Rungta College of Engineering and Technology, Bhilai C.G.

Case Study: A Growing Manufacturing Company Without

ERP
If we talk about before coming the era of digital world how companies started, what challenges
faced in the world, different departments working culture

Objective

To understand real-world business challenges faced by organizations without integrated systems.

To demonstrate the importance of information sharing and integration across functional areas.

To motivate the need for ERP solutions as a way to streamline business processes and support
better management.

Background

A medium-sized manufacturing company, ABC Furnitures Ltd., produces office chairs and tables.
The company has separate departments for Production, Finance, Sales, and Human Resources.

Problems faced (before ERP):Example for a building with 3 floors:

• Delayed Decisions: Finance team prepares monthly reports manually, so managers can’t
take quick decisions.

• Inventory Issues: Production team often produces extra or less because inventory data is
not updated across departments.

• Duplicate Entries: The same customer data is entered separately in sales, billing, and
delivery departments.

• Poor Customer Service: Customers face delays because sales cannot check production
status in real time.

Result:
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o Increased cost of operations

o Wastage of resources

o Miscommunication among departments

o Decline in customer satisfaction

Simple Definition of ERP :-

What is ERP?
• Enterprise Resource Planning (ERP) is a software system that is used by organizations to
manage and integrate the important parts of the businesses. It is the practice of
consolidating an enterprise’s planning, manufacturing, sales, and marketing efforts into
one management system.

Before ERP

• After ERP
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2. Need of ERP
For Efficiency and Productivity

• Streamlined Processes:

ERP systems integrate functions like inventory management, order processing, finance, and
human resources into a unified platform.

• Automation:

Routine and manual tasks are automated, freeing employees to focus on more strategic,
revenue-generating activities.

• Reduced Redundancy:

A central system prevents duplicate data entry and redundant processes across different
departments, minimizing errors and saving time.

For Data and Insights

• Real-Time Information:
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ERP systems provide instant access to up-to-date data, enabling faster and more informed
decisions.

• Deeper Business Insights:

A single source of truth eliminates data silos, giving management a holistic view of the
business and clear visibility into performance.

• Faster Reporting:

Accelerated business and financial reporting allows for timely adjustments and improvements
to performance.

For Cost Savings and Compliance

• Lower Operational Costs:

Streamlined workflows and reduced manual work contribute to lower operational expenses.

• Improved Data Integrity:

Integrated systems ensure consistency and accuracy, reducing the risk of financial errors and
enhancing data security.

• Regulatory Compliance:

ERP systems can help businesses adhere to industry regulations by embedding control checks
and ensuring process standardization.

3. Evolution
The stages of ERP evolution are summarized in the progression chart below:

1960s – Inventory Control Packages

1970s – Material Requirements Planning (MRP)

1980s – Manufacturing Resources Planning (MRP II)

1990s – Enterprise Resource Planning (ERP)

2000s – Extended ERP

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Now, let us talk about the present. In fact, the evolution of ERP is happening in its real sense
every passing decade.

2000s-2010s: In 2000, Gartner introduced ERP II, marking a pivotal moment in the evolution of
enterprise resource planning. This internet-enabled software provided real-time access to ERP
solutions, expanding functionality beyond core front-to-back integration. With features such
as customer relationship management (CRM), business intelligence, e-commerce, supply chain
management (SCM), and human capital management (HCM), ERP II represented a significant
advancement. By incorporating more information into the ERP system, users gained enhanced
agility in responding to changes in demand, industry trends, and opportunities for improvement.

2010 – Present: The emergence of sophisticated technologies and data storage has paved the way
for cloud-based ERP solutions, gaining momentum in recent years. Operating on a Software as a
Service (SaaS) model, cloud-based ERP eliminates the need for companies to invest in and maintain
hardware infrastructure, reducing reliance on IT personnel and simplifying implementation
processes.

Today, ERP is on Cloud

Once, legacy systems reigned supreme in the world of enterprise resource planning (ERP). These
systems were meticulously designed to integrate various functions within a company’s walls.
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However, a new era dawned as technology advanced. It brought the stages of ERP evolution into
its last leg, “ERP expansion.”

The Future of ERP: AI-Powered, Insight-Fueled, Intelligence-Driven!

The future of ERP systems unfolds with a dynamic tapestry of trends, shaping the landscape for
2023 and beyond:

Cloud dominance: The meteoric rise of Cloud ERP continues unabated, with global adoption
poised to nearly double by 2027. Driven by the imperative for digital transformation and enhanced
business capabilities, cloud solutions offer agility and scalability vital for today’s rapidly evolving
industries.

Mobile evolution: Mobile ERP evolves into sophisticated multi-device experiences, seamlessly
integrating tasks across various platforms. From smartphones to smartwatches, users enjoy a
seamless workflow, accessing ERP functionalities wherever they go.

AI and IoT integration: Artificial intelligence and the Internet of Things (IoT) converge with
ERP, unlocking a realm of possibilities. From predictive analytics to real-time monitoring, ERP
harnesses the power of AI and IoT to drive efficiency and innovation.

