An SME Guide to Implementing an ERP System – What Could Possibly Go Wrong?
This article is a sequel to our Guide to Selecting an ERP system, published recently.
The purpose of this article is not be a definitive guide, but to give you some topics to think about when you are planning your implementation.
Once again, we pick the brains of a SOS ProAdvisor and veteran of the ERP and manufacturing control software world, Barry Linnard, who has spent the last forty years selecting and implementing ERP software for SMEs around the globe. Barry has much experience, some of which he shares here.
What is an SME?
For scene-setting, I am going to repeat the SME definition that Barry opined when we discussed ‘Selection’ in the previous paper, as it also frames this discussion.
“SME is a very broad term ranging from a one-man startup to a business with five hundred employees. So, I think we need to segment the market further for any analysis to be helpful.”
“In my experience, whilst the mid and upper ranges of SMEs have been adequately served by ERP solutions in recent years, the smaller companies have been left wanting.”
“Until recently, smaller companies employing 2-50 staff were not well served by ERP software. It was just too complicated, and I learned from bitter experience that it often created more problems than it solved. So, when I first came across SOS, I could not believe how simple it was. It took just six weeks from start to finish, and it did everything expected of an ERP system. At long last there is now a solution for the Micro- SMEs.”
What preparation should be made before starting the implementation process?
Barry takes up the story, “Hopefully you followed the guidelines from the Selection article, and you now have selected your ERP system, and a motivated team keen to press on and implement it, as they have been involved in the selection and so feel engaged.”
“Also, hopefully you have your go to processes that drew up prior to the selection process, as they define how the system will work for you.”
“There is an old adage that says, ‘failure to plan is planning to fail,’ and this is one area where you should probably have a plan. This paper will hope give you some idea of the work content, and people involvement to enable you to plan better.”
“As with selection, we are going to differentiate between Micro SMEs (where you can push a system in a just few days) and Mid-Sized SMEs (100 staff plus) where you will have departments, processes, and hierarchy, and for success you will probably need a traditional implementation methodology and, realistically, a longer implementation time period.”
So, for medium Sized SMEs (100 staff+) – this section is for you!
Question: How do you eat an elephant? Answer: One bite at a time.
Because you have bought an all-encompassing ERP package – don’t think you need to eat it all in one go. Think of it as phases and take an iterative process to implementing the solution. It might take longer overall but it will be more digestible and much smoother.
A stupid thought, but one worth thinking about at the beginning of a project, is how does the project end? What are the end conditions? Or, to put it bluntly, how do you know when the project is finished? Traditional mid range ERP implementations are notorious for project creep. During the implementation, you suddenly find features in the software that you didn’t know about, and you start implementing those, and your four-month project is a five-month project. (E.g., I didn’t know it had a fixed asset module!) So, be clear about the scope of the initial implementation and define the end conditions.
Beware land and expand. If this is a mid-range implementation, you will have some of the software supplier’s consultants helping you implement the solution. They are very good at selling you more days: did you know the solution has a built-in fixed asset register? This is so prevalent, it has a name land and expand, and it will eat your budget in days. So, keep control of your project scope.
With that in mind, for a mid-sized implementation, you will need a project manager on your side (as well as the supplier’s project manager) to coordinate your resources, to keep the supplier honest (no land and expand), to own your budget and make sure you don’t over-spend. If you are new to ERP implementations, you will be thinking that (like marketing in a downturn) this is an expense you can do without. Stop! For bigger projects this is a key appointment. You ideally need to appoint someone who has implemented ERP before. If you don’t have that person in your organization, then go find someone. This need not be a permanent role, it is for the life of the project, so for many companies, a contracted professional ERP project manager is perfect.
Another thought, worthy of note. The project needs the commitment of the CEO. Unless the CEO is personally vested and totally believing in the project – it will fail. The business will at times have to prioritize resources in favor of the implementation project at the expense of business. The CEO needs his hands on the wheel when that shout must be made. Whilst this might seem blindingly obvious, I have seen many projects falter and sometimes fail because of this.
If you are a mid-sized company, you are probably moving from and old system to a new system, and at some point, you will need to think about data transfer. All new ERP systems will have mechanisms to suck the data out of your old system into your new system. But do you really want to? Is your data clean enough to become the foundation of the new system? Please make sure you know the answer to this, as otherwise you might be importing rubbish that will undermine your new system for months (sometimes years) to come. One water utility company I was working with had an old system that didn’t print the last line of the customer address, so the staff had become accustomed to using this line to make comments about the customer. This data was imported without checking, and the first invoice run with the new system (which printed all the address lines) was quite embarrassing! Many customers were not impressed at some of the comments!
Early wins are great for confidence and momentum. What do I mean? At the start of project, make the first phases the easy phases. Finance is always a good start. Pick something you know will be an easy-win and make sure you nail it. Seeing early success gives the project and the project team a boost.
