Why ERP software fails and what you should do about it

An Enterprise Resource Planning (ERP) software is an integrated business management tool assisted by software and technology that collects, centralizes, and interprets data, often in real-time, for organizations. Despite these benefits, some companies find it hard to use ERP software because it may have limited functionalities that don’t meet their core business goals. When this happens, it’s an ideal time to look for a better ERP software solution, more suited to the unique business needs.

Why your ERP software is not working

ERP systems are designed to help improve your company’s impact and efficiency. They may do so by improving your competitive advantage, reducing inventory backlogs, helping raise the standard of and turnaround times for customer service support, and increasing your production capacity and productivity. Unfortunately, there are factors that could prevent these things from happening. Failed ERP systems are common in the IT world and therefore it is critical to evaluate the circumstances that lead to failure.

Some of the most common reasons why ERP software fail to provide promised benefits are:

Collecting data is the only focus

ERP systems offer the advantage of integrating business processes. Problems occur when data is being collected through different ways at each step of the business processes. The warehouse may be using a spreadsheet and then entering the data later. Accounting may be holding on to ledgers from a unique software or more spreadsheets. If these forms of data collection are not integrated between each other, human input errors will occur, and your ERP system will fail to do what it’s designed to do.

Focusing on one customer or vendor

One size doesn’t fit all. Poorly designed ERP systems focus on the needs of one customer or vendor, which impedes adjustments for those who differ from the chosen system model. An industrial manufacturer will need a different ERP system than an e-commerce business. Involving all relevant stakeholders will help you choose and design an ERP system best suited to your unique business needs. Effective designs cover the needs of a wide band of users; incorporating flexibility into your ERP design allows for process changes and the ability to meet new business requirements and opportunities with ease. Nimble and flexible ERP systems help make companies more competitive.

The absence of real-time reporting

Real-time reporting is more than static spreadsheets. Real-time reporting can update performance dashboards in real-time to keep employees informed of key data changes as they happen. This helps the organization maintain a smooth workflow at all times a truck showing up at the guard shack can be directed to the best door for unloading upon arrival, at the same time production planners can be alerted to the arrival of possible critical parts and plan their immediate usage. Real-time data can also help provide projections for future purchasing requirements from suppliers, as well as alert sales reps when their orders will be fulfilled, and accounting to keep track of upcoming payables and receivables. Many ERPs lack some critical real-time reporting functions, generally allowing only an overview or aggregated data collection.

Poor or lack of mobility

Including access to mobile data in the ERP system design can help maximize results.  The best data is collected in real-time directly from the source. For example, your team members may be using modern mobile devices such as smartphones, tablets, handhelds, or fork truck scanners while performing their daily activities. This mobile device data should be seamlessly integrated into your company’s desktop system support dashboards and overall ERP system design.. Including mobile device data in your ERP solution can help ensure accurate data visibility and accuracy in your work processes.

Not integrating all user needs

ERP systems are not just related to IT and Accounting support. Effective ERP systems integrate all aspects of an organization and its various work processes into its design. Effective ERP systems should plan for what effective data access looks like for different end-users across the company and at all the different stages of the business workflow. For example, an IT controller’s data needs may look very different from what a floor production supervisor needs to know in order to be most effective at their job.

Often times ERP systems are designed prioritizing one viewer or stakeholder over another; this may mean that the required data for one business user could be several keystrokes away and difficult to access, therefore slowing down access to key data for some users and effectively slowing down overall business processes and efficiencies for the entire company. By making key data difficult to access and the system ineffective for some users, most ERP systems often cause some users to abandon usage in favor of static and manually updated spreadsheets or paper; this leads to the possibility of significant human error and inefficient work processes. Involving all potential users in the ERP design helps maximize an ERP system’s results.

Wrong vendor or provider

It is difficult to determine a vendor’s competence to recommend or install the ERP system your business requires. A vendor who doesn’t take the time to understand your business can be a dangerous partner. A busy vendor who puts the “new guy” on your project because of your size means that you are paying for the vendor’s education while being a tech guinea pig. A vendor with a good point-of-sale story will need to prove its worth for a “simple” distribution model or for a “complex” manufacturing operation.

Confusing training and education

Not knowing your system will lead you to failure. Education is different than training and many companies confuse these tasks. As end-users need to feel confident when navigating and using an ERP system while performing their daily activities, receiving the proper training is crucial to achieve a successful implementation. Usually, the vendors provide training sessions to process leaders using the “train the trainer” model. Education provides staff with the required methodology and business process knowledge that guide their ERP system activities. Staff personnel across the entire organization (from top master management team to shop foremen and cost accountants) won’t be effective unless they understand the concepts required to manage inside an ERP environment, and the business reasons behind these needs.

What you can do

You need to make sure that an ERP recommendation will simplify your processes and meet your unique business goals and needs. Don’t assume any software will magically solve all your problems and transform your company into a paragon of efficiency overnight. It is crucial to establish a correct baseline understanding of your business needs and operational inefficiencies that could potentially benefit from an ERP solution. This will help guide the development of an ERP solution that specifically caters to your needs.

Look for solutions that can be aligned to your core business activity. Examine the processes encoded in the software. Talk to your entire team to make sure the ERP system you are exploring will simplify your work processes and not add extra unanticipated work or time constraints to your existing workflow. If you can model your company’s best practices based on those processes, you’re choosing the right solution. If you can’t, continue searching.

Be aware that software implementation often fails to achieve its promised benefits due to the resistance to change by people who have a vested interest in existing processes. Employees that are used to doing things a certain way may be reluctant to adopt new work processes. It is important to understand the current system habits and needs of each of your users in designing a best-match ERP system.

Develop in-house for your new processes or best practices implementation to be a part of the rollout team. Generating buy-in and credibility with established workers will help give your ERP implementations process validity. Develop a schedule to listen to those using the new system and allow team members to document and share their input and best practices in adopting the new processes. Listening to and capturing input from your team throughout a new ERP system rollout will enable you to iterate and manage needs as they arise. Your team’s input also gives them visibility and ownership into the business transition process,  empowering them to be champions of their own business process improvements and subsequent success.

Vendors typically have the capability to adapt and configure the system to best meet your user needs during a rollout period.

As one of the leading providers of Sage X3 implementations in North America, and along with its expertise in multiple industries, Panni Management and Technology Corporation can help you identify your critical operational needs to customize, implement and integrate the right solution and training to meet your business needs. Contact us today to set up a free consultation for your business.

Alex Altamirano

Alex Altamirano

Alex Altamirano is an experienced Business Manager with over 20 years of experience leading business process transformation initiatives in the areas of distribution, manufacturing and supply chain. His industry experience includes cannabis accessories distribution and retail, food, oil and gas and industrial equipment manufacturing. He leads the supply chain and manufacturing business optimization practice at Panni.

Transforming businesses since 2009

For over a decade, Panni has helped companies transform their businesses to lead, innovate and be profitable. With the right combination of technology and experienced developers and consultants, we help companies with Change Management to achieve the organizational objectives. We believe in long-term relationships with our clients and provide top-notch support with fast turnaround times.