In my last post, “5 Costly Pitfalls of Managing Your Operations with Spreadsheets“, I outlined several reasons why spreadsheets are a very appealing tool (although detrimental in the long run) for managing business operations:
- Very Low Learning Curve
- Inexpensive and Readily Available
- Quickly Up and Running
- Easy to Modify
Due to these perceived benefits, it is no surprise that managing operations using spreadsheets is very prevalent among small businesses who believe the only alternative is committing to a full-blown Enterprise Resource Management (ERP) system. Amazingly, it is also extremely common for companies with a traditional ERP system in place to still rely heavily on spreadsheets for their daily operational management—then maybe re-keying necessary data into the ERP, if you’re lucky.
A recent research study (2015 ERP Report) performed by Panorama Consulting Solutions found that on average ERP implementations cost $4.5 million with a duration of 14.3 months. With that kind of investment, no matter what type of high-end features your ERP vendor included, your business will never see ROI from a system that your team refuses to use.
Why Operations Resist ERP Adoption
In our experience, there are three main reasons why operations circumvent your organization’s large investment in an ERP system.
Ineffective Change Management and Operational Disruption
Most organizations do not effectively manage the operational transformation brought on by an ERP implementation. A great example of this is outlined in Michael Krigsman’s article “ERP change management: The silent killer”, where he uses Lumber Liquidators to illustrate this point. In 2010, the retailer had $650 million in revenue and 225 locations when they reported a dramatic 45 percent drop in net income. The primary cause according to Lumber Liquidators was “reduced productivity” associated with its ERP implementation.
Krigsman goes on to say:
Lumber Liquidators problems arose because, apparently, the company did not anticipate the difficulty employees would have transitioning from the old system to SAP. Poor training is a common obstacle on enterprise implementations of this type.
Additionally, the 2015 Panorama study states that more than half of organizations experience some form of operational disruption, and approximately 55 percent reported a disruption of greater than one month. These disruptions include not being able to perform simple tasks such as shipping or receiving products and assets.
Couple these likely operational disruptions with the aforementioned change management problems, and it is easy to see why employees have a tendency to give up on ERP and revert back to rogue management tools (spreadsheets, custom access databases, or legacy systems). After all, the show must go on and managers are still on the hook to keep the business running despite disruptions caused by the system.
Overly Complex and Difficult to Use
Poorly designed and overly complex user interfaces, cumbersome navigation, and slow search features are just a few of the issues users face when it comes ERP usability. Aleksey Osintsev, an analyst for Technology Evaluation Centers, identifies a multitude of such problems in his post “Usability Still a Problem for ERP Users” including the following:
- Confusing navigation
- Counterintuitive screen functionality
- Overly complex, congested forms
- Requires extensive technical knowledge to access needed data
- Poor response times and system performance
Products that don’t appeal to their users can be self-defeating. Whenever software systems create obstacles—technical jargon, ambiguous messages, illogical sequences or visual clutter—the people who use these systems will respond in a variety of ways.
The devastating yet, unfortunately, common responses to these usability problems include team members circumventing or abandoning the system completely.
Under-delivered Value of ERP Implementations
According to the study by Panorama, a significant number of those surveyed stated their implementation did not deliver anywhere near the anticipated value. Specifically, 41 percent of participants received less than half of the anticipated benefits of the implementation while 16 percent claimed not to realize any measurable benefits.
The study goes on to state that only 58 percent of respondents considered their ERP implementation a success, while the remaining participants regarded their implementation either as a failure (21 percent) or “did not know” if the project was a success (21 percent).
Despite these issues, ERP is a requirement for today’s business and should be taken seriously by the entire organization. To overcome the outlined challenges with ERP, organizations should consider adopting “best in breed” solutions to complement their ERP implementation. Such a solution should integrate and extend ERP for Operations, Finance, and other units of the organization. This approach incorporates a more responsive, flexible solution that is tailored to your Operation’s needs. The result is a mature, fully integrated system that removes the attraction to managing operations using spreadsheets—all at a fraction of the cost of direct ERP customization.
Please contact us today if you are interested in learning how you can minimized your dependence on spreadsheets for managing your organization’s daily operations.