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ERP Implementation Process: Plan, Steps, Complete Guide 2024

ERP implementation is doing the rounds these days in absolutely all firms, irrespective of their size, and we all know why. This software ensures a better and smoother functioning of your business by streamlining various business processes such as accounting, inventory management, human resources, and customer relationship management. It not only ensures better collaboration between your employees but also assures you of improved results. Being in vogue currently, the implementation of ERP is a process that is worth for money and time. So, if you own a business, then you should definitely work on ERP, and we will tell you how.

In this blog, we will explore the key considerations for ERP implementation, including the costs, benefits, and best practices for successful deployment. We will also provide valuable insights into how to choose the right ERP system for your business. We will also highlight the key phases involved in the process and how you can ace it!

What is ERP implementation?

ERP or enterprise resource planning is software or sometimes a process built for enterprising organizations where proper resource planning, customization, and deployment of ERP systems are involved. ERP implementation is the process of implementing ERP ( Enterprise Resource Planning ). It enables you to successfully manage your business’s daily tasks and provides it with the necessary direction. ERP implementation helps businesses and organizations manage everything on a single dashboard. When you implement ERP at your firm, you save time, resources, and all the extra effort that you would be using otherwise.

What is the WOW thing that your business gets after ERP implementation? Your entire business could be monitored and managed from one single dashboard. All your disjointed systems, like payroll, invoices, vendor management, project management, sales, marketing, and every possible department, will be connected and monitored from one single dashboard.

Types of an ERP implementation project

There can be any categorization of types of ERP implementation. Considering the current industry standards followed in implementing a cloud-based ERP implementation, there are three kinds. We have given them names. They are Express ERP implementation, Standard ERP implementation, and Advanced ERP implementation. Let’s dive a bit deeper to understand these three of them.

Project TypeExpress ImplementationStandard ImplementationAdvanced Implementation
Implementation ApproachStreamlined and acceleratedComprehensive and customizedHighly tailored and advanced
Project DurationShorter timeframeModerate timeframeLonger timeframe
Customization LevelMinimal customizationModerate customizationExtensive customization
Deployment SpeedRapid deploymentControlled rolloutGradual deployment
Business RequirementsStandard processes and requirementsSpecific business needsComplex and unique requirements
Data MigrationBasic data migrationData migration with transformation and mappingExtensive data migration and integration
Testing and TrainingLimited testing and trainingComprehensive testing and user trainingRigorous testing and advanced user training
ScalabilityLimited scalabilityModerate scalabilityHigh scalability and adaptability
Maintenance and SupportStandard support and maintenanceOngoing support and maintenanceContinuous improvement and optimization

Based on your current business process, requirements, and different disjointed systems and departments, you can choose your implementation process. In every ERP implementation process, there would be a decision will be made based on the components of ERP which will be synced together, and also the type of ERP software that will be implemented. Let us understand what these components and types of ERP software shall go into the ERP implementation process.

Components of ERP Software for Implementation Process.

The components of an ERP depend on the needs of the organization but some features are intrinsic to each ERP. Some major components are finance, human resources, logistics and manufacturing, supply chain management, and customer relationship management.

ComponentDescription
Financial managementTracks all financial transactions, including accounts payable, accounts receivable, general ledger, costs, budgets, and forecasts.
Human resourcesManages all employee-related information, including payroll, benefits, performance reviews, and training.
Manufacturing and logisticsManages the production process, from ordering raw materials to shipping finished goods.
Supply chain managementManages the flow of goods and services from suppliers to customers.
Customer relationship managementManages all customer interactions, from sales to service.
Custom componentA lot of ERP implementation consulting companies, like Captivix, also help in building custom modules for your ERP needs. It can sync with custom mobile apps or web apps for better monitoring and forecasting of business operations.

Make sure that your CIO is well-informed about what modules can be useful, customized, or ignored, based on your business needs. Once you are sure of the modules, you can choose to go with the implementation of the ERP. Your ERP can be of these three type as explained in the next part of this blog.

