5 Biggest ERP Implementation Challenges

Last Updated: October 20th, 2023
Researched and Written by: Lexi Wood

There are many challenges to implementing an ERP system. Poor planning, reluctant users, and choosing the wrong vendor can all lead to problems. Learn what the biggest challenges to setting up an ERP are (and how to avoid them).

What are the Challenges of Implementing an ERP System?

  1. Poor planning and project management
  2. Poor data quality
  3. Internal resistance from employees
  4. Inaccurate cost estimates
  5. Poor vendor selection

Top 5 Challenges of ERP Implementation

1 Poor planning and project management

Inadequate planning and project management can lead to ERP implementations running off track and failing to achieve their objectives. Without a well-defined project plan, organizations may encounter delays, scope creep, and misaligned expectations, making it crucial to establish clear goals, milestones, and responsibilities from the outset to ensure a successful implementation.

Setting up a change management plan with clearly defined objectives should be easy, but it can involve additional challenges. Organizations need to establish clear, specific, and measurable goals for the ERP implementation. Establish those goals by following the 5 key phases of ERP implementation. Once in place, the project team can work towards achieving each goal, reducing the risk of scope creep and misalignment with business needs.

2 Data quality

Data quality issues pose a significant risk during ERP implementations since inaccurate, inconsistent, or incomplete data can lead to errors and full system failure. Even migrating duplicate data from a legacy system can clog up the new ERP’s workflows. The more complicated the data, the more complications there may be to the implementation.

While cleaning up data sounds easy, it can take a lot of time and effort to achieve. To mitigate this common challenge, organizations must invest time and resources in comprehensive data cleanup efforts. This involves identifying and rectifying inaccuracies, duplications, and inconsistencies in data sources before migrating them into the new system. As a safety measure, creating a secure backup doesn’t hurt either.

3 Internal resistance

Internal resistance, often stemming from employee reluctance to change, can hinder ERP adoption and success. Resistance may manifest as pushback against new processes or technology, resulting in decreased productivity and user dissatisfaction. And sometimes users who aren’t tech savvy are worried about their ability to work with an entirely digital process.

To prevent this challenge, organizations should invest in change management strategies that engage employees throughout the process. Make them feel connected to the new ERP, either through how it will make their job easier or the overall benefits it brings to the company. Another way to address this risk is by involving end-users through comprehensive training. It also helps to have a culture of open communication to alleviate concerns and encourage buy-in from all levels of the organization.

4 Inaccurate cost estimates

Inaccurate cost estimates can be a major risk in ERP implementation, leading to financial strain and project disruptions across the entire company. Underestimating costs can result in budget overruns, potentially causing the project to stall or be abandoned entirely. Hidden costs are another challenge, as some vendors charge for change orders as the scope of a project evolves. There may also be unforeseen costs associated with upgrading hardware or employee training sessions.

To mitigate this risk, organizations should conduct a thorough cost analysis that includes not only the software licensing itself, like hardware, training, and ongoing maintenance. Implementing strict budget control mechanisms, such as regular financial tracking, helps prevent unexpected expenses and ensures that the project stays within its original estimate.

5 Poor vendor selection

Choosing the wrong ERP vendor can have severe consequences, including system incompatibility, inadequate support, and costly customization requirements. All of these factors can create challenges later, if not outright failure. The vendor’s pricing might be too high, or they might have limited training capabilities. Even the most reputable vendors can simply be a bad match for some customers depending on organizational size and industry needs.

To minimize this risk, organizations should conduct a thorough vendor evaluation process. This includes assessing the vendor’s overall reputation, relevant industry expertise, and customer references beyond basic testimonials. Additionally, involving key stakeholders and decision-makers in the vendor selection process can help ensure a better fit between the chosen ERP system and the organization’s goals and requirements.

What Problems Companies Face when Upgrading ERP Systems

If you are ready for these challenges, you can avoid ERP implementation failure. However, many companies weren’t so lucky and faced problems when upgrading their ERP system:

  • Hershey: Trying to rush an implementation meant an estimated loss of $100 million in orders. Profits decreased 19% during this time.
  • Hewlett Packard: ERP implementation failure cost HP at least $160 million in lost sales when the new ERP could not process orders correctly.
  • Revlon: The failed ERP rollout of 2016 meant $64 million worth of products could not be shipped. Over $5 million was spent to fix the lapse in customer service.

To avoid losing millions of dollars, prepare your company for ERP implementation by finding the best ERP software.

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