4. Benefits
Here are the key benefits of implementing the ERP systems:

1. Improved Efficiency: ERP systems reduce the manual effort and risk of errors by
automating repetitive processes.

2. Integrated Business Processes: ERP systems streamline operations by integrating various

business processes and enable seamless data flow across the departments.

3. Reduced Redundancy: ERP systems eliminate duplicate data entries and improve data
integrity.

4. Timely Data Access: ERP systems provide real-time data access, thus helping in making
timely and informed decisions.
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5. Reduced IT Costs: ERP systems consolidate IT systems, thus lowering the infrastructure
and maintenance costs.

6. Maintain Compliance: It help to maintain compliance with industry standards.

7. Enhances Customer Service: ERP systems helps to improve service delivery by providing
quick access to customer information and data.

Types of ERPs

ERP Type Description Benefits Drawbacks

This is highly This ERP system has

ERP system is installed
On- customizable and high maintenance costs
locally on companies'
Premise provides greater and IT infrastructure
servers and hardware.
ERP control over data. requirements.

This ERP system is Cloud ERP provides less

ERP system is hosted on
scalable, low upfront control over data security
vendor's servers and
cost, and accessible and relies on internet
accessed via the internet.
Cloud ERP from anywhere. connectivity.

This provides Hybrid ERP is costly and

Hybrid ERP combines
flexibility to use both complex to integrate and
On-Premise and Cloud
Hybrid on-premise and cloud manage due to dual
ERP features.
ERP functionalities. systems.

Open-source ERP
They require technical
systems have code They are highly
expertise for
available to the public, customizable and cost-
implementation and
Open- thus allowing for effective.
maintenance.
source ERP customization.
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ERP Type Description Benefits Drawbacks

Industry-specific ERP are They offer specialized They are less flexible to
Industry- tailored to meet the functionalities and adapt to different
specific specific needs of compliance with industries and are costly
ERP particular industries. industry standards. to customize.

Small These are designed for

They are affordable They offer limited
Business small medium-sized
and easy to use. features and scalability.
ERP businesses.

These are the They offer extensive

They are costly, complex
comprehensive ERP functionalities and
to implement, and longer
Enterprise systems that are designed advanced
deployment time.
ERP for large organizations. customization.

Best-of-Breed ERP They offer the They pose integration

systems combine the best flexibility in choosing challenges and higher
Best-of- modules from different the preferred costs due to multiple
Breed ERP ERP vendors. solutions. vendors.

It utilizes the primary

They pose integration
ERP at the corporate
It offers cost savings complexity between tiers,
level and the secondary
for smaller units. thus causeing potential
Two-Tier ERP at the departmental
data consistency issues.
ERP level.

5. Emerging Trends
ERP Trends for 2025 and Beyond

1. Cloud ERP
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Historically, many organizations used on-premises ERP applications and were reluctant to
entrust core business applications to the cloud, but that’s changing rapidly. Businesses are
adopting cloud ERP to take advantage of a simpler deployment, lower costs, elasticity (i.e., the
ability to only use the necessary resources at any given time), new functionality, less need for
internal IT resources, and the ability to easily add users and functions to accommodate business
growth. In fact, one report shows the cloud ERP market is expected to grow from $72.2 billion in
2023 to $130.5 billion by 2028.

2. Two-Tier ERP

Historically, many companies tried to deploy a single ERP system for both the headquarters and
all regional offices and subsidiaries. But in practice, that approach was often costly and
extremely challenging to implement; subsidiaries often had specialized requirements, didn’t need
the full functionality of the corporate system and struggled with the one-size-fits-all approach.

3. Digital Transformation

A continuous process rather than a one-time initiative, digital transformation remains a key focus
in 2025. Modern ERP systems play a key role in this transformation by integrating digital
technology into all business functions to improve daily operations, boost revenue and increase
competitiveness — all while increasing employee productivity and improving customer service
and communication.

4. Other Technology Integrated With ERP

While modern ERP is a main element in a company’s digital transformation, it’s only part of a
bigger investment in technology. Companies are integrating their business applications with
other new technologies to improve core processes and operational efficiency. For example,
integration with IoT capabilities is becoming increasingly sophisticated. Manufacturers might
use ERP systems integrated with IoT sensors to monitor equipment performance in real time,
making them capable of predicting maintenance needs before a breakdown halts operations.
Similarly, in logistics, ERP systems linked with automated robotic warehouse solutions can
optimize inventory management and delivery processes.

5. Personalization

Historically, ERP platforms with complex scripting languages were difficult to customize to the
specialized needs of each business. But organizations can now take advantage of cloud ERP
platforms designed for easier configuration —what analysts call “low-code” and “no-code”
platforms. These tools empower companies and their users to easily tailor the ERP system to
their specific needs without extensive technical expertise.
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6. AI-Powered Insights and Improvements

As of 2025, AI and ML capabilities are becoming core components of ERP systems — not just
add-ons. Embedded within the ERP, these technologies work behind the scenes to help meet
increased demand for personalization and improve a broad range of business processes. Today,
more ERP vendors are not only including AI capabilities as standard features, but they are also
advancing these capabilities to exploit the latest in AI technology, such as generative AI.

