Over the years, we have written quite a bit about the many “train wrecks” that seem to plague a disturbing number of ERP software systems. We also have litigated many of these disputes on behalf of companies whose system did not meet the promises made by software vendors or integrators during the software sales process.
But litigation is a costly, time-consuming, energy-draining and lengthy process. Being compensated for a failure years after it occurred does not replace anything that was lost in the meantime.
In our decades-long career of negotiating, drafting and litigating contracts for ERP software systems, we have come to understand how and why many of the train wrecks occurred. In fact, there are definite signs that an ERP software implementation or digital transformation is running into trouble. Knowing the signs and acting quickly to remedy it can keep a bad situation from spinning totally out of control.
Here are six of the most-common, telltale signs for organizations that their ERP software system may be heading for trouble.
1 – Difficulty billing customers. Often, the invoicing process is the first to encounter difficulties. Either invoices can’t be generated in a timely fashion or they are inaccurate and customers start contacting suppliers because they are confused or angry.
2 – The supply chain is interrupted. The most-extreme example of this came when Revlon was unable to ship to retailers because it was getting deliveries from its suppliers late. Three separate class action suits were filed by shareholders to recover the money they lost when Revlon’s stock price took a hit. If there are supply chain issues, it’s very likely rooted in an ERP problem.
3 – Inventory control is uncontrollable. When there are supply chain issues, it almost always spills over into the area of inventory control. Managing inventory is tricky at best: Too much inventory and inventory is tied up; too little and production is slowed meaning shipments go out late. If inventory controls are not functioning properly, often it is a sign that the ERP software system is not performing as needed.
4 – Problems moving data between divisions. The great strength of ERP is that is assembles actionable data across many functions and facilitates management decisions. But if silos begin appearing where none existed before, or are not removed as promised by a vendor, it greatly inhibits comparing data streams and a business loses the ability to spot correlations and patterns that can produce key insights. If the C-suite finds this becoming a problem for them, they need to look for the root issue in their ERP.
5 – ERP isn’t integrating smoothly. For any ERP software system to generate value it must integrate seamlessly with an organization’s other systems, especially those involving payroll and finance. When this happens, it quickly snowballs into widespread inefficiency and inconvenience to say nothing of employees becoming irritated because they are having problems when their paychecks are wrong.
6 – System agility is awkward. Because ERP technology is changing rapidly, many enhancements are introduced before they are fully mature and bug-free. If an upgraded ERP software system does not integrate smoothly, it becomes more disruptive than beneficial. A warning sign that there are difficulties looming is when the system is not agile.
Benefits and Challenges
ERP software systems are a challenge to maintain due to their integrated nature. In a worst case, an undetected problem may cause it to shut down entirely causing a massive disruption that ripples through an entire organization.
So, a system that does not integrate properly will create more disadvantages for an organization than the benefits it offers. Preventing a train wreck is possible but senior people in a private business or public sector organization need to be tasked with spotting any early-warning signals that trouble is brewing. Don’t rely on your vendor or integrator to do it for you.
Whether you are installing ERP for the first time, are upgrading a legacy system, or simply have concerns about what might be happening with your ERP software system, feel free to contact us. We’ve devoted our careers to working with clients on ERP-related matters and will be happy to share what we have learned.