Some people like to give the project a name and tie some objectives to it (preferable quantifiable), and high-level timescales. Popular choices I have seen include project PHOENIX (rising out of the ashes – not sure it’s a great image, but many have used it), and project ALFIE (A Leap Forward in Excellence! Which I quite like).
How to Implement an ERP System
We are also going to break this down into two sections: implementing a Micro SME ERP system, and implementing a mid-range ERP system.
How to Implement an ERP system in a Micro SME (1-50 employees)
“SOS Inventory is probably the world’s simplest ERP system and as such is rightly the market leading micro-SME ERP system in the market.
Having implemented quite a few SOS solutions, why is it that I can implement this software in 3 to 6 weeks in a Micro SME, when a traditional mid-range ERP implementation would typically take 3 to 6 months (or more).
Partly it is because the SOS software has been written from the ground up specifically for Micro SMEs and thus is intuitive and simplicity itself to use. Most of the other systems being sold in this space are cut-down versions of mid-range systems, with inherent complexity and baggage no matter how much the authors try to simplify the menus.
Partly it is because the very nature of the Micro SME means that you can usually get the entire company in one meeting room (pandemic allowing), and in that room you know everything about how the business runs, so carrying the team with you and communications is simplicity itself.
The objective of the SOS implementation is also usually also clear and simple. It is to replace departmental spreadsheets with the world’s simplest ERP system and so create a joined-up company. The benefits of this simple objective are massive, because for the first time, the company will be operating on one version of the truth, everyone is sharing the same information. Data is input once so no errors by duplication. The right information is available in an instant, and decision making can be incisive instead of let’s try this and hope.
The Conference Room Pilot – CRP – (discussed below) is still a great mechanism for learning about the software, building confidence, training, and creating simple local user guides. But because it is all so simple, a departmental pilot can be completed in a couple of hours.
That’s about it. Putting the world’s simplest ERP system into a small company with simple processes and a few staff is a match made in heaven.
And if you need it you have weapons grade, caring, customer service and support from the SOS support team, who never let you down.
If you are a Micro SME, you should try it! It will revolutionize your business.
If you are not a Micro SME – read on…
How to Implement an ERP system in a Mid-Sized SME (100+ employees)
The bigger the company, the harder the implementation and the greater need for processes, rules, and governance. You probably already have an ERP system and are looking for something better. You have teams of people happy with the way they are working now and not wanting to change, and all they really want is to have the new system do exactly what the old system does now. Not a recipe for success, and it demands a proper change management program to implement the new system.
So where to start?
I would start with a kick-off meeting to all staff, where the CEO reiterates the new vision, the project, the objectives, the timescales. Remind people of the benefits! They are going into a period of change, and for many, extra work! If the CEO is standing next to the CEO of the ERP system supplier, so much the better. It is a partnership, and you should show this from the outset. The last thing you need is us and them attitude from the start.
You will need some governance, and the traditional governance structure is a top-level steering committee chaired by the CEO (commitment from the top!) and made up of departmental heads, and usually the supplier’s project manager. The steering committee usually meets monthly but could be more frequent in early stages.
Then for each department being impacted by the system, you will need a department task group, headed usually by the departmental manager, and staffed by the key personalities in the department.
In my book, the project is built around the conference room pilot. Find a meeting room, take your laptops/screens, and, by department (and with the departmental team) build a test-data pack that reflects how your departments runs. Have the team run the test data through the new system and check it yields the results you expect and is easy to use. If not, check and have discussions with the supplier until you are happy. You presumably saw it doing what you wanted at the demo, so there should be no-surprises here. Then, document the processes that you have settled on, and that is your internal user guide for the system. After the successful pilot, the department can start live running, whilst the next department runs their pilot.
And so, you are live, then what?
At last, you are live. You have mapped your processes onto the software, and they are tightly coupled, and all is well, for the time being at least.
But businesses aren’t static, are they? They flex and adapt to market conditions. The CEO makes an acquisition, or you sell a division, or you go into partnership with a 3PL, and before long your processes have changed, but the mapping to the software hasn’t changed. You are still using the software as you did two years ago, but now it doesn’t quite fit the new processes, and before long there is a call the ERP vendor saying, “your software doesn’t work!’
It works fine, it hasn’t changed, it is just your business requirements have changed, and you haven’t re-mapped the new processes onto the software. The two or no longer tightly coupled.
So, what to do? Re-run the conference room pilot, re-map the new processes onto the software until they are once again tightly coupled.
Want to know more?
I could write much more about the whole ERP implementation process, but others have done that already, so if you want more detail please select your favorite search engine and search away! You won’t be short of reading material!
The purpose of this article is not be a definitive guide, but to give you some topics to think about when you are planning your implementation. I hope you find this useful.
Andy Makeham has enjoyed a lifetime in software business development, as a programmer, implementor and entrepreneur. He has grown, bought and sold many business software companies and floated one on the public markets. He has worked with private and private equity owners. Today Andy acts as a business development advisor to the software sector. In that capacity he is working with SOS Inventory.