Agile ERP implementation: tips for small manufacturing businesses
Choosing an ERP (Enterprise Resource Planning) system is a major milestone for any manufacturing business, whether you’re a start-up or an established firm with a growing order book. It’s a marker of success: you’ve reached the point where your business and production processes have become too complex to manage manually and you’re ready to take the next step.
Signs you’re ready for an ERP include employees spending too much time inputting and retrieving data, or you can’t guarantee traceability. Or perhaps you’re struggling to deliver orders on-time, in full (OTIF), and have too much cash tied up in stock. Unless you iron out these inefficiencies, customer satisfaction, revenue and margins will suffer due to the competitive and fast-moving nature of manufacturing.
This is why an ERP isn’t just a ‘nice to have’ but an essential piece of kit for any industrial business in the UK today. Senior managers usually recognise the benefits it can bring once it’s up and running – but they’re sometimes hesitant. High on their list of concerns is the cost of the software, as well as the time it takes for staff to become confident using it and the general disruption it could cause. They sometimes worry too that their ERP will take too long to deliver value, or become a costly mistake because people don’t engage with it.
Traditional ERP implementation and its pitfalls
These fears are not unfounded, given that traditional on-premise ERP implementation projects are complex, with lots of moving parts.
Well before the software is deployed, tasks such as selecting a vendor, submitting RFIs and arranging demos are time-consuming. Nobody wants to be responsible for choosing the ERP that doesn’t meet the needs of the business, given that it could be in place for a decade or more.
Implementation projects have a habit of failing too. Some international brands have experienced problems but the risk feels even bigger for smaller businesses, who don’t have the budgets to absorb the cost nor the IT expertise to solve technical problems.
According to a report from McKinsey, as many as three-quarters of ERP transformations fail to stay on track, and two-thirds have a negative ROI. This can be attributed to:
● Misaligned incentives: Stakeholders don’t share the same objectives
● Poor project management: Lack of experience in managing IT projects
● Lack of business/IT integration: Failure to manage operating models, data management and validation rights
● Missing focus on business value: Activities and deliverables are needed to drive ERP transformation
● Waterfall methodology: This approach means it can take longer for the project to deliver value.
The last point is an important one. Project managers would typically follow a waterfall approach to implementation, completing each stage of the project sequentially before moving onto the next. Any delays or bottlenecks during these phases can slow down the overall delivery time, which is disruptive and costly for any business.
It could take one, two or even three years to select a vendor, and between six and 18 months to deploy the system. Then, it might be another two or three years before companies see the real benefits.
Those involved in the project could spend months (or even years) on selection and implementation until they eventually see the light at the end of the tunnel. However, until the software’s live, you’re unable to respond effectively to any challenges and opportunities that come your way. What’s more, external events and changing business requirements may mean the project fails to deliver on its original objectives.
What is agile project management?
The problems associated with waterfall methodology are why a growing number of project managers today prefer to take an incremental, or agile, approach to software implementation projects, including ERP deployment. According to the Association for Project Management, it involves:
“An iterative approach to delivering a project throughout its life cycle. Iterative or agile life cycles are composed of several iterations or incremental steps towards the completion of a project. Iterative approaches are frequently used in software development projects to promote velocity and adaptability since the benefit of iteration is that you can adjust as you go along rather than following a linear path.
“One of the aims of an agile or iterative approach is to release benefits throughout the process rather than only at the end. At the core, agile projects should exhibit central values and behaviours of trust, flexibility, empowerment and collaboration.”
The use of agile in project management follows its near-universal application in software development, where projects are broken down into sprints – with cross-functional teams working collaboratively to build, develop, test and deliver the product within a given timeframe. The reason agile has become the norm in software development is because it can drive up productivity and quality, reduce time-to-market and increase ROI. Importantly, it also allows teams to respond quickly to change.
You might hear the phrase ‘fail fast’ in relation to agile. While the idea of failure is not something you might want to contemplate during any project, the idea is that you have the freedom to try something different on a small-scale with minimal risk to establish whether or not it works.
