ERP failure occurs when objectives defined during implementation are not met. Types of failure include financial, timeline, and business interruption. Miscommunication, budgeting errors, and inflated sales figures are reasons for failure. Financial failure occurs when the system does not provide the promised returns or exceeds the budget. Timeline failure occurs when implementation is significantly delayed. Catastrophic failure occurs due to miscommunication and can slow down company processes.
In business, Enterprise Resource Planning (ERP) failure basically occurs if one or more of the objectives defined when opting for ERP implementation are not met. Types of failure include financial failure, timeline failure, and business interruption or slowdown. Generally a failure in one part of the implementation planning process, ERP failure can occur for many reasons and can result from problems anywhere in the business or in the planning process. Reasons for ERP failure include miscommunication, budgeting errors, and inflated sales figures.
If the ERP does not provide the company with the promised financial returns on investment, this is a type of financial failure. An ERP does not generate money by nature, but it is designed to facilitate company processes such as accounting, human resources and data exchange to improve the efficiency of the company. When deciding whether to implement ERP, company management often creates estimates of how much they expect efficiency to increase after ERP implementation. This efficiency data can be translated into approximate dollars and cents to estimate what ERP means to the company financially. If the system return is significantly below the estimated value of the platform implementation, it will be considered an ERP failure.
Another type of financial failure of an ERP can occur if the ERP implementation does not occur within the budget defined for the ERP. Before implementing an ERP, management should have calculated an estimated cost, including the physical resources needed, such as money, labor, and space, as well as the cost of retraining and preparing employees for the newly implemented system. If the ERP implementation costs greatly exceed the projected costs, this may be a type of ERP failure, although an ERP that exceeds budget may still be a partial success if it manages to meet the other ERP objectives.
An ERP implemented significantly later than designed is considered a timeline failure. When an ERP implementation does not meet its projected completion date, the delay can be caused by variables such as how long it takes employees to learn a new system. Timeline delays can also occur as a result of inaccurate time estimates during ERP implementation planning, as if the computers were not ordered to arrive on time for training.
Serious failures in the implementation of the ERP can slow down the company’s processes, which can affect the work of employees, as well as the production and shipment of company orders. Generally, catastrophic ERP failures occur due to miscommunication. Sometimes there is a miscommunication between management, but poor communication with company employees who are responsible for parts of the ERP can also end in catastrophic failure. When a complete failure of an ERP brings a company to a standstill, on-site employees must be empowered to make the necessary changes to get production back online as quickly as possible, including reverting to the system used before the ERP.
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