The True ERP Challenge in 2023: Aligning People,
Process and Technology
By Erin Koss,
CPA is an Andersen Business Consulting Alumni (1993-1999),
and CEO of Syte Consulting Group, Inc.
This
year, the hottest topics in the enterprise resource planning (ERP) world are
all about technology — everyone seems to be talking about artificial
intelligence and rapid implementation methodologies.
And
while the software is changing rapidly — and the tech part of ERP is exciting —
what often gets left out of the conversation is the human aspect of ERP implementation.
At
Syte Consulting Group, we firmly believe that the success of ERP solutions
comes from an awareness of the interconnectedness between people, process and
technology.
In
our conversations with family-owned manufacturing companies, we’re hearing that
many organizations are facing post-implementation challenges and struggling to
get a return on their ERP investment — and technology is not the problem.
These
companies are struggling with issues around how well people are prepared to go live,
how they have been trained to operate the new solution and how they can
optimize the technology for full benefit.
Read
on to find out how these trends are showing up for companies in 2023, and the
best practices we recommend for leveling up your people so you get maximum
return on your software investment.
To
give context to the conversation about people and resources, let’s start off by
looking at the biggest recruitment and retention trends happening in the U.S.
right now — in the overall labor market, and specifically in the manufacturing
sector.
The
State of Employment in the U.S.
In
August 2023, the U.S. Bureau of Labor Statistics reported that job openings increased to 9.6 million,
which indicates a growing demand for labor across various industries.
Hires
remained relatively stable at 5.9 million, and the hiring rate stayed at 3.7%.
Total separations, which include quits, layoffs, discharges, and other
separations, also remained largely unchanged at 5.7 million.
Companies
are trying to fill a lot of roles. What’s causing the recruiting and retention
challenges?
In a Statista survey, approximately 50% of
human resource professionals reported that rising salary expectations and a
lack of career advancement opportunities were negatively impacting hiring and
retention efforts.
Meanwhile,
what does the manufacturing job market look like?
As
of August 2023, the unemployment
rate in the manufacturing sector was 2.7%, compared to the overall U.S. unemployment rate of 3.8%.
Job openings rose to 640,000 (up from 572,000 in July).
These
statistics show that the demand for manufacturing labor remains high, and seems
to be growing month over month.
Some
economists believe manufacturing employment could be getting a boost from U.S.
policy changes that support semiconductor production, domestic infrastructure
and clean energy development.
Mark
Zandi, chief economist at Moody’s Analytics, said, “Policy has really been an
increasingly powerful tailwind of the manufacturing
base.”
Others
believe shifted economic demand has also played a part. A journalist on the Waupaca Foundry blog states:
“The
years that followed [the Great Recession of 2008] are considered the recovery,
which led up to the 2020 recession. Consumer demand slowly returned as
Americans rebuilt their credit scores and made big purchases — like a new
vehicle — they may have otherwise put off during the recession. That helped
support jobs in manufacturing for American workers assembling the latest and
greatest trucks and SUVs.”
What
We're Hearing From Family-Owned Manufacturing Companies
Syte
Consulting Group speaks to a lot of family-owned manufacturing and distribution
companies during and after ERP projects, and we hear about a wide range of
post-implementation problems.
One
of the most notable issues is the struggle to achieve the anticipated return on
investment (ROI) after implementing an ERP system.
Many
times, even two to five years post-implementation, companies are still
experiencing system adoption issues. Many still rely on spreadsheets for tasks
like material requirements planning (MRP), which should be facilitated by the
ERP system.
This
sometimes occurs because of a lack of training and documentation during the
implementation phase, and the company is still feeling the pain years down the
road.
And
again, that’s not a technology problem — that’s an issue with people and
processes.
We’re
also seeing high turnover in the manufacturing sector, and many companies are
struggling to recruit talent for open roles. Human resource problems aggravate
existing training deficiencies. New employees struggle because there isn't a
proper knowledge transfer mechanism, making learning curves steeper.
One
significant consequence of these challenges is companies' unpreparedness for
the "operate and optimize" phase post-implementation. This crucial
phase is when initial implementation goals that were postponed during the
hustle and bustle of the ERP launch can be revisited and executed.
But
if the team is not properly staffed and trained, this phase can really bog down
an organization.
Compounding
this industry-wide staffing challenge are growing pains for family-owned
manufacturing companies. When a company is ready to implement an ERP, it is a
clear sign that they are maturing — and with that maturity comes new staffing
needs. The roles that got the job done are not the same roles required now that
the company is larger and more complex than the last time systems were
implemented.
Companies
often make the mistake of thinking they’ll pull staff resources temporarily for
an ERP implementation, those employees will do double duty until the
implementation is complete, and then those people can go back to their
operational roles. But the reality is that to achieve optimal ROI, ERP
solutions need to be continuously optimized— and that requires ongoing
allocated resources.
Knowing
this and planning for it from the beginning is the only way to avoid
“operational limbo,” where they have a
backlog of projects to execute, but they’re hampered by lack of resources, training
deficiencies and turnover. In this situation, the optimization that leaders
envisioned when they implemented the ERP takes much longer than they pictured,
and the path to realizing the ERP system's full ROI becomes murkier.
Best
“People” Practices for ERP Implementation
So
if those are the issues we’re seeing in the field — what are the solutions?
Here
are our recommended best practices for supporting ERP systems effectively:
● Start
planning early:
Talk about people and processes during ERP selection and the period before
going live. Anticipate and prepare for the “operate and optimize” phase well in
advance.
● Think
about future needs: What
additional resources and structural changes might be required to optimize the
ERP implementation?
● Practice
change management during and after: An
ERP project is primarily a change management initiative, and it impacts
individuals company-wide. Your team will deal with emotions ranging from
excitement to resentment, so you’ll need to guide people through the effects of
the new technology.
● Remember
that ERP implementation is just the start: Post go live, be prepared for backlog
tasks, feature adjustments and emerging challenges. Adopt a continuous
improvement perspective and align ERP evolution with business growth. Line up
the resources to have a post go-live team for future projects. Prioritize
ongoing support, training and maintenance in your implementation plan to ensure
smooth daily operations.
Here
are some resources that can help you get ready for your own ERP implementation:
Resource Planning Guide for ERP Implementation
Syte's Holistic Approach to ERP
Implementation
Success
in ERP implementation goes beyond choosing a technology solution. Family-owned
manufacturing companies also need to train, equip and consistently back the
people at the heart of the change.
At
Syte Consulting, we help our clients align their teams, processes and tech
throughout the ERP journey — from the first brainstorming meetings to the final
finish line (and beyond).
Get
in touch today
to find out how we can help you.