Part 2 – Is cloud based ERP an extremely risky project for SMEs?
Anderson Yates consultants have been asked to rescue three ERP projects in the past two months, all involving companies that employ less than 250 employees – deploying cloud based ERP. What went wrong for them and what lessons can be learned that will ensure your company doesn’t fall into the same traps? (Part 2)
This week’s case study is based on an ERP implementation rescue for an E-commerce company selling luxury wear in several countries. Their ERP system has been running for 12 months when we were appointed following a change in its operations team.
Case study 2 – Lessons from an E-commerce ERP project rescue
Surely if it has been running for 12 months, it must be working properly? You would have thought so wouldn’t you? Yet in reviewing how their stock items were set up for items with different sizes and colours, they were not correctly done. Consequently, when sales invoices and delivery notes were printed, there were missing information relating to the size and colour of the product. Could they have picked this up at User Acceptance? Yes, definitely. The UAT phase should have involved creating new stock items of all types.
Was that it? Anything else? When we were reviewing questions and anomalies regarding the system and how it behaved, it became clear that the new operations team has had little training in the use of the software and some of these anomalies may have been by design. An example question was can we hide or default the VAT column when users enter sales orders. Whilst the system can be configured to do so, it was not practical as orders were created for sales to different countries for the same client.
Do you have a System Design Document for the implementation? This is one of the first questions our consultants would ask when reviewing an implementation. I got a blank stare and a question of what is that? The system design document contains details of configuration options. It explains the reason why the system is set up as it is. Unfortunately, none was available. Our recommendation to clients is that a System Design Document should be updated at the earliest opportunity after go live. It is the system administrator(s)’s role to do so. This allows the administrator(s) the opportunity for final review.
Our stock valuation is incorrect – it should have been higher than what is being reported? Our suspicion was confirmed by this very statement. We didn’t think the system was correctly implemented with the right stock valuation method in place. I was further puzzled by why I was also asked to help them correct stock numbers and valuation. It was like opening a can of worms. It appears that the process of stock ordering, receiving, sales order processing, despatch and sales invoicing has not been strictly followed through. The finance team has been adjusting stock valuation to compensate for the incorrect valuation method in use. Frustrations and stress level was high as reports of sales through and valuation were being questioned.
What we did? Following a review with the Operations manager, a plan of action was agreed. Correct stock type, correct stock valuation as at the end of the previous year. Review previous sales orders and close those already fulfilled or partially fulfilled if no more despatch is to be made. We provided the operations team with training on the correct use of the system and the effect of each step of the process on accounting. We also provided training on the use of reporting tools to report on transactions, to carry out analysis and the use of Dashboard for KPI reporting.
Transformation delivered. The corrective work took three days to complete and training was provided “on the job”. The operations team is now able to maintain the system correctly and understands the impact of their action on accounting. The stock valuation is now correctly reflecting the purchase cost of items made up of several components including packaging and additional work purchased from multiple suppliers on a number of purchase orders. We are now six weeks since the remedial work was carried out. Stock Valuation at the end of May was to be compared to physical stock count. The team is now preparing for the launch of a new range for the summer season. They are now using the import routine devised for adding new stock lines which included style, size and colour. “We are delighted by the care and attention provided by your team. You have in-depth knowledge of the product and we have no hesitation in recommending yourcompany” was the comment from the operations manager.
Here is our Sales pitch ……
Are you in the process of setting up your ERP system and need additional resources? Have your business model changed since your ERP was set up? Are you now struggling in using your ERP system? Would further optimisation or training be helpful? Our consultants are experts in Netsuite, Sage, Deltek Vision, Microsoft Dynamics, Sales Force & FinancialForce CRM, ERP and Business Intelligence solutions. Call us on 01223 257769 or email: firstname.lastname@example.org if you need an impartial advice and assistance. We will carry out an initial ERP health check review. Our mission is to assist SMEs to successfully adopt business management solutions that help them win more business, improve efficiency, increase profitability and provide flexibility to maximise opportunities.
Key lessons learned:
- Ensure that a thorough User Acceptance Testing is carried out before go live. It must include all current and potential scenarios. Run an end to end process testing not just segment tests.
- We cannot emphasise the importance of training. It reduces frustration and stress. Get help early if you think the system is not behaving as you would expect it to. If you think something is wrong – you are usually right.
- Ensure that you or your supplier documents your new ERP processes including details of the configuration options and the reason why they were selected. Update the document after go live as soon as possible and carry out final configuration check.
- The choice of consultants matter for your ERP project success.
Next week will be our final instalment and conclusion to the question “ Is Cloud based ERP an Extremely Risky Project for SMEs?” We will share with you what lessons can be learned from a financial services company implementing Services focused ERP (SRP – Services Resource Planning).