Ask any manufacturer what the most likely short term plan is for their aging ERP solution. The most likely answer is not an upgrade or a purchase from a major software supplier. It’s the dreaded “no decision” of living with the status quo. Many companies put off moving forward due to the fear of change and the perception of it as an overwhelming effort. 

Unfortunately, the truth about postponing ERP system replacement is that doing so creates a cascade of issues for a business that compounds over time, affecting both its short-term efficiency and long-term strategic positioning. Businesses should move forward with ERP replacement when the need is real, in order to remain competitive, compliant and capable of supporting growth and innovation.

This blog reveals that mitigating the risks associated with purchasing and implementing a new ERP system doesn’t have to be paralyzing. Through careful planning, strategic decision-making, and effective project management, business leaders in charge of an ERP project can avoid the most common obstacles to success.

Risk #1 – Business Disruption

ERP replacement can cause substantial disruptions to a company’s ongoing operations. The fear of downtime, productivity loss, and operational chaos during the transition is understandable.

Risk mitigation strategies concerning disruption begin with a phased implementation. Businesses should implement the replacement in phases as opposed to all at once, starting with non-critical functions, gradually working up to the more essential processes. Detailed implementation planning with the implementation team, prior to the commencement of the project, keeps everyone on track with meeting milestones. Contingency plans should also be drafted in case anything unforeseen should occur.

It should be noted that new ERP solutions can often run parallel alongside an old legacy system for a transitional period, allowing users to get used to the new software while maintaining operational continuity. Typically, during this time, extensive training is performed so that employees will be ready to hit the ground running on day one when the new ERP completely takes over.

Risk #2 – Complexity and Risk During Implementation

ERP projects can be highly complex, carrying a risk of failure. Concerns about delays in rollout are all too common, from overall project management challenges to integration issues and data migration problems.

Fortunately, businesses can reduce ERP project delays by taking the following steps. First, project teams should be assembled, comprised of people experienced in ERP implementations specifically associated with the manufacturing space. If none exist within the organization, external consultants can be brought in. Such experts have deep backgrounds and experience, and know of proven ERP best practices and project methodologies that yield successful, on-schedule results.

Conducting regular progress reviews as the project progresses allows the implementation team to stick to set milestones, identify any risks or problems that may arise and to make the necessary adjustments around them. Finally, pilot testing can be conducted within specific departments or functional areas to identify and resolve any potential issues before full go-live.

Risk #3 – Legacy System Dependency

Some organizations hesitate to purchase a new ERP because they find themselves overly dependent on a highly-customized solution. Businesses replacing customized ERPs fear that the unique capabilities their old systems address won’t be replicated by a new solution, or won’t be performed as well. Such worries tend to be irrational, and shouldn’t prevent a business from moving ahead with a modern-day solution they desperately need.

To allay concerns about replacing such systems, companies should perform a thorough inventory and analysis of their old ERP, documenting all customizations, integrations and dependencies. Special note should be taken of how the old system assists various processes and which critical functions will need to carry over to the system replacing it. This is again an opportunity for consultants with best-practice experience in manufacturing to contribute with templated standard processes.

Additionally, the analysis step also presents an opportunity for businesses to map out their data migration strategy – specifically how existing data will be ported over to the new ERP. Data migrations offer businesses a rare opportunity to cleanse existing data of redundancies and errors.

Ideally, key stakeholders will be involved during the analytical stage, bringing insights and special requirements from across all departments within the organization. They’ll ensure the new ERP will meet the needs of the company and help to develop comprehensive training programs for all employees. Note that detailed documentation and records should be kept about the legacy solution being replaced to refer to during implementation of the new system. 

Risk #4 – Regulatory and Compliance Concerns

For manufacturers in the automotive and life sciences industries, adhering to strict regulatory and compliance requirements during ERP replacement is essential. Ensuring that a replacement system complies is critical during the vendor selection phase. It’s not unusual for companies to postpone buying a new system while verifying it can meet the rigors of compliance. For this reason, proactively engaging with regulatory bodies for guidance on compliance issues during ERP implementation is recommended.

Selecting a reputable ERP vendor with a proven track record in the type of business considering the replacement is critical. Prior to selecting a vendor, a business usually performs a “deep dive” into all of the applicable standards. Automotive manufacturers, for example, consider IATF 16949 and ISO/TS 16949 during their evaluations. FDA regulations such as ISO 13485 are of key importance for Life Science companies. When in doubt, implementation teams can employ regulatory consultants to determine if a new ERP under consideration will support the regulations.

Next, a company should implement rigorous data migration protocols to ensure all data transfers from the old system to the new are accurate, complete and compliant. Any modern-day cybersecurity measures required by regulatory bodies should be incorporated during this phase. Getting up to date with current cybersecurity laws and standards will prevent an organization from liability and losses long-term.

Organizations should plan on comprehensive testing to validate that the new ERP meets all regulatory requirements, including user acceptance testing (UAT) with scenarios that test compliance features. Ensure that the system can provide detailed audit trails and logs that track user activity and system changes that are often required for compliance purposes. 

Risk #5 – High Costs and ROI Uncertainty

One of the primary reasons businesses choose not to move forward with ERP replacement is due to the cost of doing so. The project cost includes the system elements of software, hardware and services. These costs should be established by experienced resources as the industry is rich with stories of ERP project time and cost runovers. Also, in order to give the green light to any such purchase, a company’s executive leadership team must have a clear understanding on the return on investment such an extensive, disruptive project will yield.

To get past these roadblocks, a detailed needs assessment should be performed to determine which functions are needed versus modules and features that are not essential. Realistic budgeting should include all potential costs. Taking these steps should trim the overall spend considerably. Defining key performance indicators to track the performance of an aging ERP in terms of lost dollars, scrap, and inventory can go a long way into determining how making a change can positively impact the bottom line.

Why You Should Fix What “Isn’t Broken”

Many ERP vendors are now selling cloud-only solutions, which have lower up-front costs compared to older, legacy systems. The reason for this is that they offer seamless upgrades, reduced IT infrastructure costs and subscription-based pricing models that spread costs out over time.

Also be sure to minimize customizations to only those that are absolutely essential for business operations. Customizations are costly and often add complexity that is counterproductive to why a new ERP is being implemented in the first place. Working closely, hand-in-hand with one’s selected ERP vendor should not be dismissed – often, vendors will be happy to provide robust support during and after implementation. Finally, be sure to explore loans or grants to help fund the ERP purchase. 

By following these risk mitigation strategies, businesses can overcome their fears of ERP replacement and arm themselves with a solution that’s future-proof, secure and poised to deliver a rapid ROI.