ERP systems have come a long way not only in terms of optimizing and smoothing out business processes but also boosting the overall growth of the company. So, it is essential to have the correct ERP implementation plan for optimal resource allocation and utilization.
In this article you will learn about the ERP implementation process so that you can analyze which is the best way to go about implementing it. Here are the 12 ERP implementation phases for a successful transition. But wait. What if you created an ERP system from scratch? Does doing so make sense? And what if you used an ERP system from a supplier but went through the ERP implementation process yourself. Keep reading – let’s dispel the doubts together.
But first off – what is an ERP implementation?
ERP software (Enterprise Resource Planning) is a system for managing internal activities in a company. It is a tool capable of automating, controlling, and analyzing internal processes such as logistics, inventory, production, accounting, and finance.
There are different categories of these tools, from professional programs that cover all functions, to systems created with Excel templates or with a CMS such as WordPress.
Careful ERP implementation process is a key in ensuring the success of the software. There is also the possibility of creating an ERP from scratch, but this option is not the most frequently chosen one, as it involves a series of processes that can take time, but we will see this later.
Once you have defined the category and type of ERP to be used in the company, it is time to move on to the ERP implementation process. That is the moment when the system is installed, configured and adapted, so that it works in harmony with your company's processes.
Is it advisable to create an ERP on your own?
Professional programs are the most widely used and the easiest options to implement. But sometimes, custom-made developments can help the ERP system work more efficiently since the system is tailored to your specific needs.
However, this is not a cheap or quick choice. Creating an ERP system is an ambitious task, which can take months of work. It requires software and programming specialists, who not only handle the technical side of software development, but also the functional side of an ERP system.
The team that intends to create an ERP system must know in depth the functions of accounting, warehouse control, sales, purchasing as well as any other elements that are specific to your needs.
A much more accessible option, which also does the work, is to adapt an out-of-the-box ERP system to your company's processes and use a renowned solution available on the market.
How about an open source ERP system, which allows you free access to its internal configuration, so that any professional can customize its functions? In this way, you do not start from scratch, and you can distribute and modify the developments that have already been made by someone else.
Whatever you choose – a ready solution or your own ERP system – these are the 12 ERP implementation phases you’re likely to face:
1. Identifying problems and establishing the target(s)
An ERP system provides a comprehensive solution to many problems faced by companies everyday. However, it is very important to identify the real objective why you want ERP implementation in your company. The question you’re asking yourself is along the lines of: What should the ERP system be implemented for?. This means a needs analysis carried out across the whole company as the first ERP implementation phase. Key performance indicators (KPIs) must be analyzed to understand the need for ERP implementation. Then, it is essential to identify the exact problem or need that motivates you and break it down into ERP implementation phases.
2. Defining the scope
The objectives of ERP implementation can be many, from bringing transparency of operations to having financial control, supporting organic expansion, supporting procurement or supporting common processes. It can also be a combination of all or just some of these elements.
According to data, 61% of ERP implementations take longer than expected and 74% of ERP implementation plans exceed budgets. Not surprisingly, the main cause of delays and budget overruns is the unclear definition of the ERP implementation phases and requirements. So, future ERP system features should be evaluated against your current as well as predicted business needs.
3. Brainstorming and evaluating options
Approximately 33% of ERP buyers do not try out any products before making a purchase and approximately 22% the companies surveyed reported that they purchased the first system they looked at.
These are dangerous statistics, not only for those implementing the ERP system but also for vendors, as optimal utilization of an ERP system remains in the realm of dreams. For a successful utilization of an ERP system, the management must invest time in evaluating the available options and take ownership of the whole process.
ERP system package vs. ERP system customization
The organization needs to understand the difference between ERP system package configuration and customizations, clearly because more often than not, there is no one-size-fits-all and purchasing an ERP system means tweaking it to cater for your specific needs.
The evaluation of ERP system options is a very important task, as they will be evaluated based on current needs as well as future requirements. There are two perspectives: the here and now as well as the long-term vision.
To the cloud
A cloud ERP solution, is the current preference of customers but there are still on prem options – this is also a decision that needs to be taken. Do you want to use your own servers? What will be the cost be of such an approach? Or would you rather keep your data in the cloud? Pay a flat fee and sleep better at night?
Therefore, a company needs to exchange ideas with ERP system vendors and consultants to incorporate the best ERP implementation plan for the organization.
4. Building an ERP Implementation Plan
Once the ERP system to be implemented in the company has been selected, it is necessary to assign a dedicated manager, since all the company processes will be affected by the ERP implementation.
ERP system and its implementation
It is then necessary to define which technical and human resources are necessary for the ERP implementation process. Some companies providing the ERP software also offer ERP implementation services at an extra charge. Or you can choose a partner company that will do this service for you.
However, having an internal team with assigned roles and responsibilities is more than necessary, regardless of the approach that you adopt.
Making friends with the supplier's staff
Once the people in charge of the ERP implementation in the company have been planned internally, it is time to hold a meeting with the supplier's staff. The objective of this stage will be to reach an understanding where the current state of the company and the necessary requirements of the new ERP to be installed are put on the table.
Configuration and Development
The configuration of the tool is the ERP implementation phase in which the actual implementation begins. The first installations and tests of the ERP system are made, and the necessary integrations and developments are configured so that it can work within the current processes of the company.
Once the initial tests have been successful and the ERP has been integrated into the company's processes, it is time to train the staff to use it.