Types Of ERP Software.

We have written extensive, in-depth content on the types of ERP systems which you can read. But, to give you a very diligent and informative idea about the type of ERP software while in the ERP implementation process study, let’s know it here.

As far as the types are concerned, there are three forms of ERP:

  1. Cloud-based: These ERPs are easy to implement because the ERP software is hosted on a third-party hosting platform. A lot of the burden of server management is shifted to the vendor that is offering the ERP software. An example of a Microsoft Dynamics 365 ERP solution is hosted on Azure. So, Microsoft takes care of the ERP infrastructure. Your ERP implementation partner will set it up for you. So, cloud-based ERP software implementation is easier compared to traditional ERPs.
  2. On-premise: These types of ERP systems are hosted on the organization’s own servers. This makes it a bit costly when compared to cloud-based ERP. This restricted hosting offers more control over managing the application and customizing it based on business needs.
  3. A hybrid of the first two: These systems are a combination of good features of both. It is more scalable, and more customization is possible. It is even more cost-effective. It can be a good option for organizations with unique or complex business needs.

Phases of a Good ERP Implementation Plan

The process generally has some major phases, each having specific goals. When you are starting with the ERP implementation process, make sure that each phase is undertaken for the better functioning of your system. We have provided in-depth information about carrying out the ERP Implementation in phases.

The ERP implementation process consists of various phases, each with specific goals. It begins with discovery, where an ERP system is selected and a management team is assembled. The analysis follows, assessing business goals and potential risks. Planning involves resource allocation, change management, and budget forecasting. The design focuses on documenting how the ERP system will improve workflows. The development team customizes the software to meet specific business requirements. Migration ensures data transfer to the new system. Testing evaluates system performance, while training familiarizes employees with the ERP system. Deployment can be all at once, phased, or parallel, and support ensures ongoing system maintenance. Successful implementation leads to improved performance and post-implementation evaluation. Our ERP implementation phase consist of 10 different phase which makes for a successful ERP implementation process.

  1. Discovery.
  2. Analysis.
  3. Planning
  4. Design
  5. Development
  6. Migration
  7. Testing
  8. Training
  9. Deployment and
  10. Support.

These 10 phases of the ERP implementation process are very subjective when the ERP consulting team is all set to do the transformation. Following these calculative steps can turn your ERP implementation process around.

Steps for ERP Implementation Process

There are 17 major steps for ERP implementation, which you must abide by.

  1. Define the scope of ERP implementation: Write the objectives of your project, anticipate all risks involved, and assign roles to a team.
  2. Select an ERP system: There are three kinds of ERP systems: custom-built systems, cloud-based systems, and customized ERP systems.
  3. Draft a project plan: Be logical with your plan and involve stuff like your goals, planned methods, and end-case studies, among others.
  4. Time taken for ERP implementation: Be patient, and know that generally, the process of ERP implementation takes around 4 to 8 months.
  5. Define the steps involved: Understand the goals and needs of your business to define steps in a better manner.
  6. Create a change management plan: You must begin by planning out the plan of ERP implementation in simple steps and then delegating work based on expertise and not seniority.
  7. Work on an achievable goal: You need to create a schedule for yourself that is urgent but also achievable. Remember not to make tall claims or goals that cannot be achieved with the given resources.
  8. Communication: To improve communication, you can start by scheduling an organized meeting with all your IT partners. Another thing that you can do is avoid changes in the team.
  9. Predict costs and budget: Estimate your expenses and draft a budget. Your actual expenses may exceed the estimates, but you can avoid this by being careful about hidden costs.
  10. Arrange mid-way approvals: Rather than keeping the entire process to be improved in the end, you should try to approve the actions of your employees frequently.
  11. Plan testing: You can test the ERP system through three kinds of tests: technical tests, functional tests, and user acceptance tests.
  12. Data migration: You can ensure smooth data migration through two steps: first, converting and collecting data from previous software; and second, reviewing and obtaining approvals.
  13. Be prepared for change: You must comprehend that mere paperwork does not change the functioning of your business automatically. So you should indulge the employees in the workings of your new system.
  14. Training: You may train your employees either on the ground, that is, face-to-face, or through e-learning.
  15. Plan before going live: You should plan the deployment through hardware synchronization, frequent tests, and data migration confirmations.
  16. Support & Maintenance: Work with your developer and ensure that they are available round the clock, in case of any need.
  17. Evaluate success: Ask yourself whether you can achieve your goals through this ERP implementation or not. Find out if there have been any improvements or not.

