Enterprise Resource Planning(ERP) is a process of managing all resources and their use in the entire enterprise in a coordinated manner. Whether you are using an ERP system for large industries or a small business implementing the system will align separate departments and improve worth flow. It will bring order to chaos, and tie the system together so the flow between them is easier to access. To implement an Enterprise Resource Planning, one should start by first creating the businesses case, from there configuration; this includes business logic and data conversions.
Then the process of introducing the system to the user so the ERP system may begin use, from that it goes onward and upwards. A simple three or so step process, but was why do 75% of all ERP systems fail? (Andy)ERP systems can fail in hundreds of different ways, from user errors to companies not meeting the deadlines set. An ERP failure does not mean the system was not implemented. Cost plays a huge factor to implement an ERP system it is extremely expensive, this includes training, integration, data analysis, and conversion. When implementing an ERP system, you should also know the risks.
Some of the major risks include cost overruns, operation problems when going live with the product, the improvement potential can be determined not enough. One company that had an enterprise resource planning failure was the well-known shoe company NIKE. Back in the 2000s, Nike spent 400 million dollars on updating their supply chain system and ERP implementation. (Koch) This was a unique management of supply chain with the hope to forecast demand in the market. This system would enable the organization to quickly respond to changes in the market, and the ability to create newer products within a week instead of a month. Nike planned for the system to easily be able to decrease unwanted products and increase styles in rising demand. Nike knew implementing ERP systems can take time and required process they were patient when implementing the systems.
So why did a huge 400-million-dollar ERP system fail? (Koch) Nike hired I2 Technologies to create their ERP software. I2 then created and customized versions of ERP software and delivered it by the end of the year 2000 for 400 million dollars. The system I2 created for NIKE was functional, but Nike had a problem implementing the system on a large scale. Nike had I2 fix the system, during this time stock dropped 15%. ( Koch) Nike blames I2 for the problems and reported that the system lacked performance and functionality.
Nike then went with a different company to meet their needs. Why did this ERP implementation fail? The client’s requirements were not met, more communication was needed to clarify specifications. This company failure was not due to the system not being created, it failed because the client wanted and expected more. What I2 presented to Nike was not the vision they saw. Be aware of common issues that can make the project unsuccessful.
IT specialist need to know the common missteps when implementing an ERP system. First, you need to make sure to carefully gather the requirements. ERP systems give your business processes improvement and making a bad process makes the bad processes run faster(CIO). Software usage and main critical processes errors need to be identified in the beginning. This allows for adjustments to be made for inefficient and outdated processes.
Next, get end-users involved in the decision-making process. Yes, high executives from the organization need to play a role but gather information from employees who use the system most will provide the best way to implement the right solution. Expense go over budget, do not underestimate the expenses.
Implementing the system in steps allow for a nice problem free launch. Enterprise resource planning systems are too complex to be done at once. Steps should be taken, determine requirements for implementation, implement the system, users need to be trained, and go live. Allow end-user involvement every step of the way. If no one knows how to use the system properly then the system will fail.
Enterprise Resource Planning software can give an accurate forecast for the company, and with knowing your maximum efficiency the organizations become profitable. The implement of an ERP system is not done by in-house IT specialist and usually, a third-party vendor is involved. The time frame for the going live phase depends on several factors including the size of the business, the number of departments, customization, and the magnitude of change. (tutorialspoint.com) When implementing a new ERP system, the organizations need to have a clear definition of success. Organizations need to define the business processes they wish to execute, the financial benefits needed, and deadlines need to be discussed right away. Though cost is a major disadvantage to enterprise resource planning the benefits it can offer the organizations in the long run for a cost-efficient system.
Being able to integrate different departments in a company allowing for efficient communication, which then enhances productivity. (tutorialspoint.com) ERP systems manage all resources and there use in an enterprise, it will store all data in one centralized location, in real-time for the users. So, why do 75% of all ERP projects fail? There is never just one answer, every company failure of the implementation of Enterprise Resource Planning is different. The Nike implementation failure was due to the company not liking the system I2 Technologies presented them, they then went to another organization who did meet their needs. Failures of ERP system come in all different shapes and sizes.