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Why ERP (Enterprise Resource Planning) system fails and how to avoid the pitfalls?

ERP (enterprise resource planning) system refers to a type of software that organizations use to manage day-to-day business activities such as project management, risk management, accounting, etc. ERP uses a centralized database in which users can look at real-time data collected from all across the business to measure productivity and profitability via dashboards of the system. Without ERP software, it will be difficult for different departments to access the same set of confidential data within the company, making communication between departments disjointed. However, utilizing ERP can resolve such issues easily. There are various factors that determine the success and failure of ERP systems. The major reasons why ERP system fails are:

  1. Lack of Planning: Every organization must build a plan during the planning phase. A plan should be very detailed specific which includes Time and Budget planning, Risk management planning and assigning tasks to each and every participant of the project. Many ERP systems fail due to lack of planning and therefore many unforeseen problems may come which cause failure of ERP implementation. The plan for a successful ERP implementation needs to be specific, detailed and realistic. 
  1. Unclear business objectives: Project manager or team leader should clearly define what are the goals and objectives of the project and what is their definition of success. Without a clear destination, the endpoint becomes a moving target and hence harder to achieve their goals. 
  1. Under-estimating resources required: A correct estimation of the resources required is essential to avoid ERP implementation failure. The required resources must be well-documented and planned during the planning phase of the project so that there won’t be a need to discuss and add more resources needed during the implementation phase. The resources are: Participants of the project, hardware and software requirements, estimated budget, etc. 
  1. Insufficient testing: Testing phase is one of the most essential phases of project development. The purpose of this is not only to see if the software works but also to see if the system meets the business needs and requirements. Reducing testing time may lead to having unexpected errors after the software was launched and this might affect the reputation of the company. Insufficient testing might also end up in disappointing clients with unexpected errors and delay in product launches. 
  1. Lack of training: After the ERP system is well implemented and tested, end users must be trained so that they will be able to understand the system and how to use it. As we are all aware now that the ERP system covers the whole organization with different departments and different types of end-users, they all must know the basics of the ERP system and how it works. 

So in order to avoid those pitfalls, Get Leadership Support. Besides the fact that ERP implementation can be very costly, it implies high stress, long working hours and many problems that must be solved within specific timeframes. Evidently, you can’t deal with all these without the support of your leadership team. Your cross-functional team should include the most knowledgeable and skillful workers. Only these employees are able to identify, assess and rethink existing processes to prepare your organization for the “big shift” and prevent ERP implementation failure.

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