If it does, you can progress faster; and if it doesn’t, you gain valuable feedback that drives improvements. Other agile terms you may come across include sprint (a timeboxed period to complete tasks), and daily stand-ups (a quick meeting to discuss progress and identify any problems).
From lean to agile
Even if you know little about software development, you’ll be familiar with lean manufacturing. As defined in another McKinsey report, this involves the ‘systematic analysis of processes and value streams to reduce waste, variability, and inflexibility [to boost] performance in cost control, product quality, customer satisfaction, and employee engagement’ and ‘a mindset of continuous improvement and flexible working processes.’
Agile has evolved from lean via Six Sigma and has been applied in manufacturing environments. There’s a focus on ‘iterative development’ where products are released quickly and then improved upon. A flexible ERP can support agile manufacturing by providing data-led insights that drive improvement. The same is true of the ERP implementation itself – start small and roll the software out to key users so you get value from it straightaway and gain feedback that can be shared with your vendor to help them refine it.
Making the case for agile ERP implementation
The authors of this McKinsey report say it’s no surprise that ERP vendors are increasingly advocating an agile approach to implementation. After all, the method has proven benefits that are well-known to anyone working in the software industry.
Certainly, from our own experience, we have a number of examples of how our software has been successfully deployed in this way in manufacturing businesses.
What helps, in our case, is that the product has been developed for small firms in specific verticals, which makes implementation faster and more straightforward.
Large-scale manufacturers, on the other hand, typically have more complex requirements, so an agile approach might feel like too much of an unknown, and a bigger risk. However, when it’s well-managed, agile methodology helps to reduce complexity and the chance of failure, and ensure the project stays on track and delivers value – no matter how big or small it is.
Is a zero-risk agile ERP implementation even possible?
The possibility of zero-risk agile ERP implementation is an exciting prospect, but how realistic is it?
Deploying traditional on-premise systems using the waterfall model, as we’ve seen, can be inherently risky because of the upfront costs and time it takes to go live. Then, any additional time spent on training or building out customisations could cause further disruption for busy production and office teams. Furthermore, unlike some of the larger players, smaller companies cannot afford for the project to go over-budget.
We believe that software doesn’t have to be difficult to implement. A cloud-based out-of-the-box solution can offer all the key features you need to get started and deliver a good ROI almost immediately. Just as important is that you start building a bank of knowledge about what works well and what doesn’t, share it among your team and feed it back to the vendor. This helps to shape the development of the software and ensure you’re getting features and functions that work for you and your sector.
The most successful implementation projects involve internal teams working collaboratively with their vendor in an agile way, to go-live quickly and start getting results.
Pick the right vendor, with good knowledge of your industry, and instead of running through multiple demos before purchasing, you can select a low-cost package on a no-obligation basis and train up staff to use it from day one. If you decide that this ERP isn’t for you, you haven’t lost much time on its implementation and you can take your learnings forward into future IT projects.
There are a number of principles and steps associated with agile – details of which are widely available online. A vendor, with a tried-and-tested agile implementation methodology, can guide you through this process, so every team is working as efficiently and effectively as possible. To get your started, we’ve compiled the following tips, based on our experience of working with small industrial businesses.
Tip 1: Collaboration with your ERP vendor
We’ve mentioned this already, but it is one of the most important drivers for success, especially if you don’t have the funds for expensive project management or IT consultants. Good communication throughout the selection and implementation stage means that the vendor understands exactly what you want so it can be delivered.
This is your opportunity to find out how specific features in the software can support your business, and whether or not they can be configured in a certain way for ease-of-use.
Personalised consulting sessions with your vendor help them to understand your current processes, strategy and future plans – and not just IT-related ones either.
For example, you might be considering buying a £2million machine for your factory that pushes back your timeline for ERP investment, so this should be factored into your project roadmap. Or, you may want to implement a more ‘basic’ version of the software to start improving processes, with a view to adding features in the future. Don’t be afraid to lean on the experts, who can guide you to the next stage of your plans, even if they change.
Once your ERP is in place, you should be able to see what’s working well and what isn’t, and feed back to the vendor. As a final point, not every business is a perfect match for the vendor. Your firm could already be too big or complex for a particular system, or your senior management team may not be fully onboard with the project. You’ve still not lost anything by trialling the system, as it helps to inform your next steps.
