The ERP Wheel of Pain: Avoiding Costly Mistakes in ERP Implementation

The Real Cost of a Manufacturing ERP Implementation

ERP implementation can be a daunting task, especially for manufacturing companies. Recently, I presented at a user group event, sharing insights on budgeting and potential losses in ERP projects. Let's explore the concept of the "ERP Wheel of Pain" and how you can avoid common pitfalls to ensure a successful implementation.

Defining ERP Success

To define ERP implementation success, we focus on three criteria: on time, on budget, and on spec. On spec means delivering the critical functionality your company needs. However, using these criteria, many projects fall short. This leads us to the concept of the ERP Wheel of Pain.

The ERP Wheel of Pain

The ERP Wheel of Pain illustrates that about half of ERP projects are "challenged," meaning they fail to deliver on time, on spec, or on budget. These projects often cost 2-3 times more than initially estimated. Failed projects require a complete do-over, while "successful" projects often exceed budget and time constraints, delivering only a fraction of the promised functionality.

Expected Value in ERP Projects

Let's introduce the concept of expected value. Historically, for every dollar spent on ERP implementation, companies lose about 50 cents. Imagine implementing a mid-market ERP manufacturing solution, estimated at 5,000 to 10,000 hours with billing rates of $200-$250 per hour. This translates to projects costing between $1 million and $3 million. Cutting this in half, your expected loss could be $500,000 to $1.5 million.

Why Engage in ERP Projects?

Despite these daunting figures, companies continue to engage in ERP projects, often using the same processes and expecting different results. The key to avoiding these pitfalls is to spend less time and money upfront by gathering better requirements.

The Solution: Discover Sessions

One critical step is to conduct a Discover session. This session helps gather detailed requirements efficiently, ensuring you don't miss critical elements that could lead to costly change orders and do-overs. By using our Discover platform, you can gain a comprehensive understanding of your requirements and make informed decisions, setting your ERP project up for success.

Conclusion

Avoid the ERP Wheel of Pain by focusing on detailed requirements gathering and realistic budgeting. A Discover session can provide the insights you need to ensure your ERP implementation is on time, on budget, and on spec. Don't fall into the trap of costly mistakes—use our Discover platform to pave the way for a successful ERP project.