7 ERP Implementation Challenges and How To Overcome Them

2. Didn’t take the future into account

ERP implementation risks and why ERP systems fail are important factors to consider when implementing an ERP system. Our experience shows that the lack of preparation and planning is the main mistake when implementing an ERP system.

Over the past couple of years, the economy has changed significantly and continues to change, so most ERP systems were not ready for such changes. There is a need to improve somehow and modernize enterprise resource planning systems so that it is possible to consider all changing indicators in the future. Otherwise, the implementation of ERP trends will become a burden for the correct and productive activities of the enterprise.

ERP implementation takes several years, and the system must still fulfill its goals. Therefore, it must be designed to work without needing changes for at least 2-3 years. To avoid repeating the same mistakes in the future, you should design and think over the structure and scale of the enterprise at least three years in advance.

Naturally, it is impossible to know everything in advance: new laws, market changes, and significant events worldwide. But the already known directions of development cannot be ignored.

Here are a few examples of changes to consider:

• technological changes in production;
• business expansion, creation of branches;
• business fragmentation.

3. Too detailed terms of reference

Often, managers believe that the ERP implementation progress can be algorithmic and detailed. This is how substantial technical specifications appear, which take several months to compile.

But ERP is a complex system, and it is impossible to foresee everything in advance. In almost any implementation, something will go wrong, and you will have to change the initial setting.

For example, some of the business processes needed to be understood. It means that one or several modules need to be finalized. As a result, some sections of the technical requirements will have to be changed, and in fact, this failed ERP implementation took a lot of money and time.

You should use another approach. First, an integrated work plan is drawn up, which is divided into stages. Then, a separate technical specification is written for each step in the implementation.

4. Planning budget and deadlines without margin

A rare implementation is going entirely according to plan. Сhallenges of ERP implementation include shifting deadlines, spending more money, or abandoning some part of the system. Therefore, when planning deadlines and budgets, it is better to count these with some margin.

If you do not meet the budget, you must abandon some modules or customize additional functionality. Or look for an extra budget.

If you do not meet the deadline, you can disrupt your business plans or fail the customer.

For example, we promised customers to expedite shipping and billing by the end of the year. They took our promises into account in their plans. They’ll have to change their plans if we don’t make it in time. This is unpleasant. The relationship is ruined.

5. Wrong modules selected

ERP systems contain many modules, and most companies use only a part of them. If you start to implement everything in a row, you will end up with a large useless system that will not bring the desired results.

The finance module is most often introduced first because it is essential to avoid problems with money. Accounting and control of financial flows is something that only some organizations can do.

Then it is recommended to introduce accounting and tax accounting. They can be implemented in one module or separately. They are essential for reporting to the state. ERP implementation failures can lead to big troubles. The state will punish you if you make a mistake, even by accident. An ERP system will reduce the likelihood of errors.

Further, the modules are implemented depending on the main activity of the company, for example:

• eCommerce: Purchase, Sale
• Industry/Manufacturing: Purchase, Manufacturing Management
• Logistic: Transport

6. The bottom-up strategy of information processing and knowledge ordering

The challenges of implementing ERP include the need for a top-down approach to align the system with company goals and avoid implementation issues. Practice shows that new information in the company daily cannot be foreseen in advance. So you will be forced to constantly improve the ERP system and significantly increase investment in its implementation. Therefore, each developer faces the problem of moving from obtaining the total amount of information to a specific limit when designing an ERP system. Since the enterprise receives large amounts of information of various contents daily, the ERP specialist needs to choose from all this information flow only the most significant data. Naturally, each company has its own needs for information support. Therefore, correctly implementing an ERP system means choosing important information for top management. But as the practice shows, ERP specialists, without going into the details of the importance of the incoming data, enter a lot of unnecessary and redundant information into the system, thereby increasing the development cost. As a result, the leadership receives enormous amounts of unanalyzed details, significantly slowing down the process of making business management decisions. When designing and implementing an ERP system, which requires high costs, it is necessary to consider mainly the company goals and, on this basis, correctly determine needed information and features.

7. Incorrect assessment of the economic efficiency of the ERP system implementation

One of the main challenges of implementing an ERP system is its high cost. It includes the cost of the IT infrastructure, payment for consulting services, etc. So, the top management is faced with the task of comparing the prices of automating business processes with the final economic results of the project.

To avoid possible ERP implementation failures, it is necessary to determine the cost of including certain information at all stages of the design and implementation of an ERP system. The greatest efficiency of an ERP solution is possible only if the company has well-built business processes.

