around and benefitted from the system after cleaning up and process improvement.
Peter Theisen is business consulting director of Freewill Solutions. He may be contacted at www.freewillsolutions.com.
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