A professional ERP system, such as MS Dynamics 365 FSCM (Finance & Supply Chain Management), allows access to system functions and functionalities by means of an intuitive and user-friendly interface. Nevertheless, you still need to train your users. With Dynamics it’s going to be plain sailing as this ERP system creators have invested R&D work in features that make the user experience more pleasant.
At this stage, the final system tests, final adjustments and fine-tuning must also be carried out.
5. Data Migration
Once an ERP implementation plan is drafted, the next important step is data migration, which provides a smooth transition and guarantees effective future use of the ERP system. Afterall, the ERP implementation process can be a big change, especially if the company is going to be using an ERP system for the first time.
Identifying what data is necessary for a successful transition is very important. While ERP systems allow for data entry, a complete data change can be a burden on the software. Therefore, only the necessary and most important data should be transferred to the new ERP system, and great care should be taken to ensure that data can be retrieved when needed.
6. Verification as the most important part of ERP implementation best practices
Preparing the company for ERP implementation is the core of all implementation steps and plays a vital role in the process, whether it is a success or a failure. After detailed brainstorming between the vendor and your management, the required infrastructure is installed and needs to be verified.
The infrastructure on which the ERP software will run must have the scope for scalability along with the options to customize it on demand. As it is difficult to predict all future variables, such a requirement should not have many limitations.
An ERP system such as Microsoft Dynamics 365 FSCM has been designed through a significant amount of research and in line with the needs of the industry. In some cases, customization may not be necessary, while there may be some specific requirements that need to be catered for nevertheless.
So, during pilot testing, the realization of the value of the system against the desired value of the company should be evaluated. Afterall, ERP implementation is a major company investment decision that involves a large set of resources. Management must continually keep an eye on its performance and maintenance schedule. And it is at this ERP implementation phase that you will be deciding whether customizations will be necessary.
8. Change management
Employees of any company are used to the same type of activities performed through a defined process in their daily routine and any change may not be easily accepted, especially when it is something as significant as the ERP system.
ERP systems are not fixed assets like a computer that is purchased and configured in the company's office, it is actually a system that is supposed to improve the work environment and work style, which affects not just one or two operations, but all of them.
Management must engage their employees and prepare them to answer critical questions such as:
A series of brainstorming sessions and resolution of questions would increase employee confidence and prepare the staff to welcome positive change with open arms. Change is for everyone and communicating this positively to employees will make things easier, as an ERP system can only provide optimal results when every employee embraces the change. Therefore, care must be taken to ensure a smooth but successful transition by building consensus and trust among employees.
- Why is it important for the organization to have an ERP system?
- How will an ERP system increase productivity?
- How can an ERP system automate administrative functions and save time?
9. Technology and knowledge transfer
21% of ERP system implementations fail to deliver significant business benefits. The reasons vary, starting with inadequate customizations or suboptimal software utilization as a result of poorly trained personnel operating the system. Mind you, training is the most important aspect of the ERP implementation process.
Knowledge transfer ensures that there are fewer problems and more success, especially when an ERP system is implemented for the first time in the company or when the platform is changed from one ERP system to another.
Company management must ensure the proper transfer of technological knowledge between the vendors and the company's internal IT support staff. Proper use of technology and effective training should be considered as top priorities as these are the keys to the success of the project as a whole.
10. Project management and testing
After evaluating all the available options, selecting the most suitable one and then training the employees, the real aspect of ERP implementation is the actual project implementation. According to one study, 40% of ERP system implementations cause major operational disruptions after go-live, so doing a proper implementation is a must.
Rigidity can be counterproductive as there is a large amount of time lag between the selection, evaluation, and implementation processes. There is also lateral improvisation that must be built into the project plan. At the same time, the main objective should not be diluted or changed. So the whole ERP implantation process is a mix of art and science and balancing on uneven ground. But. The good news is that it’s doable.
11. Go live
ERP implementation reaches its most important point at this stage. It is when, progressively, it moves from testing to action. The new ERP system is used by employees and begins to work on production. In this phase the support programs are defined and what is necessary during the first weeks to execute the improvement adjustments. Once the ERP solution is verified and implemented correctly, it is time to go live.
12. Control and monitoring
Once the ERP implementation has been completed, it is necessary to organize a permanent control system. This serves to regulate and reorient the process, in case something is not going as expected.
It is advisable to perform an additional functionality test, just as a safety measure. An ERP system is not a one-time event, but rather an ongoing process. It is something that the company has to continuously monitor to avoid any aberrations or system failures that may affect the functionality of the ERP software.
Finally, regular updates to the vendor's software are one of the requirements of the solution once the implementation is complete. With Microsoft’s One Version policy it’s easy to keep Microsoft Dynamics up-to-date. Maintenance should also be performed periodically as an aspect of ongoing support, which helps ensure a smooth and functional ERP system.
Creating an ERP is a complex decision. ERP system vendors offer free trials to test the tools. There are open source tools, which allow you to customize the software and accommodate the needs specific to your company. In a nutshell – there are options.
ERP implementation, beyond the type chosen, is also a fundamental process, which will change your business landscape forever according to the choice previously made. For this reason, spend time doing exhaustive research and have a hands-on trial experience – this is second to none. Have a look at the available software, test it out. Ask an expert. Learn more about Microsoft Dynamics 365 Implementation Services. Good luck with your ERP!
Would you like to learn more? Check: Microsoft Dynamics 365 Implementation Services