Will your new ERP system be a success?

How will you judge whether your ERP (enterprise resource planning) system is a success? Will it deliver the benefits that you were expecting? Will it provide a sound return on your investment? Or will you simply be relieved when it is implemented in a reasonable time and cost without damaging your organisation?

 

The reasons why companies decide that they want a new ERP system are legion. But the three most pressing can be categorised as follows:

 

>Project Objectives
>Business Objectives
>Business Benefits

 

Knowing which of these is your primary motivation will help you set the goals you want to achieve from the new ERP system and therefore allow you to most accurately measure results.

 

Project Objectives

 

Sometimes Project Objectives drive the desire for a new system. An existing system may:

 

>comprise an assortment of disparate systems that have little if any integration

>involve data duplication

>be difficult and costly to maintain

>no longer be supported

>be insufficient to meet some new legal requirement

 

These are issues that annoy staff, create errors and decrease productivity. They create problems that build up to the point where a company is willing to implement a new system in order to remove them.

 

Business Objectives

 

Where business objectives drive the desire for a new system, a company may be looking to:

 

>reduce administration costs

>decrease its outstanding debtors amount

>improve service levels

>decrease the value of inventory

>gain a competitive advantage

>grow revenue without increasing staff numbers

 

The focus here is to improve the business in one or more ways by implementing a new ERP system and, hopefully, also improve the company’s processes and procedures around the new system.

 

Business Benefits

 

In my experience, only rarely do Business Benefits drive the desire for a new system. Business Benefits are the quantifiable result of achieving Business Objectives, they may be expressed as follows:

 

>increase revenue by 13% per annum for the next three years

>reduce to, and then maintain, stock on hand at a value of no more than 12.5% of annual revenue

>decrease the outstanding debtors amount by $450,000 from its current average monthly level

>increase market share to 38% within 2 years

 

How to best measure success

 

Project Objectives alone should not drive a decision to implement a new ERP system. At best they are an indicator that opportunities exist to make improvements – once identified these improvements can be expressed as Business Objectives. Measuring system success on the basis of achieving the Project Objectives amounts to little more than a sigh of relief when the implementation is complete. Of course, Project Objectives have to be achieved but by themselves they do not provide any measurable benefit to an organisation.

 

Business Objectives can appear to be pretty persuasive reasons to commit to the expense and risk of a new system, but another step is needed, to convert the Business Objectives into Business Benefits, thereby allowing a company to assess cost versus benefits; calculate a return on investment; and establish a basis for measuring success.

 

The achievement, or otherwise, of Project Objectives can normally be established after a new system has been in operation for three months. Some success in achieving Business Objectives should be apparent from six months onwards, while assessment of the Business Benefits delivered should be continual from twelve months onwards.

 

A reputable ERP partner will schedule Post Implementation Review meetings during the initial ERP project planning process. These meetings, and the reports produced from them, will allow the client to assess whether or not their new system and the associated new practices and procedures have delivered the benefits that were being sought by the organisation. Post Implementation Review meetings also provide an opportunity to identify any shortcomings in the system, the procedures, and the work practices, and take timely action to take corrective action.

 

Peter Hill is a Director of the Melbourne based company Fenwick Software. He has been in the Information Services industry for more than 40 years, working in both Australia and New Zealand.

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