7. Predictive Analytics

The hunger for AI-infused ERP highlights organizations’ increasing desire to mine their
operational and customer data for new and relevant insights that will increase the top and bottom
lines.

While it’s always been possible to analyze ERP data to reveal what happened in a business’s
past, a focus in 2025 and beyond is using advanced predictive analytics to uncover and address
what is likely to happen in the future. This data can be used to predict outcomes that help
companies avoid potential issues and capitalize on emerging opportunities.

Applications with Examples

1. Autonomous Solutions
AI and ML technology are only advancing, making it likely that ERP systems will move
toward greater autonomy. In practice, this could mean ERP systems will be capable of
proactively managing business operations without human intervention.

Example : ERPs may be able to automate even more complex decision-making processes,
such as optimizing supply chain logistics or dynamically adjusting pricing strategies.

2. Blockchain Integration

Blockchain has been buzzing about for years, but the technology could increasingly be
integrated into ERP systems to enhance transparency and security. This is particularly
useful in supply chain management, as blockchain would allow for tamper-proof records of
transactions and real-time tracking of goods and services across the globe. It’s also relevant
for sustainability: Companies can use blockchain to create “green ledgers” that
transparently track environmental data alongside or as part of traditional financial metrics.
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3. Conversational AI

With the rise of virtual assistants and chatbots, ERP systems are likely to incorporate more
conversational AI and voice interfaces. These technologies can make user interaction more
intuitive and accessible, enabling users to perform tasks or retrieve information through
natural language commands rather than keystrokes or clicks.

Predictive Analysis for Company:

For example, software with ML capabilities can comb through a maintenance company’s
vast data repository to gather pertinent information about appliance repairs to predict
when breakdowns are likely to occur. The organization can use that data to optimize
maintenance schedules so it services or replaces parts right before they cause problems
for clients.

Predictive analytics is also expanding into areas like financial forecasting, demand
planning and even human resources, where it can predict employee turnover and improve
hiring processes.

Role of Enterprise
An enterprise's core role is to provide goods or services to customers, generate profit, and
contribute to economic growth. It involves identifying opportunities, developing ideas, and either
creating new businesses or expanding existing ones. Enterprises drive innovation, create jobs, and
ultimately enhance the overall economic well-being of a society.
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Fig: Importance of Roles in Todays Modern Enterprise

Here's a more detailed look at the key roles:

1. Providing Goods and Services:

• Enterprises produce tangible items (goods) and offer intangible activities (services) that
meet customer needs and wants.

• Examples include manufacturing products like cars or providing services like haircuts or
legal advice.

2. Generating Profit:

• A primary goal of any enterprise is to make a profit, which is the financial reward for
providing goods or services.

• This profit can be used for reinvestment in the business, distribution to owners, or other
financial goals.

3. Creating Jobs:

• Enterprises are major sources of employment, reducing unemployment rates and

contributing to the overall economy.

• New businesses and expanding enterprises create new job opportunities.

4. Fostering Innovation:
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• Enterprises are engines of innovation, introducing new products, technologies, and

business models.

• This innovation can lead to increased productivity, improved quality of life, and greater
competitiveness.

5. Contributing to Economic Growth:

• Enterprises drive economic growth by increasing the national income, improving

infrastructure, and raising the standard of living.

• They contribute to the Gross Domestic Product (GDP) and can lead to greater prosperity
for a community.

6. Adding Value:

• Enterprises add value to goods and services by making them more appealing to customers.

• This can be achieved through unique selling points, branding, design, or by improving
quality.

7. Meeting Customer Needs:

• Enterprises exist to satisfy customer needs and wants, whether through fast delivery, low
prices, or high-quality products.

• By understanding and responding to customer demands, enterprises can build a loyal

customer base and achieve success.

In essence, an enterprise is a dynamic entity that plays a vital role in economic development by
creating value, fostering innovation, and providing opportunities for individuals and communities.

Business Function
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Business functions are the distinct activities or tasks that a business performs to achieve its
goals. These functions can be broadly categorized into core and support functions. Core
functions, like production and sales, directly contribute to revenue generation. Support functions,
such as HR and finance, facilitate the core functions and ensure the business operates
effectively.

Core Business Functions:

• Production:

This function is responsible for creating the goods or services that the business offers.

• Sales:

This function focuses on the direct exchange of goods or services for money.

• Marketing:
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This function involves promoting and selling products or services, including market research and
advertising.

• Customer Service:

This function ensures customer satisfaction by providing assistance before, during, and after a
purchase.

• Research and Development (R&D):

This function focuses on developing new products or improving existing ones.

Support Business Functions:

• Human Resources (HR):

This function manages the workforce, including recruitment, training, and employee relations.

• Finance:

This function manages the financial aspects of the business, including accounting, budgeting,
and financial planning.

• Information Technology (IT):

This function supports the business with technology infrastructure and solutions.

• Legal:

This function provides legal advice and ensures compliance with laws and regulations.

• Operations:

This function oversees the processes involved in delivering products or services, including
logistics and supply chain management.

• Strategy:

This function focuses on long-term planning and decision-making to achieve the business's
goals.

