Do you know Why ERP Implementation Fails in Manufacturing Industry?

Used Case

ABC Manufacturing,(name changed) a large-scale production company, initiated an Enterprise Resource Planning (ERP) system implementation to streamline its operations, enhance production efficiency, improving data visibility, and enhancing overall business efficiency.

However, challenges related to over customization and complexity during the ERP implementation significantly impacted the project’s success.

Challenges Faced

Undefined Scope and Requirements
The scope of the ERP project was not well-defined, resulting in constant scope creep as new requirements emerged throughout the implementation. The absence of a clear scope, There was a desire to improve efficiency, but without a understanding of which processes needed enhancement, the project lacked direction

Unnecessary Complexity in Workflows
The customization requests led to the incorporation of unnecessary complexities in workflows. Rather than optimizing processes, the ERP system became burdened with intricate workflows that slowed down operations and increased the risk of errors

Lack of Standardization
The company struggled to strike a balance between customization and standardization. The absence of clear guidelines and governance led to a fragmented system architecture with different departments adopting varying customizations, resulting in a lack of uniformity.

Integration Challenges
Overly customized modules posed challenges during integration with existing systems. The lack of a standardized approach to customization hindered seamless integration, leading to data discrepancies, system errors, and delays in information sharing between departments.

Insufficient Stakeholder Engagement
Key stakeholders, including department heads and end-users, were not actively involved in the initial planning stages. Their valuable insights into departmental needs, challenges, and expectations were overlooked, leading to a lack of buy-in and ownership.

Incomplete Data Analysis
Insufficient attention was given to data analysis and cleanup before migrating data to the new ERP system. The existing data, riddled with inconsistencies and inaccuracies, led to errors and disruptions in the new system

Unclear Communication Plan
There was a lack of a robust communication plan to keep all stakeholders informed about the project’s progress, changes, and expectations. Employees were unsure about how the new system would impact their roles, leading to anxiety and resistance

Impact on the Project

Timeline Delays
Due to the lack of a well-defined scope and unforeseen challenges, the ERP implementation faced significant delays. What was initially planned as a twelve-month project extended to eighteen months, resulting in additional costs and frustration among stakeholders

Decreased System Performance
The unnecessary complexity in workflows and the lack of standardization resulted in decreased system performance. Slow response times and system errors became more prevalent, impacting user satisfaction and overall productivity.

Increased Operational Costs
The ongoing maintenance of the heavily customized ERP system incurred higher operational costs. The need for specialized resources, extended testing periods, and increased support efforts contributed to a strain on the company’s budget.

Low User Adoption
The absence of clear communication and involvement of end-users led to low enthusiasm and resistance among employees. Many were unsure about the benefits of the ERP system, resulting in low adoption rates and a steep learning curve

Budget Overruns
Inadequate planning and constant scope changes led to budget overruns. Unforeseen expenses, such as additional customization to meet evolving requirements, further strained the financial resources allocated for the ERP project

Our Recommendations

Invest time in thorough planning, including defining clear goals, assessing organizational needs, and creating a detailed implementation roadmap. Engage key stakeholders early in the process to strike a balance between customization and standardization.

Focus on configuring the ERP system to meet essential business requirements and regularly assess the impact of customizations.

How we Address the Issues

Redefining Objectives
The company reevaluated its objectives, working closely with department heads to identify specific pain points and goals for each business unit. This helped create a targeted approach for the ERP implementation, and The project team worked on clearly defining and documenting the project scope.

Standardization Guidelines
Clear guidelines for customization were introduced to strike a balance between meeting departmental needs and maintaining system standardization. The guidelines outlined the acceptable level of customization, promoting a more uniform and manageable system architecture

Workflow Optimization
The company initiated a comprehensive review of workflows to identify and eliminate unnecessary complexities. Redundant processes were streamlined, and the customization requests that did not contribute significantly to operational efficiency were reevaluated

Integration Framework
ABC Manufacturing invested in an integration framework to ensure a more seamless integration of customized modules. This framework provided a standardized approach to data exchange between departments, reducing the risk of data discrepancies and errors

Customization Governance Committee
ABC Manufacturing established a customization governance committee comprising representatives from key departments. This committee was responsible for reviewing and prioritizing customization requests, ensuring alignment with overall business objectives, and preventing unnecessary complexities.

Communication Strategy
A robust communication plan was implemented to keep all stakeholders informed about the project’s progress, changes, and expectations. Regular updates were provided, addressing concerns and fostering a positive perception of the project.

Data Cleansing Initiatives
Before migrating data to the new system, the company invested time in data cleansing initiatives. This involved identifying and rectifying inaccuracies, ensuring that the data transferred seamlessly to the ERP system

Results

Streamlined Implementation
The establishment of the customization governance committee and adherence to standardization guidelines led to a more streamlined implementation timeline. Customization efforts were prioritized and aligned with business objectives, reducing delays.

Cost Savings in Maintenance
By reducing unnecessary complexities and standardizing customization efforts, ABC Manufacturing achieved cost savings in ongoing maintenance. Updates and patches could be implemented more efficiently, reducing the overall operational costs associated with ERP system maintenance.

Increased User Adoption
Engaging end-users early in the process and addressing their concerns through effective communication and training resulted in increased enthusiasm and higher user adoption rates

Budget Stabilization
By carefully managing the scope and addressing risks, the company was able to stabilize the budget, preventing further overruns and ensuring that financial resources were allocated effectively.