Which Comes First, Business Process or ERP Implementation?

In our conversations with clients and prospective clients, we sometimes find that they are looking for the ERP to solve all of their business process problems. There is no doubt that an ERP system can help, but the ERP on its own, surrounded by poor process will make the implementation tough and will leave your team frustrated. If you are running into process roadblocks as you work to scale your business and you know you need a new ERP system as well, then using the ERP implementation as the impetus to make meaningful process changes is a great approach, but only if you have the right ERP implementation partner. The right partner will know business, leading business practices and will know the capabilities of the ERP. You will need to be open with the partner that there are process gaps in your business and that you are looking to the partner to help you address these gaps.

Why Business Process and ERP Implementation Must Go Hand in Hand?

The success of an ERP implementation heavily relies on the alignment of business processes with the ERP system. Implementing an ERP system without addressing underlying process inefficiencies can lead to complications and suboptimal results. Conversely, optimizing business processes without considering the capabilities of the chosen ERP system can limit the potential benefits and create compatibility issues. Therefore, it is crucial to determine the order in which business process improvement and ERP implementation should take place.

The Pros and Cons of Improving Business Processes Before ERP Implementation:

Pros:

1. Improved Efficiency: By streamlining and optimizing business processes before ERP implementation, organizations can eliminate inefficiencies and reduce waste, leading to improved overall efficiency.

2. Clear Understanding of Requirements: Addressing process gaps and shortcomings prior to ERP implementation helps organizations gain a clearer understanding of their requirements. This enables them to select an ERP system that aligns with their needs and supports their future growth.

3. Smooth Transition: A well-defined and optimized business process sets the foundation for a smooth transition to the new ERP system. This minimizes disruption and facilitates user adoption.

Cons:

1. Time and Resources: Improving business processes can be a time-consuming and resource-intensive endeavor. Organizations may need to invest significant time and effort to analyze, redesign, and implement new processes.

2. Limited Focus: Concentrating solely on process improvement might delay the ERP implementation, potentially affecting other areas of the business that could benefit from the new system.

3. Integration Challenges: While optimizing business processes independently, there is a risk of overlooking integration requirements and compatibility issues with the chosen ERP system. This may cause additional complexities during the implementation phase.

The Pros and Cons of ERP Implementation Before Improving Business Processes:

Pros:

1. Immediate System Benefits: Implementing an ERP system right away allows organizations to harness its immediate benefits, such as centralized data management, real-time reporting, and improved visibility across departments.

2. Early User Adoption: Deploying the new ERP system early provides users with hands-on experience and familiarity, which can improve the overall adoption process.

3. Process Alignment to ERP Capabilities: By implementing the ERP system first, organizations can analyze and reengineer their processes to align with the system’s capabilities. This ensures that the optimized processes are fully compatible with the chosen ERP system.

Cons:

1. Prolonged Inefficiencies: By implementing the ERP system without addressing existing process inefficiencies, organizations risk perpetuating outdated and suboptimal practices. This can hinder the realization of the full potential of the ERP system.

2. Change Management Challenges: Postponing process improvement until after ERP implementation may result in resistance from employees who have grown accustomed to the previous, inefficient processes. Overcoming resistance and driving change becomes more challenging in such situations.

3. Customization and Adaptation: Depending on the ERP system’s limitations, organizations may need to heavily customize the system to fit their processes. This can increase costs and delay the implementation timeline.

Striking the Right Balance:

Considering the pros and cons of both approaches, it becomes evident that a balanced combination of business process improvement and ERP implementation is essential for success. Key factors to consider include:

1. Evaluate Current Processes: Conduct a thorough analysis of existing business processes to identify inefficiencies, bottlenecks, and areas for improvement.

2. Engage Stakeholders: Involve key stakeholders, including process owners, department heads, and IT personnel, in the decision-making process to ensure a comprehensive understanding of requirements and goals.

3. Prioritize Critical Processes: Identify critical processes that need immediate attention and determine whether ERP implementation should precede or follow process improvement.

4. Select the Right ERP System: Choose an ERP system that aligns with the organization’s requirements and supports the desired process improvements.

5. Collaborate with ERP Implementation Partner: Work closely with a trusted ERP implementation partner who understands both business processes and the capabilities of the chosen ERP system. They can provide valuable guidance and support throughout the entire process.

6. Continuous Improvement: Implement a culture of continuous improvement, where business processes are regularly assessed and refined to maximize the benefits of the ERP system.

Conclusion:

In summary, the question of which comes first, business process or ERP implementation, does not have a one-size-fits-all answer. In our opinion, it is beneficial to solidify Business Processes first. That said, the optimal approach depends on the specific needs and circumstances of each organization. Striking the right balance between business process improvement and ERP implementation is crucial for achieving maximum ROI and long-term success. By leveraging the expertise of an ERP implementation partner and adopting a continuous improvement mindset, organizations can effectively align their processes with the chosen ERP system and optimize their overall operations. So, whether you decide to improve your business processes before or after ERP implementation, it is essential to work with the right partner who can guide you through the process and help you achieve your desired outcomes.

Have you been through an ERP implementation? What challenges did you face in aligning your business processes? Share your experiences and insights in the comments below.