• Purchasing:

This function manages the procurement of goods and services needed by the business.
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Importance of Business Functions:

• Organization:

Business functions help organize the various activities of a company.

• Efficiency:

Specialized departments within each function allow for efficient task execution.

• Goal Achievement:

Properly managed business functions are crucial for achieving the overall goals of the business.

• Adaptability:

Well-defined functions allow businesses to adapt to changing market conditions.

Business Processes
What Is Business Process Management And How Can It Help Your Business?

BPM is an acronym for “business process management.” Different experts have defined business
process management in different ways, so there's really no industry-approved definition. Here,
we will try to define it in the easiest way you can understand.

Business process management is the practice of reengineering and optimizing an organization’s

business processes for improved performance, increased efficiency, and effectiveness.
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What is a business process?

A business process is a set of related tasks, performed to accomplish a specific organizational goal.
It can also be defined as a series of logically structured activities that produce a specific service or
product for customers.

A perfect example is when a purchase order is created, approved, and issued to a vendor. The
vendor supplies the goods or provides the services as needed and then sends an invoice. The
accounts payable department receives the invoice, then processes and pays it after a series of
approvals.

Business processes can be complicated, as they usually consists of different participants doing
different things at different stages. But there's a simpler concept out t

BPM is not project management.

Some people make the mistake of thinking that BPM is the same as task management or project
management. But that is not correct: BPM is neither task management nor project management,
but it can still take place within the context of a project.

Project management is about planning and piloting a unique, transient endeavor (usually initiated
to achieve planned objectives) from start to finish. Task management is about organizing and
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administering or supervising the conduct, performance, or execution of an activity arising out of a

project.

Tasks and projects are often one-time and non-repetitive. Business process management is focused
more on repeatable, ongoing processes following a set pattern.

A Typical BPM Life-Cycle

A typical business process management follows the life-cycle given below to complete a business
process:

1. Designing

2. Modeling

3. Execution

4. Automation

5. Monitoring

6. Control

7. Measurement

8. Optimization
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Here's how it works in steps:

• Step #1: You design the process and determine how it should look.

• Step #2: You model it using business process management software.

• Step #3: You execute it by putting it in a business process management tool. (For
efficiency, this step often involves automating the the workflows of the process using
workflow automation software.)

• Step #4: You monitor and control the process (while in execution), driving compliance
and redefining rules as necessary.

• Step #5: You measure and optimize. (This is where you gather data about how the system
functions, and using the data to make improvements.)

Business Process Automation (BPA)

Business process automation is the use of technology to cut costs and streamline business
processes. It's a technology-enabled, systemized method that simplifies complex, redundant
business processes.

BPA focuses on replacing manual processes with automated ones so you can get more done in
less time with less effort. It saves costs by reducing the need for human input and by preventing
errors that would require extra time and resources to solve.
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Application of ERP in Business Functions

• Financial Management: ERP systems automate financial tasks like accounts payable
and receivable, general ledger, and cash management. They provide real-time financial
reporting, such as balance sheets and profit & loss statements, helping management get a
clear view of the company's financial health.

• Supply Chain Management: This application helps businesses manage the entire flow
of goods, from procuring raw materials to delivering the final product to the customer. It
includes modules for procurement (purchasing), inventory management, and logistics,
helping to optimize costs and efficiency.

• Manufacturing: For manufacturing companies, an ERP system is used for production

planning, scheduling, and quality control. It can track work orders, manage bills of
materials (BOM), and monitor production capacity to prevent delays and material
shortages.

• Human Resources (HR): The HR application of an ERP system manages employee

data, including payroll, benefits, and performance management. This centralizes
employee information and automates many administrative tasks.
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• Customer Relationship Management (CRM): While sometimes a separate system,

CRM is often a module within an ERP. It helps manage customer interactions, sales
pipelines, and marketing campaigns, providing a complete view of the customer from
initial contact to post-sale support.

User Cases
Here are some specific user cases that illustrate how an ERP system is used by different
departments and individuals to solve real-world problems:

User Case 1: Inventory Manager in a Retail Company

• Problem: The manager struggles to keep track of current stock levels. They frequently run
out of popular items, leading to lost sales, and have excess stock of slow-moving products,
tying up capital. Manual stock counts and spreadsheet tracking are slow and error-prone.

• ERP Solution: The ERP system provides a real-time, accurate view of inventory levels
across all locations. It automatically updates stock counts as items are sold or received.
The system's predictive analytics can forecast future demand based on sales data,
seasonal trends, and promotions, helping the manager to place orders at the right time and
avoid out-of-stock situations.

User Case 2: Financial Controller in a Service-Based Company

• Problem: The financial controller spends a significant amount of time manually

consolidating financial data from different departments (e.g., project management, sales,
and accounts) to close the books at the end of the month. This process is time-consuming
and risks human error.

• ERP Solution: The ERP system's financial module automatically pulls data from all other
integrated modules. As soon as a project is completed or an invoice is paid, the data is
updated in the central ledger. This eliminates manual data entry, reduces errors, and allows
the financial controller to close the books and generate financial reports in a matter of
hours, not days.

