Turn your ERP failures into optimization success

· 3AG blog,erp,analytics

ERP. No other three letters can strike such fear into the heart of a CFO. But why is this the case? And what can leaders do to solve this problem?

What does ERP stand for

First a quick primer. The term Enterprise Resource Planning, or ERP, was first coined by Gartner in the 1990s. It describes software that evolved out of maintenance resource planning and manufacturing resource planning tools developed in the 1960s. By integrating new features like finance and accounting into these tools, companies were able to get a much more integrated view or their operations.

Who are the primary users of ERP systems?

The primary users of ERP are accounting, finance, logistics and production, but it’s hard to find anyone not affected by ERP implementations.

What are the primary business benefits of an ERP system?

It’s important to understand that there are things that ERPs can do quite well, and that there are things that ERPs struggle with. ERPs have were traditionally designed to record activities against a work order, i.e. to process business transactions efficiently. Consequently, the benefits of ERP include:

  • Providing a central repository for most of your company’s data and business processes
  • Reduction of manual paperwork
  • Inventory management & expiration tracking
  • Automatic creation of accounts payable and accounts receivable
  • Traceability
  • Quality management 
  • Standardization of information and processes


All sounds great so far, doesn’t it? Now for the bad news:

  • ERP failures are common. According to Gartner most ERP implementations fail
  • ERP implementations are expensive
  • ERPs take a long time to implement, generally measured on the scale of years
  • New ERPs may require business process changes
  • Organizational changes that occur mid-implementation could affect business processes
While cloud-based ERPs remove the IT burden of managing infrastructure, they still suffer from ERP integration issues. Furthermore, cloud-based ERP systems lack the customizability of their on-site predecessors.

ERPs are great at collecting data, not so good at interpreting

Despite the cost and long implementation time, ERPs are critical in helping organizations record data and business processes. They force departments to follow process and ensure that everything is properly tracked. And they are powerful tools for managing customer orders, purchase orders, manufacturing orders, field service requests, shipments and returns.

Where companies tend to face ERP disappointment is when they try to access this data (outside of a standard work order). Business reporting, analytics, predictive modeling – these are all very important use cases that are not easily handled by an ERP.

Perhaps it’s an issue of perspective. ERPs are good at outlining and policing business process. These work flows get coded into the ERP at implementation, becoming a static snapshot of the company’s process. Just like physical equipment however, over time these processes wear down and become inefficient. In contrast, businesses are dynamic, complex systems that change over time due to changing conditions.

How can you tell when your ERP is not working for you?

There are a few signs that your ERP implementation is getting a bit stale:

  • A proliferation of spreadsheets and manual workarounds are required to make things work
  • Significant effort is required to close financials, build forecasts and develop basic reporting 
  • You’ve experienced a lot of employee churn since the original ERP implementation or most recent upgrade
  • You and your team have a sneaky suspicion that the data you’re looking at isn’t accurate

Do you need an ERP upgrade?

Not necessarily. Many companies choose to manage reporting and analytics separately by extracting data from the ERP into a separate data repository (known as a data warehouse or data lake). The advantage to this approach is that companies can now take advantage of other modern reporting, dashboarding and analytics tools without the need for expensive changes to the ERP. Furthermore, data from other systems can be stored in a data warehouse, opening the possibility for even richer analysis.

Closing the loop and optimizing your business

Accurate reporting is critical for an organization, allowing employees to make informed decisions and avoid shooting from the gut. But reporting alone is not enough, a