8 Reasons ERP Projects Fail in Distribution

ERP failures happen for many reasons, but most of the time, they are preventable. It’s just a matter of anticipating and knowing how to prevent common problems. Here are some of the most common pitfalls and how to best avoid them.

Id 35617 Erp Failure

Once again, the story of another catastrophic ERP implementation failure made headlines last month, resulting in years of lost work and hundreds of millions of dollars of negative impact to the bottom line.

Why are ERP-related implementation horror stories nearly as common on the internet as cute cat videos? Well-known organizations from The Hershey Co. to the U.S. Navy have famously endured colossal failures when they attempted to implement ERP systems.

ERP technology functions much like the brains of a distributor’s organization, sending the right signals to keep sales-to-cash, operations, accounting, compliance, human resources, customer and sales all humming along in harmony. ERP failures happen for many reasons, but most of the time, the failures are preventable. It’s just a matter of anticipating and knowing how to prevent common problems. Some of the most common pitfalls include:

1. It’s the Wrong Solution

A Corvette may be fun to drive, but it won’t get you anywhere if what you really need is a tractor.

It’s important to identify a solution that meets your company’s specific needs, because if you take a generic system and try to customize it on a project basis, that can be a set up for failure.

In fact, your best bet is an industry-specific version from a well-established technology provider. This allows you to benefit from best practices for your particular needs on a solid, open platform.

2. Lack of Executive Sponsorship

Before investing the time and expense required to implement an ERP system, it’s imperative to make sure that your company’s executive team is fully committed to and actively engaged in the project. Implementing ERP is simply too big and too important an undertaking to be carried out if only the information technology leaders are invested in the project.

When executives aren’t committed, they may look at ERP as an IT project, and as a result they may view the system as just an expense.

3. No Internal Evangelists

Every organization has people at all levels who are influential, people who colleagues look up to and respect. As important as it is to have clear commitment from executives before undertaking implementation of ERP, it’s just as vital to have the support of those key experts and leaders throughout the company.

That support typically comes with education and understanding. If those leaders understand from the beginning the advantages an ERP system will bring to them and their department – as well as to the entire company – then the ERP system won’t be merely something the chief executive is insisting on, but viewed as a benefit to all. When it comes time for training and rollout, those leaders will be pulling the wagon, bringing their colleagues on board, rather than pushing back against implementation.

4. Wrong Partner

When you’re implementing ERP, choose a partner who has a focus on your industry. You don’t want to spend time and money explaining your business to the people implementing the software. You want a partner who brings that to the table and can challenge the status quo by recommending best practices that have been learned and refined from their other clients in your industry. 

This is one case in which the customer might not always be right. The customer very rarely has the same level of experience and expertise as the software provider or consultant. You’re hiring them for that expertise, so don’t choose a partner who is going to keep quiet when they disagree. Make sure you partner with one that is going to challenge your preconceptions so that you come up the best possible system for your needs.

5. Scope Creep

ERP solutions can do an almost limitless number of things. They just can’t do them all at once on the first day you implement the system. So when you’re getting ready to implement your ERP system, take it one step at a time.

In my experience, there are two reasons to do it this way.

First, you don’t want to roll out all the system’s elements at once and risk missing your target implementation date. The fact is, if you miss the deadline, you can’t necessarily count on simply re-scheduling implementation for the next day, or the next week. That target date likely was chosen for a reason – maybe it was the end of the quarter, or the fiscal year. If it’s missed, you’ll need to re-evaluate and determine when the next strategic implementation date will be. And that could mean a considerable delay, or even a complete re-evaluation of the project.

Second, you want to begin realizing a return on your ERP investment as quickly as possible. That means exercising a measure of patience and managing the initial scope so that you can get a part of the system up and running and begin benefiting from it right away. You will get to the second, third and fourth phases eventually.

6. Unrealistic Expectations

ERP systems may be capable of a lot, but they won’t solve every issue in your business. Your business can reasonably expect to realize benefits in improved inventory turns, better financial visibility, streamlined processes and more efficient collaboration between divisions.

However, if the expectations for an ERP system include everything from increasing sales and customer satisfaction to making the floor in the warehouse bright and shiny, disappointment is inevitable. The result may be a widespread questioning of the entire system and its effectiveness.

7. Poor Communication

It sounds basic, and yet many distribution businesses overlook the importance of assuring that those who will be using the ERP system can communicate and collaborate with the team charged with configuring and implementing the system.

I remember one ERP implementation where those who would be using the system sat on one side of a wall, while on the other side, behind a huge set of doors, was the team in charge of configuring the system. That wall and those doors literally stood as barriers to communication. It didn’t come as a surprise to me when I later heard that the project was behind schedule and the customer was unhappy with the work being done by the consultants.

8. Trying to Recreate the Old System with New Technology

Change can be hard. Any time a new system or new way of doing things is introduced, there will be a few people who will embrace it enthusiastically. But most will resist. They may point out that, for example, accounts receivable has always run a certain way, and that old way worked. Therefore, we should design the new system to accommodate that.

This is why communication and finding the right implementation partner are so important. The right partner will communicate with the accounts receivable department, and explain, for example, that with the new cloud-based ERP, accounts receivable will feature artificial intelligence, which can automatically prioritize collection calls based on which customers are most likely to pay – in addition to other benefits they may not have with their current process.

Matt Petersen, Senior Director of Industry Solutions at ENAVATEMatt Petersen, Senior Director of Industry Solutions at ENAVATE

When people understand the advantages of a new system and how it will benefit them, they are less likely to resist.

Matt Petersen has served in leadership positions in distribution software for more than 15 years. He is currently the Senior Director of Industry Solutions at ENAVATE, which provides consulting and wholesale distribution-focused enterprise software solutions based on Microsoft Dynamics 365, AX and CRM platforms. Reach him at [email protected] or visit enavate.com.