User Case 3: Sales Manager in a Distribution Business

• Problem: The sales manager needs to provide a quick and accurate quote to a potential
client, but they have to call the warehouse to check on product availability and the finance
department to get the latest pricing. This slow, manual process can cause them to lose the
sale to a faster competitor.
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• ERP Solution: With the ERP's integrated modules, the sales manager can access real-
time data from a single dashboard. They can see the current inventory level of a product,
check its price, and even view the customer's payment history to offer a custom discount,
all within a few clicks. The system can then automatically generate a quote and, once the
order is placed, a work order for the warehouse, streamlining the entire sales cycle.

Risks of ERP Projects

Every project suffers from risks. There are also risks for the ERP projects such as organizational
factors, employee skills, software systems design issues, and technology integration factors. One
of the most important risk factors is to redesign the business process to suit the best practice
business process. The main challenge in ERP system is acquiring the necessary skills.

Some other risks factors that are unique to ERP implementation are non-adherence to standardized
specifications, data migration from legacy systems, lack of top management support, etc. The
complete list is given in the following table:

Risk Category Risk Factors

• It fails to redesign business process

Organizational factors • It also fails to follow the wide design of an
enterprise which is helpful for the data integration

• Insufficient training and re-skilling

• Insufficient internal expertise

• There is lack of business analysts with proper

knowledge of business and technology
Employee skills
• It fails at mixing of internal and external
expertise effectively

• Also there is lack of ability to recruit and retain

qualified ERP systems developers
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Risk Category Risk Factors

• Lack of senior management support

• Lack of proper management control structure

Management factors
• Lack of champion

• Ineffective communications

• It fails to adhere to standard specifications which

are being followed by the software
Software systems
• Lack of integration
design issues
• Poor data quality of legacy data and data
migration problems

• Insufficient training of end-users

• Ineffective communication
User training and • There is a lack of full-time commitment to
involvement customers for project management and project
activities

• Lack of sensitivity to user resistance

• Inability to avoid technological bottlenecks

Technology planning
and integration • Attempting to build bridges to legacy
applications
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8 ERP implementation risks and how to manage them

There are eight major risks associated with implementing an ERP system. These are:

1. Lack of Management Support

2. Insufficient Project Management
3. Overly Optimistic Scheduling
4. Difficulty Finding Experienced ERP Talent
5. Neglecting To Prepare and Train Employees
6. A Poorly Managed Integration
7. Poor Data Quality
8. The Inability to Rework Processes

Risk #1 Lack of Management Support

If management isn’t wholeheartedly on board, it will be difficult to win over other employees.
Some workers may assume that if management isn’t behind the project, it isn’t truly important
to the organisation or their careers. They’re more apt to resist taking the time to learn and adapt
to the new system.
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Management support also is critical to gaining the resources, including funding and employee
time, essential to a successful ERP implementation. Without these resources, it becomes more
likely the project will miss its schedule, budget, or fail to deliver on its goals.

Risk #2: Insufficient Project Management

ERP implementations involve many (if not all) departments across an organisation. They impact
numerous processes, and often require multiple system and data integrations. Managing a project
of this scope demands dedicated, qualified resources. Skimping on project management, or
simply assigning the initiative to employees who are available, increases the likelihood that the
project runs over budget or behind schedule. More importantly, it increases the risk that the ERP
system fails to provide the benefits that are driving the implementation in the first place.

Risk #3: Overly Optimistic Scheduling

While it’s critical to involve multiple stakeholders, it’s also important to recognise that the
business must continue as usual with all stakeholders hitting their existing targets. The schedule
needs to reflect this reality and consider the hours which each team member can allocate to the
project.

The schedule also should recognise that few projects of this size and complexity proceed
absolutely smoothly. Instead, most encounter at least a few roadblocks, like difficulty
assembling all the information that will be integrated into the system. Rather than assume all
phases of the implementation will proceed without encountering any obstacles, allow for
contingencies.

Risk #4: Difficulty Finding Experienced ERP Talent

Experienced, knowledgeable experts in ERP implementations and operations are in high

demand. Attracting and retaining the experienced ERP professionals who can ensure
implementation success requires investment, and businesses should budget and plan accordingly.
Think about the different types of talent you may need at different stages, such as specialist
contractors at the start and employees further along in the project.
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Risk #5: Neglecting To Prepare and Train Employees

Change management is key to the success of any major systems implementation, and particularly
one that can impact as many roles as an ERP solution. Employees who weren’t involved in the
decision to implement the system may not understand how it will benefit the organisation. Many
may feel the old ways worked better; some employees may view a new system as an implied
criticism of the ways in which they’d been doing their jobs. Some will worry about their ability
to learn the system. If left unaddressed, these concerns will lead to behaviours that delay the
implementation of the system and potentially undercut the benefits it can offer.

Risk #6: A Poorly Managed Integration

ERP software brings together multiple other information systems. Ensuring the clean, accurate
integration of these systems is critical to the ability of the solution to successfully automate
processes and provide accurate, timely data.