Best ERP Implementation Method

There are two methods that you may consider for ERP implementation: the big-bang implementation or the phased approach. In the big bang method, the whole ERP system will go live in one go, and the functions of your company will be entirely transformed! Such a method reduces the time of implementation; however, it can be stressful for your employees and cause disruptions as well. If you are choosing this method, consider it if your ERP need is small. For big, enterprising companies, the Big Bang ERP implementation process will be a disaster.

In the phased approach, the ERP goes live in phases; that is, each feature is deployed in a sequence. This method is also called “land and expand,” and its implementation takes longer compared to the former. But the good part is that it relieves your employees of possible stress and alleviates risks.

Tips for Selection and ERP Implementation

Here are 11 tips to ease the process of selection and ERP implementation:

  1. Define objectives and set goals for guidance: Begin by understanding your goals and drafting a plan that keeps them all in mind. Resolve political issues within the firm if any, and ensure that change management processes are going well.
  2. Maintain the processes: You should rethink how your company works and how you can make it more efficient. Take advantage of the data migration and deployment whenever possible.
  3. Streamline your data: Know what you are migrating and make sure that it is relevant to your business. Do not overhaul unnecessary data and remember to migrate with utmost care.
  4. Focus on major needs: You should know what your business actually requires as this will help you find an ideal option for yourself. There is no point in investing in something that does not matter at the moment.
  5. Plan ahead of time: Conduct this part with your vendor by asking them about the future support that they will be providing. Check whether the system will grow with your business and whether it can be customized or not.
  6. Schedule demos in the beginning: Ask your vendor to give you demos of the system you are choosing, to understand whether it will suit your needs and work to your advantage or not.
  7. Choose a viable vendor: Be sure of whom you are dealing with. Choose a vendor who has a reputation in the market and industry expertise, to make the ERP implementation smoother.
  8. Prioritize end-users: While selecting a system, keep the end-users in mind. Check if it will work the best for them or not because the end-users will be handling its activities and deciding how it will work for your business.
  9. Integration: The ERP should work in consonance with the other apps and software involved in your business to ensure the smoother working of the business.
  10. Be sure about customizations: Know whether you would like to customize your system or standardize it. To be sure, a lot of companies these days are opting for standardization.
  11. Low-code works the best: Low-code can help you deploy any improvements quite safely and ensure the efficiency of work. These do not impact the core of the ERP system.

Best Time for ERP Implementation

The best time varies based on factors like the company, industry, and business cycle. Usually, the best time for ERP implementation is during the slower periods of business or the off-season. Another factor to keep in mind before starting the process is the stability of your business.

If you try to implement ERP in the middle of the night, due to some random idea that you got, it will only result in a haphazard for your business. Therefore, analyze the possible chances or rate of success of implementing the software before taking any decision.

How Long Should an ERP Implementation Take?

Firstly, you should be patient with the process as it is not child’s play. Good things take time and so will this. ERP implementation is a complex process that requires patience. Generally, the ERP implementation process will take around 4 to 8 months however, the actual period depends on how complex your project is and the size of your business. Never rush the process for the sake of speed, as a thorough and well-executed implementation will yield the best results.

A smaller business with simpler a form of the project will take less time than the opposite. Just remember that the process will take time for the best result and therefore, do not hurry with things.

ERP Implementation: Costs Involved

The cost of ERP implementation can vary depending on a number of factors, including the size of the organization, the complexity of the ERP system, and the level of customization required. However, in general, ERP implementation costs can range from a few hundred thousand dollars to several million dollars.

