All entries for Thursday 30 June 2011

June 30, 2011

Rethinking ERP Implementations

Many organisations have hoped to improve their competitiveness by investing in ERP systems. However, the implementation and associated changes in business processes is a complex and highly cost intensive project. There are several stories about failure during the implementation and divers authors call attention to the implementation process. Hence, it can be agreed that, next to a high leadership commitment, a strong control mechanism is needed during the implementation in combination with a step by step approach.

So far, consultancies mostly undertake the implementation process, which, as it is said, costs three times more as the system itself. However, if the success rate is so low that only few are able to benefit from the plenty of advertised benefits of an ERP system, why is there such a lack of innovations regarding the ERP implementation?

Considering the implementation of Six Sigma via a belt system, I wonder if this would be suitable for ERP implementations in a similar way. The belt system is a hierarchy based on 5 specified roles, each of them indicating a certain degree of expertise with the aim to convert the culture and the processes. Transferring this to the ERP implementation would mean that there are trained leadership roles, responsible for promoting and direction the chosen ERP implementation area (e.g. HR, Production or Finance) and trained managers and employees at various levels, responsible for conducting and control the implementation, conducting process redesigns under consideration of the old legacy system and feedbacks of future process user and for conducting coaching and teaching session on the operational level.

I see advantages in, firstly, that various roles and responsibilities required for the implementation process are clearly defined and separated compared to having a small number of external consultancies, which are responsible for a whole set of implementation activities. Secondly, organisations invest into their own employees and create valuable knowledge, as they understand the business process from the past. Thirdly, since any change requires a cultural change, which happens internal in the mind of the workforce by fully agree and adapt to the change, the “belts” can make a significant contribution to enable a true change by decreasing the resistance of employees to use the ERP system.

One disadvantage represents the costs, which are still very high. Moreover, it is important that the chosen employees for the belt system are only concentrate on the implementation over a longer period. Hence, their current role may be replaced by other required employees, which increases labour costs. Nevertheless, on a long term perspective this is likely to pay off compared to the non-success stories of past and properly future ERP implementations.

I only can see this from my point of view. If anybody has a better background of both Six Sigma and ERP implementation I would be pleased to obtain some critic in form of limitations or disadvantages of integrating a belt like system for ERP implementations.

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