Risk #7: Poor Data Quality

In many organisations, the data that will eventually feed into the ERP system contains
inaccuracies and duplicates. For example, the same data may be stored in multiple systems, but
with slight variations in spelling or format. Some data may be outdated and no longer accurate.
For the ERP system to provide a single version of the truth that can inform decision-making, the
data populating it needs to be accurate, timely, and truthful. That can require a thorough cleanse.

Risk #8: The Inability to Rework Processes

Optimising the benefits of an ERP system often requires rethinking existing business processes.
If your organisation simply continues its existing approach to operations, its performance
probably will remain the same. If the decision is made to customise the ERP solution to fit
existing processes, you’ll likely add cost and time to the implementation schedule, without
seeing the boost in performance you’re looking for.

2 Justify investments
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The document recommends using a business case approach like VAL IT to align investments
with goals, quantify costs/benefits/risks, and establish accountability. Considering flexibility
options and adjusting projections based on risk can improve ROI estimates and confidence in a
project's likelihood of success.

Lets take an Example

Objective

• Effective Governance Practices will allow you to:

o Build more accurate and credible business cases

o Incorporate benefits, costs, flexibility and risk factors into your business cases

o Understand the most important financial concepts: return on investment (ROI),

net present value (NPV), internal rate of return (IRR), and payback period

o Prioritize and select projects based on their financial projections

o
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IT business case justifications

• A justification process provides transparency into the value of technology investments

• A consistent, repeatable justification process will:

o Clarify how the organization will use its resources to accomplish a particular
goal

o Identify not only the costs but also the benefits and risks associated with the
investment

o Provide a consistent method for prioritizing and selecting projects

o Ensure tracking of metrics to measure costs, benefits realization, and customer

satisfaction

Business cases are a proven way to justify technology investments

• The business case approach:

o Aligns technology investments with business goals and objectives

o Provides a consistent ROI methodology across all projects over time

o Establishes a uniform, meaningful dialog between IT and the business, in terms

the business understands

o Defines metrics that business stakeholders have agreed to, helping to ensure
benefit realization and accountability

o Identifies risks and risk mitigation strategies

o Ensures that strategic flexibility options are considered and valued

VAL IT is a proven, consistent, & effective methodology

• Provides the techniques and tools to quantify, justify, and value investments

• Aligns project goals with business goals and assigns accountability

• Supports decisions with a business case

• Takes into account risk and flexibility options

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• Facilitates “what if” scenarios

• Assigns clear accountability

• Allows one to view all decisions as a portfolio of investments

Understanding risk broadens range of possible outcomes

• Risk impacts estimates of costs, benefits, & flexibility

• Risk assessments help capture the amount of:

o Uncertainty that the technology may not work as expected

o Uncertainty that internal/external conditions may change, jeopardizing potential

investment benefits
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o Uncertainty that the vendor will miss or fail to meet its contractual obligations

• In business cases, there’s a natural human tendency to:

o Overestimate benefits and/or

o Underestimate costs and/or

o Ignore risks – resulting in

o An ROI that is too optimistic

Adjusting for risk

If a risk-adjusted ROI still demonstrates a compelling business case, it raises confidence that the
investment is likely to succeed, since the risks that threaten the project have been taken into
consideration and quantified.

Consider flexibility options

• Flexibility = investing in additional agility or capacity now, which can — with some
future additional investment — be turned into future business benefits

o It is the value of the option or ability to take a second action in the future

o The value of the option always comes at an incremental future cost (if no future
investment is required, it should be treated as a normal benefit in the business
case)

• Black-Scholes model is what VAL IT uses to value flexibility options

Typical investments in flexibility options

• Upgrades

• Network bandwidth

• Training

• Infrastructure

• Architectures

any change that will require a second investment before additional value can be achieved
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Metrics

• Primary stakeholders should be held accountable for benefits realization and

optimization

• Each metric must have an owner, an individual who is held accountable for that
commitment

• Typically IT is accountable for cost savings in IT department while business is

accountable for revenue increase, cost savings/productivity gains in business unit
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MYTHS
Common myths about Enterprise Resource Planning (ERP) systems include that they are only
for large businesses, are excessively expensive, are difficult to implement, are rigid and
inflexible, and are solely for the IT or finance departments. In reality, modern cloud-based
ERP solutions are scalable for businesses of all sizes, offer flexible pricing, are easier to
implement, can be customized to specific needs, and benefit all departments of an
organization.

Here are some common ERP myths and their corresponding truths:

Myths vs. Reality

• Myth:

ERP systems are only for large enterprises.

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• Reality: Modern ERP solutions are scalable and modular, making them suitable
for businesses of all sizes, including small and medium-sized businesses
(SMBs).

• Myth:

ERP systems are too expensive.

• Reality: While there is a cost, cloud-based ERPs offer flexible subscription

models and scalable pricing, making them more affordable for smaller
businesses.

• Myth:

ERP implementation takes too long and is overly complex.

• Reality: Cloud-based implementations are generally faster, and vendors have

streamlined processes, reducing the complexity and impact on day-to-day
operations.

• Myth:

ERP systems are rigid and can't be customized.

• Reality: Modern ERPs are designed for flexibility, offering customization

options, modular add-ons, and integrations with other software to fit specific
business needs.