Here are some of the factors that can affect the cost of ERP implementation:

  1. Size of the organization: The size of the organization will have a significant impact on the cost of ERP implementation. Larger organizations will typically require more complex ERP systems and more customization, which will drive up the cost of implementation.
  2. Complexity of the ERP system: The complexity of the ERP system will also affect the cost of implementation. More complex ERP systems will require more time and resources to implement, which will drive up the cost.
  3. Level of customization: The level of customization required will also affect the cost of implementation. If the ERP system needs to be customized to meet the specific needs of the organization, this will add to the cost of implementation.
  4. Vendor: The vendor that is chosen to implement the ERP system will also affect the cost of implementation. Some vendors charge more than others, and the cost of implementation will also vary depending on the vendor’s experience and expertise.

In addition to the factors listed above, there are a number of other costs that may be associated with ERP implementation, such as:

  1. Training: Training for employees on how to use the new ERP system can be a significant cost.
  2. Data migration: The cost of migrating data to the new ERP system can also be a significant cost.
  3. Support: The cost of ongoing support for the ERP system can also be a significant cost.

It is worth noting that the typical cost of ERP implementation is around $7200 for a small-scale ERP implementation process. It’s essential to keep in mind that the actual cost of the ERP system may fluctuate depending on the unique requirements of your business. The various factors outlined above are crucial in determining the cost of the ERP software that is best suited for your company. As such, it’s important to weigh your options carefully before making a financial commitment. To ensure you make an informed decision, consider hiring consulting professionals to assist in the process.

ERP Implementation: Best Practices to Follow

Implementing an ERP system requires careful planning and execution to ensure its success. Here are some best practices to consider for a successful ERP implementation:

  1. Clearly Define Goals and Objectives: Clearly define the goals and objectives of the ERP implementation project. Identify the specific business outcomes and benefits you aim to achieve. This clarity helps in aligning the implementation process with the organization’s strategic vision.
  2. Engage Key Stakeholders: Involve key stakeholders from different departments throughout the implementation process. This includes executives, department heads, end-users, and IT personnel. Their involvement ensures that the ERP system meets the needs of all stakeholders and garners their support.
  3. Thoroughly Assess Business Processes: Conduct a comprehensive analysis of existing business processes to identify inefficiencies, bottlenecks, and areas for improvement. Optimize processes before implementing the ERP system to maximize its benefits and avoid automating ineffective or inefficient workflows.
  4. Select the Right Implementation Team: Assemble a skilled and dedicated implementation team comprising both internal resources and external consultants. Ensure that the team members have relevant expertise and experience in ERP implementation. Clear communication channels and defined roles and responsibilities within the team are crucial.
  5. Plan for Change Management: Develop a change management strategy to address the impact of the ERP implementation on the organization and its employees. Communicate the benefits and goals of the ERP system, involve employees in the process, and provide training and support to facilitate a smooth transition.
  6. Ensure Strong Project Management: Appoint a project manager responsible for overseeing the entire ERP implementation project. The project manager should possess excellent communication skills, strong leadership, and the ability to manage timelines, budgets, and resources effectively.
  7. Prioritize Data Accuracy and Migration: Pay careful attention to data migration and cleansing processes. Ensure that data from legacy systems is accurate, complete, and properly mapped to the new ERP system. Validate the migrated data through rigorous testing to maintain data integrity.
  8. Conduct Comprehensive Testing: Perform thorough testing at each stage of the implementation process, including unit testing, integration testing, system testing, and user acceptance testing. Test all functionalities, configurations, and integrations to identify and resolve any issues or bugs before the go-live phase.
  9. Provide Adequate Training: Invest in comprehensive training programs for end-users to ensure they are proficient in using the ERP system. Tailor the training to different user roles and provide ongoing support to address user queries and concerns.
  10. Monitor and Evaluate Performance: Continuously monitor the performance and usage of the ERP system after implementation. Identify areas for improvement, track key performance indicators (KPIs), and make necessary adjustments to optimize system performance.

