Overlooked costs when implementing ERP systems
The Visual South team has over 25 years of experience with implementing ERP applications. We have basically seen it all when it comes to ERP implementations and come to recognize the characteristics of successful implementations, as well as the warning signs when an implementation is at risk. The good news is that the typical implementation goes as planned and is successful. But a common challenge that can derail the implementation process is a failure to identify hidden costs. Companies must have a plan to manage those hidden costs.
In our decades of experience, one of the highest hidden costs of ERP implementation is the extra internal time involved with an ERP implementation. And as they say, time is money.
Top categories of required internal time during ERP implementations
Successful ERP implementations require that current employees spend time doing activities that are additive to their normal day-to-day responsibilities in the current business system(s) that are being replaced. These additional activities are commonly overlooked or unplanned for, but the hours stack up and impact business operations…and therefore increase costs. Internal time that often goes unaccounted for during implementations includes:
- Learning the new system. This includes live training from professional services, self-led video training, live video courses (e.g. Infor Campus), training manual reviews, and practice time. These 5 Keys to ERP Training Post-Implementation may be helpful.
- Developing new procedures. Team members will be asked to define and build new and improved processes and procedures for the system. It takes time to discuss, vet, test, refine, and then document the new procedures. This is time consuming and all key department managers and group leaders will be involved in the process.
- Pilot testing. Your implementation leaders and all system users will need to spend time pilot testing. Users have to prove to you and, more importantly, to themselves that they can navigate the new system. You will need a minimum of two piloting events before you go live with the new ERP and there will be procedural refinement and fine tuning to do after each one. Our advice is to go live when your team is ready. Your team should never be practicing on the system after go live—that is a recipe for failure.
- Migrating after the go-live date. Your employees will have to spend time transitioning to the new way of working in the ERP. It may be a significant change for veteran employees who probably developed their own systems (spreadsheets) and the learning curve can be tough.
A solution to avoid hidden costs in ERP implementation
So, how can you estimate this hidden cost during an ERP implementation? The Visual South team developed a matrix that allows our customers to define how many internal hours they think the project will require. The estimates are often quite revealing. The key benefit is that requests for extra internal resources are no longer a surprise. The matrix also calculates a reasonable time frame for implementation, based on what a company wants to do versus what a company is capable of doing, given their resources. This knowledge ensures that proper expectations are set and expectations are managed. Ultimately, our matrix reduces the possibility of a project running longer than expected, due to a lack of available internal resources, and improper expectations about how to accomplish ERP-associated project tasks correctly and on time.
One of the biggest hidden costs of an ERP implementation is internal resource requirements. Visual South can assist with this process, identifying hidden requirements and quantifying the amount of time needed from your team to be successful.
If you are looking into replacing your current ERP system and need assistance with knowing where to start, putting together project budgets, developing internal costs requirements, or anything pertaining to manufacturing-focused ERP applications, we can help. The easy way to get help is to set up a free 30 minute consultation . Visual South also has a library of information that is very helpful on the Visual South Blog.