When implementing supply chain management software, the budget should reflect a flow of expense over time rather than just the initial outlay. We know that roughly 64% of ERP projects exceed their budget which indicates that many project managers have difficulty forecasting accurate figures for these expenses. For that reason, it’s wise to consider the hidden costs of supply chain implementation.
1. Neglecting training and development
The practical realities of adopting new supply chain software dictate that training is an essential part of the implementation process yet only 35% of buyers believe that training and development are very important to project success.
You should budget correctly for a training program according to the size of your operations. For example, a large-scale project might consider bringing in an experienced ERP project manager with a broad understanding of how different functional areas interact to manage proceedings. Hiring outside the company might seem costly upfront but it can help take the pressure off key stakeholders down the line.
With a goal of true business process improvement, it’s important to note that some software providers do include training as standard and others may offer it as an optional extra. Before implementation, you need to consider the versatility of the training options provided by your vendor. Training should be extended to everyone – existing and new staff members – to ensure successful user adoption. That being said, people in different job roles will often require different levels of training according to the individual needs of their discipline. Ask yourself, can my vendor’s training program offer support in these specialist areas?
Even if a vendor offers the opportunity for comprehensive training, you should always build contingency into your budget for refresher training. As the supply chain disciplines within your business evolve over time, the applicable skills of individuals will decay – your warehouse picking staff are unlikely to become your next IoT analysts. As staff is promoted and new employees hired, there’ll be a temporary skills deficit that will need to be rectified for the organization to continue to run efficiently.
2. Migration away from custom code
Custom code, written specifically for a particular installation, can add expense to a project at a later date. If you’re upgrading to a new system then there’s no guarantee that it will be able to accommodate everything your custom code did. Upgrades are inevitable as technology and the industry moves forward so it’s imperative you set your budget accordingly. For the sake of long-term efficiency, you’ll need to make a commitment to short-term costs that are necessary to achieve a migration or replacement of ERP or WMS customizations.
The price of implementing an upgrade may not be immediately obvious. As well as costing your company financially – often exceeding $1 million – an upgrade will take time and resources. It might mean maintenance periods and downtime leading to a less than efficient supply chain in the interim period whilst improvements to the system are being made.
An added layer of complication here is the potential strain on your own IT team as vendors are unlikely to support issues arising with custom code integration. Considering 65% of support problems are due to custom code, many companies are left with no option but to reach out to an implementation consultant to help maintain customizations and to safeguard themselves against any future problems. If you’re locked into a vendor support contract and forced to look for further support elsewhere, it can eat away at your budget.
By addressing these hidden costs of supply chain implementation at the outset, your supply chain software implementation is more likely to stay on track financially.
3. Upstream and downstream integration
Another question to ask yourself is how well your new software will integrate with third-party tools. 30% of buyers see application compatibility as very important drivers of new software purchase and it’s not surprising as, with the rise of SaaS and mobile applications, organizations are increasingly required to link their supply chain systems to external cloud-based systems. Software subscription plans will often cover integration but for that, you’ll pay a premium.
Testing the integration of apps with ERP or WMS is not without risk and could easily result in disruptions to normal service. More specifically have you considered the logistical implications of possible integration with upstream and downstream supply chains? Supplier-to-ERP communication is an essential component of a lean supply chain, which means there’s a need to standardize data format across systems. Poor integration is costly because it means logistical operations are inefficient for example, if your ERP does not allow you to plan around an ASN then it’s probable you’ll struggle to fulfill orders to the appropriate timescale.
The final hurdle to address when considering integration is the necessity for a project manager to put in place a robust change management training plan. Organizational change management goes beyond just implementing a new system. There should always be an emphasis on KPI analysis in relation to the wider business goals, with a focus on educating team members across departments. By addressing these hidden costs at the outset, your supply chain software implementation is more likely to stay on track financially.
Lauren Stafford serves as a Digital Publishing Specialist at ERP Focus, a platform that gathers together the latest thinking, news, and research about ERP software. Have insight to share? Read more information on Ultra Consultants Guest Blogging.