Tips for Overcoming Challenges in a Retail ERP Implementation
An ERP (Enterprise Resource Planning) system is the most important system in a retail organization as it caters to all the core functions such as merchandising, price management, inventory, finance and accounting, sales and distribution and human resources. Implementing such an enterprise wide system is a challenging task and a costly project for a company. Perceived benefits such as reduced cost, increased operational efficiencies, automation and integration of business processes, data and knowledge sharing among different business functions, make ERP implementation attractive.
Given the nature of complexities and the huge investment that it commands, such an implementation program is a strategic initiative and is sponsored and monitored at the highest level of management. Despite such commitments, it is common to see implemented ERP systems that have not delivered the promised benefits to the business and are considered failures. Many studies have shown that a change for the better in management during the implementations could have saved these projects.
Two basic approaches to implement an ERP system are - big bang and phased approach. Both approaches have their advantages and disadvantages.
Big Bang Approach
In the case of a big bang approach, where all the business functionalities are rolled out at one go, significant savings can be realized in terms of time and money. A responsive corporate culture and nimbleness to accept and implement change is required greatly. A team of business function owners/champions that understand the impact of change across an organization and can make decisions keeping the big picture in mind is a must. However, it is important to keep in mind that this approach also poses huge challenges to an organization. Typically, end users resist change or are not able to keep pace with the new system. Lack of data or incorrect data in the beginning creates a negative impact in their minds, which develops resistance towards the system.
Phased Approach
A phased approach means rolling out fewer business functionalities at a time. This approach means longer roll out duration as well as significant spending in data conversion and phasing out other legacy systems. In a phased approach, since the system changes gradually, there is a large scope of user acceptance and user training. This approach can be useful when organization complexities do not allow big bang rollout. There are several examples when core retail modules such as merchandising management, financial systems, and price and promotion management have been implemented in the first phase. Modules such as sales audits, data warehouses, as well as planning and forecasting have been implemented in the next phase.
To Be or Not to Be
Addressing business processes remains a huge challenge for companies. There are two options for companies to pursue. In the first option, a gap analysis is needed to find out which AS-IS processes will not be matched by the ERP supported processes. This poses a challenge if ERP supported processes do not bring significant value and the end user of ERP resists the adoption of new processes. Though it is assumed that people will adapt to new processes quickly, resistance becomes a big obstacle, as many do not see any value additions in their day-to-day work or improvement from their previous processes. All such issues need to be addressed carefully and a proper program needs to be put in place. Some of the suggested steps would be:
- Identify To Be processes and affected user groups
- Create an extensive training plan to ensure the comfort and familiarity with new business processes
- Receive feedback from the user group
With the second option, a company would want to retain its processes and may decide to customize the ERP package. This decision is preferred when the processes involved with the retailer offers a competitive advantage. Such customization is a time and money -consuming task. In some cases, customization will mean tinkering with the core of an ERP and may result in destabilizing the ERP system. Enough cases have been reported where poor customization has resulted in implementation failure. It should be noted that when a software vendor develops software for an industry or big business, it cannot incorporate all the required business processes.
Change Management for End Users
If everything falls in place, the biggest challenge still comes from the end user perspective. It is easy to understand this when you see a new system implemented. There are always a few people who are used to working in silos that feel threatened. At times, people will need to provide data when a new process becomes part of their responsibilities, although they may not need that data in their daily operations. Issues of owning the data and accessing the data need to be addressed. Trust and rivalry among departments is another issue. These and other issues demand positive changes in management practices from the project's inception. An open line of communication among functions at all level needs to be promoted to foster a common understanding of the system and its benefits. Some recommendations are:
- Identify the functional silos
- Initiate early involvement with user groups during implementation
- Create an open communication channel across functions to build trust and confidence
- Encourage active participation in designing new processes and buy in
- Receive feedback from management
Many users need training and time to become productive on a new system. Early involvement of such users during the design phase and business processes defining will help them understand the system. An education and training program needs be provided to help with learning the new system. Above all, milestones need to be defined to gauge their system readiness and to give them enough confidence in the systems.
