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 have also litigated many of these disputes on behalf of companies whose systems 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. Receiving compensation for a failure years after it occurs 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.
Below are six common signs that indicate an organization’s ERP software system might 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. An extreme example of this came when Revlon was unable to ship to retailers because it was getting late deliveries from suppliers. Shareholders filed three separate class action suits 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 usually spills over into inventory control. Managing inventory is tricky at best: too much inventory and inventory is tied up; too little and production is slowed, meaning shipments are delayed. If inventory controls are not functioning properly, it is often a sign the ERP software system is not performing as needed.
4 – Problems moving data between divisions. The great strength of ERP is it assembles actionable data across many functions and facilitates management decisions. However, if silos begin to appear, or are not removed, it greatly inhibits comparing data streams. A business also loses the ability to spot correlations and patterns that can produce key insights. If this becomes a problem for the c-suite, 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 does not happen, it quickly snowballs into widespread inefficiency, to say nothing of employees’ irritation with incorrect paychecks.
6 – System agility is awkward. Because ERP technology is rapidly changing, the introduction of enhancements can happen before they are fully mature and bug-free. If an upgraded ERP software system does not integrate smoothly, it becomes more disruptive than beneficial. Difficulties loom when the system is not agile.
Benefits and Challenges
An ERP software system is a challenge to maintain due to its integrated nature. In a worst-case scenario, an undetected problem may cause it to shut down entirely, causing a massive disruption that ripples through an entire organization.
A system that does not integrate properly will create more disadvantages than advantages for an organization. Preventing a train wreck is possible, but senior people in a private or public sector business need to spot any early warning signals that trouble is brewing. Don’t rely on your vendor or integrator to do it for you.