• Myth:

ERP systems are difficult to use.

• Reality: While a learning curve exists, modern ERPs are designed with user-
friendly interfaces, and training and support are readily available from vendors.

• Myth:

ERPs are only for manufacturing companies.

• Reality: ERP systems support various industries and departments, including

sales, HR, and operations, providing benefits beyond manufacturing.

• Myth:
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ERPs are solely the responsibility of the IT department.

• Reality: ERP implementation and success require cross-departmental

collaboration, with management and various teams playing crucial roles
throughout the process.
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Case Study: The Myth of "ERP is a Plug-and-Play Solution"

Background

ABC Manufacturing Ltd. is a mid-sized company producing automotive spare parts. The
management decided to implement an ERP system to integrate finance, supply chain, and
production processes. The CEO believed in the popular myth that “ERP is a plug-and-play
solution that starts delivering benefits immediately after installation.”

The Situation

The company purchased a well-known ERP package and went live within four months.
However:

• Employees struggled to use the system due to lack of training.

• Legacy data was migrated without cleaning, leading to errors in inventory and finance.

• Managers expected instant results without proper change management.

The Problem

• Production schedules were delayed due to inaccurate data.

• Customer complaints increased because order tracking failed.

• The ERP system was blamed as a "failure," even though the issue was poor planning and
unrealistic expectations.

Analysis

The root cause was not the ERP software itself but the myth that ERP works "out of the box."
ERP requires:

• Proper business process reengineering (BPR).

• Employee training and change management.

• Data cleaning and customization.

Learning Outcomes

• Myths about ERP can lead to wrong decisions.

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• ERP is a strategic investment that needs customization, training, and phased

implementation.

• Success depends on people, processes, and preparation—not just software.

Life CYCLE of ERP

The ERP life cycle is the entire process of implementing, maintaining, and eventually upgrading
or replacing an Enterprise Resource Planning (ERP) system within an organization. It involves
distinct stages such as Pre-Evaluation, Package Selection, Project Planning, Gap Analysis,
Configuration, Data Migration, Training, Testing, Go-Live, and Post-Implementation Support. A
well-managed life cycle ensures successful adoption, long-term efficiency, and alignment of the
ERP system with business needs.

The following are the Stages of ERP Implementation:

Stage 1: Package Selection–

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Every business has its unique challenges. One software cannot cater to all the businesses. Thus,
choosing an ERP software is the most important stage. Out of available options in the market,
choose options that have capabilities to cater to the requirements of your business.

Stage 2: Project Planning–

It is necessary to have a detailed plan to sail through the complex process of implementation and
keep you on track. Planning helps you to look at the project on more granular level and ensure
the resources are well utilized. It helps to mitigate last minute surprises, and chaos.

Planning includes making a team which will handle various aspects of the project. The team may
consist of project manager and representatives of departments that will use the system. It must
involve senior managers to ensure that resources are allotted in right quantity and time.

Stage 3: Gap Analysis–

Gap analysis is the process of analysing the current business processes and the outcome that you
intend to reap out of this project. The step involves understanding of current issues, including
process inefficiencies and requirement for the ERP system.

In a way we can say that gap analysis finds out the expected results from an ERP software. This
stage helps to focus on desired outcomes and provides a laser like direction to the development
of the project.

Stage 4: Re-engineering–

This ERP implementation stage helps to restructure the procedures and redesign systems to
achieve improvements in business processes. It involves designing of new and more efficient
workflows and other business processes.

At this stage, involve end-users also as they are the ones who know processes better and can
suggest the changes to meet them. Involving them also ensure that they are ready to take the new
system and feel comfortable to the change, which otherwise will be difficult.

Stage 5: Customization–

With re-engineered processes, the new system must be customized to accommodate processes
and procedures. Along with customization, the team must start planning data migration. The
project team must decide which data should be migrated, avoiding unnecessary data (old and
irrelevant data) migration.

Step 6: Training–
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With new system in place, the training to the employees is essential. Training is vital to enable
them to start using the system efficiently.

Step 7: Testing–

It is very crucial stage of implementation life cycle. Testing is done to assess the errors and flaws
of the system and to resolve them before actual application process.

Stage 8: Application or Going live–

This is the step where actual implementation takes place. It happens when all the data is collated,
converted, refined and ready to be fed into the system.

At this stage, there may be some confused employees, despite training, be prepared for it. Whole
core team must be present and well prepared to answer questions, fix issues and help the
organization to sail through this change.

Stage 9: Maintenance-

Once the new system is implemented, it must be maintained and updated regularly. The
employees must make sure that the system works in full swing, providing intended benefits to
the organization. At this stage, feedback of users plays a key role. The project team must adjust
the system as per the feedback.

Here's a breakdown of the typical stages:

1. 1. Pre-Evaluation and Needs Assessment:

Identifying the business problem and defining the requirements for a new ERP system.

2. 2. Package Selection:

Evaluating different ERP vendors and selecting the best-fit software package for the
organization.

3. 3. Project Planning and Blueprinting:

Creating a detailed project plan, assembling the implementation team, and designing the system
architecture.