Conclusion
An ERP implementation presents challenges at all levels starting from vision and strategic goals to acceptance from end users. A successful implementation will ensure that the business reaps rich dividends of its initiatives and achieves a competitive advantage in the market.
Given the nature of complexities and the huge investment that it commands, such an implementation program is a strategic initiative and is sponsored and monitored at the highest level of management. Despite such commitments, it is common to see implemented ERP systems that have not delivered the promised benefits to the business and are considered failures. Many studies have shown that a change for the better in management during the implementations could have saved these projects.
Two basic approaches to implement an ERP system are - big bang and phased approach. Both approaches have their advantages and disadvantages.
Big Bang Approach
In the case of a big bang approach, where all the business functionalities are rolled out at one go, significant savings can be realized in terms of time and money. A responsive corporate culture and nimbleness to accept and implement change is required greatly. A team of business function owners/champions that understand the impact of change across an organization and can make decisions keeping the big picture in mind is a must. However, it is important to keep in mind that this approach also poses huge challenges to an organization. Typically, end users resist change or are not able to keep pace with the new system. Lack of data or incorrect data in the beginning creates a negative impact in their minds, which develops resistance towards the system.
Phased Approach
A phased approach means rolling out fewer business functionalities at a time. This approach means longer roll out duration as well as significant spending in data conversion and phasing out other legacy systems. In a phased approach, since the system changes gradually, there is a large scope of user acceptance and user training. This approach can be useful when organization complexities do not allow big bang rollout. There are several examples when core retail modules such as merchandising management, financial systems, and price and promotion management have been implemented in the first phase. Modules such as sales audits, data warehouses, as well as planning and forecasting have been implemented in the next phase.
To Be or Not to Be
Addressing business processes remains a huge challenge for companies. There are two options for companies to pursue. In the first option, a gap analysis is needed to find out which AS-IS processes will not be matched by the ERP supported processes. This poses a challenge if ERP supported processes do not bring significant value and the end user of ERP resists the adoption of new processes. Though it is assumed that people will adapt to new processes quickly, resistance becomes a big obstacle, as many do not see any value additions in their day-to-day work or improvement from their previous processes. All such issues need to be addressed carefully and a proper program needs to be put in place. Some of the suggested steps would be:
- Identify To Be processes and affected user groups
- Create an extensive training plan to ensure the comfort and familiarity with new business processes
- Receive feedback from the user group
With the second option, a company would want to retain its processes and may decide to customize the ERP package. This decision is preferred when the processes involved with the retailer offers a competitive advantage. Such customization is a time and money -consuming task. In some cases, customization will mean tinkering with the core of an ERP and may result in destabilizing the ERP system. Enough cases have been reported where poor customization has resulted in implementation failure. It should be noted that when a software vendor develops software for an industry or big business, it cannot incorporate all the required business processes.
Change Management for End Users
If everything falls in place, the biggest challenge still comes from the end user perspective. It is easy to understand this when you see a new system implemented. There are always a few people who are used to working in silos that feel threatened. At times, people will need to provide data when a new process becomes part of their responsibilities, although they may not need that data in their daily operations. Issues of owning the data and accessing the data need to be addressed. Trust and rivalry among departments is another issue. These and other issues demand positive changes in management practices from the project's inception. An open line of communication among functions at all level needs to be promoted to foster a common understanding of the system and its benefits. Some recommendations are:
- Identify the functional silos
- Initiate early involvement with user groups during implementation
- Create an open communication channel across functions to build trust and confidence
- Encourage active participation in designing new processes and buy in
- Receive feedback from management
Many users need training and time to become productive on a new system. Early involvement of such users during the design phase and business processes defining will help them understand the system. An education and training program needs be provided to help with learning the new system. Above all, milestones need to be defined to gauge their system readiness and to give them enough confidence in the systems.
Conclusion
An ERP implementation presents challenges at all levels starting from vision and strategic goals to acceptance from end users. A successful implementation will ensure that the business reaps rich dividends of its initiatives and achieves a competitive advantage in the market.