Implementing ERP solution is high-risk decision because it will cost million and also affect your whole company. Unfortunately ERP is not a magic button that can solve all your business problems, no matter what vendor you choose.If your business strategies or key business processes are flawed, even the most advanced IT system is not going to help. In fact, there are many organizations attain benefits much lower than their expectation of ERP implementation.
A figure below is a report from Panorama Consulting showing a failure of ERP (SAP) implementation in Shane Co.
|Planned Results||Actual Result|
|Implementation Duration||1 year||3 years*|
|Implementation Cost||Under $10M||$36M|
|Cost as % of Sales||5%||18%|
|Business Benefits||Better demand forecasting||Wrong inventory mix for critical Xmas Season|
|Ongoing Cost||Improve||8 contractors on staff to stabilize system|
|End Result||Enhance business benefit||Corporate bankruptcy|
The figure does not tell that implementing ERP is a wrong decision because you can find many successful ERP implementations out there . It just shows how high the risk it takes so that you have to consider it carefully. Therefore, prior to ERP vendor selection process, you have to make an assessment by asking, “Why do we want to implement ERP?” This question will help you defining clear goals or have a clear understanding what you want to accomplish by taking on ERP projects. Unfortunately, this question is the toughest to ask once you’re already on the ERP bandwagon.
The goals should be business-focused. Technical purpose and goals are also important but often, they are not inadequate. The others thing you have to do are evaluate cost vs. benefit (Return of Investment) of ERP project, identify and quantify opportunities for improvementt.
By doing these perhaps you realize that ERP is not the solution to solve your business problems at the moment. Perhaps you want to optimize what you already have, improving existing process, redesigning your organization and so on or perhaps, in the contrary, you find that ERP is the best route to solve your business problem.
And don’t be afraid to say no to ERP if you realize that it is not the best solution right now.
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Source : Panorama Consulting
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