The biggest advantage of the implemented ERP system is its rich functionality. But practice shows sometimes businesses use ERP as a tool that helps in the preparation of tax reports or a simple calculator. It can be facilitated by a few reasons, from the wrong choice of a consulting company to the wrong choice of system tasks and goals. Many businesses make the fundamental mistake of being guided by the “buy now, and then we’ll see” principle. Therefore, these enterprises also incur significant losses of funds.

Most CEOs run their business based only on their experience, intuition, vision, and very unstructured data about their state and dynamics. Therefore, the first thing that needs to be done for the project of introducing an ERP solution to be successful is to formalize all activities that you plan to automate. In most cases, this cannot be done without the involvement of professional consultants. Our experience shows that consultants’ costs are not comparable to the losses from a failed automation project.

5 Famous ERP Implementation Failure Examples To Learn From

ERP systems are renowned for their ability to streamline and optimize business processes. However, despite their immense potential, sometimes it can go awry, and ERP implementation failures can cost a fortune. In this article, we will explore some of the common ERP failure reasons and global ERP implementation challenges through the lens of some of the world’s largest companies.

Revlon: Lost valuable sales

In 2019, cosmetic giant Revlon implemented a new SAP ERP system to help streamline its business processes. However, the implementation went awry, and the company could not process orders or invoice customers, leading to a loss of $32 million in sales. Additionally, the company was forced to pay a $900,000 penalty to settle a Securities and Exchange Commission (SEC) investigation into whether it misled investors about its finances.

Nike: Loss of over $100 million

In 2000, Nike implemented a new ERP system from i2 Technologies to help automate its supply chain management. However, the implementation went over budget and schedule, causing significant supply chain disruptions that led to a loss of over $100 million in sales. The company eventually had to abandon the i2 system and switch to a new supply chain management system. Nike’s stock price dropped by over 20% after the ERP failure.

Hershey’s: Halloween disaster

In 1999, Hershey implemented a new SAP R/3 ERP system to help streamline its supply chain management. However, the implementation went so badly that the company could not deliver its Halloween candy to retailers, leading to a loss of $150 million in sales. The company was forced to air-freight candy to retailers at an additional cost of $100 million, leading to a total loss of $250 million. The company eventually had to scrap the SAP system and switch to a new supply chain management system.

National Health Service (NHS): Cost over £10 million in wasted resources

One example of a healthcare ERP implementation failure occurred with the electronic health record (EHR) system used by the UK’s National Health Service (NHS). In 2013, the NHS implemented a new EHR system called the “Care.data” program, which aimed to gather patient data from various sources and store it in a single database.

However, the program was met with significant resistance from patients, healthcare professionals, and privacy advocates who expressed concerns about the security and confidentiality of patient data. Additionally, technical issues with the system’s functionality caused delays and inaccuracies in data collection and sharing.

As a result, the NHS was forced to suspend the Care.data program in 2016 and ultimately abandoned it entirely in 2018. The failed implementation cost the NHS millions of pounds in wasted resources, lost productivity, and reputational damage. This example highlights the importance of thorough planning, stakeholder engagement, and effective communication when implementing ERP systems in the healthcare industry.

Target: Supply chain problems

In 2013, Target implemented a new SAP ERP system to help streamline its supply chain. However, the implementation led to significant supply chain problems, including stockouts and overstocking, causing the company to lose millions of dollars in sales. The implementation also delayed the company’s expansion into Canada, eventually failing. The company eventually had to invest millions of dollars to fix the supply chain problems and switch to a new management system.

ERP Implementation Without Failure With Digicode

Are you looking for a credible Dynamics 365 ERP consulting provider that eliminates any ERP implementation risks? Digicode is a custom software development company in USA specializing in expediting business automation and intelligence for clients, bringing consistency to industrialized processes, and reducing overhead costs and inventory for SMBs and enterprises. We can help you handle your ERP implementation, build custom functionality, integrate with other platforms, and provide support and user adoption training.

At Digicode, we pride ourselves on our expertise in various fields, including retail, fashion, predictive analytics in manufacturing, wholesale, eCommerce, logistics/warehouse, and professional services.

One of our successful cases involved helping the Science and Technology Center to gain visibility and control over grant management using Dynamics 365 Business Central. This non-profit organization in Kazakhstan and Ukraine supports civilian science and technology partnerships by financing and supporting specific scientific projects.

If you’re interested in using our services, please don’t hesitate to contact us. We look forward to hearing from you and helping you achieve your business goals.