By following these best practices, organizations can enhance the likelihood of a successful ERP implementation, maximize the benefits of the system, and drive long-term business growth and efficiency.

Once you have ensured all these points are taken care of, you will be thoroughly ready at your firm.

Failure Rate and Major Reasons

Not all that we do is bound to succeed. Similarly, the implementation of ERP can fail at times. Here is some data to help you analyze the failure rate before moving further.

As per McKinsey, 75% of all ERP implementation projects fail to meet their set targets and 74% of them take longer than expected.

The failure rate of ERP implementation projects has been a topic of discussion in the industry. While ERP implementations can be highly successful, there have been instances where projects have encountered significant challenges and failed to deliver the expected outcomes.

Here are a few examples and case studies highlighting instances of ERP implementation failures:

  1. Hershey’s ERP Implementation Failure: In 1999, Hershey’s, the renowned chocolate manufacturer, attempted to implement an ERP system to streamline its supply chain and improve inventory management. However, the project faced multiple issues, including inadequate testing, lack of user training, and data migration problems. These issues led to disruptions in the supply chain during the Halloween season, resulting in a loss of approximately $100 million in revenue.
  2. Waste Management’s SAP Implementation: Waste Management, a waste and environmental services company, embarked on an ERP implementation project with SAP in 2007. The project aimed to unify its financial systems and processes. However, the project encountered challenges, including misalignment of business requirements with the software, lack of executive buy-in, and inadequate testing. These issues resulted in financial reporting problems and a lawsuit between Waste Management and SAP, ultimately leading to a settlement of $100 million.
  3. Lumber Liquidators’ ERP Failure: Lumber Liquidators, a hardwood flooring retailer, struggled with an ERP implementation in 2013. The project aimed to modernize its business operations but faced issues with data accuracy and integration. The ERP system failed to meet the company’s requirements, causing disruptions in inventory management and financial reporting. As a result, Lumber Liquidators experienced significant financial losses and had to revise its financial statements.
  4. Revlon’s SAP Implementation Challenges: Revlon, a global cosmetics company, faced challenges during its ERP implementation with SAP in 2018. The project aimed to integrate various business processes and improve efficiency. However, the implementation encountered difficulties, including delayed shipments, inaccurate financial reporting, and difficulties in fulfilling customer orders. These issues resulted in a decline in sales and profitability for Revlon.

These examples highlight the complexities and risks involved in ERP implementations. Factors contributing to failure can include inadequate planning, poor project management, lack of user training, data migration issues, and misalignment of software with business requirements.

It’s important to note that while these cases represent instances of ERP implementation failures, there are also numerous successful implementations that have transformed organizations and delivered significant benefits. Lessons learned from failed projects have led to improvements in project management methodologies, change management approaches, and risk mitigation strategies to increase the chances of successful ERP implementations.

Verdict

So, by the end of now, it is very clear what is ERP Implementation and its significant role in undertaking any business. We have highlighted the major steps involved in ERP implementation. Each step or phase, as you may want to call it, is crucial for a successful implementation. By carefully considering your business needs, evaluating potential ERP solutions, and implementing best practices for deployment, you can ensure that your ERP implementation is a success. With the right approach, ERP implementation can be the key to unlocking the potential of your business and driving growth and efficiency.

Frequently Asked Questions

When should a business implement ERP?

The implementation should come into the picture when a business starts facing serious issues. These are majorly concerned with the number of systems or software having your data, which gets hard to manage! If you want all your data to be in one place, you should implement ERP.

What is the ERP implementation lifecycle?

This is the process for planning, creating, testing, rolling out, and going live with a new ERP system. It may also mean ERP implementation steps and the time period involved in successfully implementing the system.

How to avoid ERP implementation delays?

One can avoid ERP implementation delays by developing a foolproof plan mentioning the resources, processes, and decisions at each stage of the process. You should also review this regularly to avoid any hiccups.

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