How to Avoid an ERP Software Failure

One Large Volume ERP Nightmare

By Sheldon Needle

They say that the devil in the details when in comes to choosing the right ERP software. Even the best of intentions by the buyer and seller can cause a project to go awry when poor decisions are made during the evaluation and/or implementation phases.

This war story based on an actual case, demonstrates just how tricky it can be to avoid being claimed as a software victim even when it appears that standard due diligence was done.

A $200M+ manufacturer and distributor chose a well regarded mid-market ERP solution for its operation. Just about everything seemed to check out. The sales presentations were excellent; it seemed well suited functionally; there was no internal resistance to choosing the vendor; they had all the necessary applications and scalability seemed assured since many companies much larger than theirs were using that solution successfully. They even hired a supposedly experienced outside consultant to be their eyes and ears on the project so that it would run smoothly.

However, after 1.5 years of effort and several millions of dollars sunk into the MRP software and hardware acquisition, the software is literally crippling the company operation because it is not nearly capable of processing their transaction volumes fast enough. It only took then a few days after going live to figure this out. Was there no parallel processing or backup in place while they transitioned?

The company processes thousands of sales orders with many line items for many plants every day but the software is too slow to keep up. They are literally falling further and further behind every day!

The vendor has given some advice regarding their hardware configuration but it has only resulted in a nominal improvement. Sad to say, they don’t have any good options at this point.

How and why did they arrive at this crisis point?

In truth, it was somewhat predictable since there were warning signs early on that should have alerted the key decision makers that something might be amiss.

  1. The company had previously successfully used a pretty good mid-market product for a number of years (albeit with some workarounds for multiplant needs). They never brought that vendor in as a candidate for an upgrade to the product they were using or an alternative sold by that vendor. Why not?
  2. Senior management took charge of performing the conference room pilot . The senior execs ran their pilot test with a test batch consisting of a small number of sales orders with 5 – 10 line items (instead of their typical 50-60 items) a tiny fraction of their actual daily transaction rate. Each of a dozen plants processes hundreds of sales orders daily. Normally conference room pilots involve a large, true to actual, volume test as well as small volume tests.
  3. The implementation phase was rushed by the vendor’s project leader who pushed past any schedule delays saying the shortfalls would be dealt with when going live. This was done even when it was clear the company’s internal staff had not done their homework in preparing and or auditing data prior to entry to the new system.
  4. The company itself had no technical skills to screen vendor recommendations for hardware or operating system issues.
  5. The outside consultant hired by the company to represent their interests was very weak to the point of incompetence. Who was this person. Who recommended him? Could it have been the vendor?

This sort of thing does not usually happen with larger companies who have experienced staff. They know a bad ERP selection decision can result in disaster so to avoid any fatal surprises, they will run parallel systems for months with the old system and the new one and check that they get the same results before pulling the plug on the old system. Doing this , of course, also checks whether the new software can meet the performance criteria.

Summary

It’s hard to imagine a company spending several millions of dollars, not to mention thousands of manhours, and coming up with a virtually useless solution. Unfortunately, it happens and will continue to happen unless experienced independent staff with leadership skills are put in charge of these bet the company projects.

Company executives should think in terms of investing the necessary resources to insure success. Necessary resources mean a committee of managers with experience in software selection and implementation and the full support of management to recommend the right solution after following all the essential steps in evaluation and implementation.

It all comes down to knowing what you don’t know in order to avoid potentially catastrophic results.

 

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