Tip 2: Appoint a champion
Any major project, no matter how seamless it is designed to be, involves change and that can be daunting for the wider team. It might simply be that people are concerned about the disruption it could cause day-to-day, or how quickly they’ll get up-to-speed. Sometimes there’s resistance because employees are worried that software designed to automate processes will put their jobs at risk.
Just as communication with your vendor is critical, so too is it important to keep the workforce informed and be sensitive to their needs.
Appointing a champion is common and advantageous, not just in agile but a range of project and change management methods, including lean and Six Sigma. This person is normally a senior figure, such as a CFO, CEO, MD or COO but it could also be a middle manager who knows the business, and its daily operations, inside and out. Even a small company needs someone to take charge and demonstrate why the software is needed by ‘selling’ its features, highlighting the problems it can solve, and answering any questions.
Tip 3: Train your team incrementally
One reason why teams might be reluctant to accept change is because it takes them away from their day job. They know they need to be trained on the new system but, in small companies, which may only have 10 people, a day out for training can leave staffing resources stretched. What’s more, it’s difficult to expect an overly busy team to retain that much information. Failure of employees to engage with training, and the software itself, is one reason why ERP implementation projects fail to deliver on their objectives.
An agile approach to training, on the other hand, helps to address these issues, ensuring everyone can get the most from the software in a time-efficient manner.
Delivering training in two-hour bursts, with a one-hour follow-up the following week, means that staff can understand the fundamentals of the systems straightaway and put their learning into practice. They can start small, perhaps only entering a handful of customers or orders at the beginning, but it’s a valuable opportunity to test their skills and provide feedback, while also ensuring the software starts delivering returns sooner.
Of course, it goes without saying that easy to use ERP software will always encourage adoption and advocacy among the workforce, and minimise training requirements.
Step 4: Drive continuous testing and improvement
By implementing and deploying your ERP at the same time (or as close as possible), you can start to measure ROI immediately, without the lengthy validation phase seen in the waterfall model.
This is where good communication with your vendor is once again essential. It should be quick and easy for you to raise a ticket within the portal, detailing an issue you’ve encountered or suggesting an improvement.
As mentioned previously, real-life feedback drives improvements in the software – and receiving this throughout implementation, rather than only at the end – means customers benefit from a continually-enhanced product.
Tip 5: Reflect on your progress and adapt your ERP implementation roadmap
A retrospective, or retro, is held at the end of every sprint in agile projects to give teams a chance to reflect on what went well, what didn’t and determine their next course of action. Rather than evaluating everything at the end, you can make continuous improvements while the project is still live, reducing the risk of a failed implementation. It’s also an opportunity to adapt your roadmap, in line with new opportunities and challenges that arise, and prioritise the improvements that will deliver the best ROI.
Last, but certainly not least: take the time to celebrate wins and successes. The waterfall model culminates in a big launch or go-live day (or ‘big bang release’ in software development), whereas agile is a series of smaller wins. Working to achieve these helps to keep teams’ eye on their objectives and motivate them throughout the project. We’re not suggesting that you shouldn’t celebrate your win when the software is fully up-and-running – there’s always room for celebration, and the end of a sprint is a good time to do this.
The fact that agile software implementation is being used by increasing numbers of small industrial businesses should allay some of the concerns you might have.
With the risks negligible, it’s possible to test out a fully-functioning ERP system, and make meaningful changes to your business critical processes with no obligation to continue using it beyond implementation. You might decide that a particular system isn’t for you and choose another product on the market, or you might build on what you have. But one thing we know for sure is that few would want to revert to manual processes – ever again.
Fortee is a brand new cloud-based ERP solution from Forterro, developed for small-scale manufacturers in key industries such as metal, electronics, furniture-making, medical devices and others.
Our agile 40Live implementation methodology delivers quick results, and iterative progress. It combines standard training with iterative, personalised consulting sessions that will efficiently onboard your users using your company’s real production data, and have you live in 40 days or less.