4. 4. Gap Analysis and Business Process Reengineering:

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Analyzing the differences between the ERP system's capabilities and the business processes, and
reengineering processes to meet new needs.

5. 5. Data Migration and System Configuration:

Transferring existing data to the new system and configuring the ERP software to align with the
company's specific processes.

6. 6. Training and User Adoption:

Training the implementation team and end-users on how to effectively use the new system to
ensure smooth adoption.

7. 7. Testing and Go-Live:

Conducting thorough testing of the system to identify and resolve any issues before the official
deployment.

8. 8. Post-Implementation Support and Maintenance:

Providing ongoing support, monitoring system performance, and making adjustments or

optimizations as needed.

9. 9. Evolution and Retirement:

The system may undergo upgrades, new functionalities may be added, and eventually, it will be
replaced or retired, starting the cycle anew.

Methodology for Implementation in ERP

An ERP implementation methodology is a structured approach to deploying an Enterprise
Resource Planning system within an organization. It encompasses planning, designing,
configuring, testing, and maintaining the ERP software to align with business processes and
objectives. Key methodologies include Waterfall, Agile, and Hybrid, each offering a different
approach to project management and implementation.
Key Aspects of ERP Implementation Methodology:
• Planning and Analysis:
This initial phase involves defining the project scope, setting objectives, and
assessing the current business processes.
• System Selection:
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Choosing the right ERP software that aligns with the organization's needs and
budget is crucial.
• Design and Configuration:
This stage focuses on customizing the ERP system to fit specific business
requirements and workflows.
• Data Migration:
Transferring data from legacy systems to the new ERP system while ensuring data
integrity is a critical step.
• Testing:
Rigorous testing, including unit testing, system testing, and user acceptance testing,
is essential to identify and resolve potential issues before go-live.
• Training:
Providing comprehensive training to users on how to effectively use the new ERP
system is vital for successful adoption.
• Go-Live and Support:
The go-live phase involves launching the system company-wide or in phases,
followed by ongoing support and maintenance.
• Continuous Improvement:
After go-live, it's important to gather feedback, monitor performance, and make
necessary adjustments to optimize the system.
Common Methodologies:
• Waterfall:
This linear, sequential approach is suitable for projects with well-defined
requirements and minimal changes anticipated.
• Agile:
This iterative and flexible approach is ideal for projects with evolving requirements
or when adapting to changing business needs.
• Hybrid:
This approach combines elements of both Waterfall and Agile methodologies to
leverage their strengths and address specific project needs.
Choosing the right methodology depends on the organization's specific needs,
project complexity, and risk tolerance.
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5. Case Study / Application / Use-case

Background

XYZ Textiles Ltd. is a medium-sized garment manufacturer. The company struggled with
scattered systems for accounting, inventory, and production planning. To address inefficiencies,
management decided to implement an ERP system.

Situation

The company’s IT manager believed that buying ERP software was enough. However,
consultants explained that ERP must follow a life cycle and use the right implementation
methodology to succeed.

ERP Life Cycle in XYZ Textiles

1. Project Planning: Formed a cross-functional ERP team.

2. Package Selection: Compared SAP, Oracle, and Microsoft Dynamics; selected SAP.
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3. Gap Analysis: Found mismatches between SAP modules and existing business
processes.

4. Reengineering: Redesigned procurement and production workflows.

5. Training & Implementation: Employees were trained; ERP was deployed using a
phased methodology (Finance → Inventory → Production).

6. Post-Implementation Support: Continuous monitoring and vendor support ensured

smooth operation.

Methodology Chosen: Phased Implementation

• The company chose the phased methodology instead of a “big bang” approach.

• ERP modules were implemented step by step, reducing risk and allowing employees to
adapt gradually.

Problems Faced

• Initial resistance from employees (fear of job loss).

• Data migration delays due to unclean legacy data.

• Higher costs due to extended implementation time.

Results

• After 18 months, XYZ Textiles reported:

o 20% improvement in inventory accuracy.

o Faster financial reporting.

o Improved production scheduling.

• The company concluded that following the ERP life cycle properly and choosing the
right implementation methodology were the key factors for success.

Learning Objectives from the Case Study

1. To understand the importance of following the ERP life cycle stages systematically.

2. To evaluate why methodology selection (Phased, Big Bang, Pilot, Parallel) impacts ERP
success.
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3. To analyze the role of change management and data migration in ERP projects.

4. To recognize challenges and mitigation strategies in ERP implementation.

Cost of Implementation:
The methodical capture and evaluation of implementation costs forms the foundation for
informed investment decisions in the manufacturing industry. A structured cost analysis enables
precise quantification of all relevant expenditures and strategic optimization of resource
allocation.

Cost Structure Analysis

The systematic categorization of implementation costs encompasses:

• Direct hardware costs for system components including equipment and infrastructure

• Software licensing and maintenance contract expenditures across platforms

• Implementation services and project management resource allocation

• Training investments for employee qualification and skill development

• Infrastructure modifications and system integration requirements

Investment Parameters

Quantitative evaluation of investment factors through:

• Total Cost of Ownership (TCO) calculation over complete system lifecycle

• Return on Investment (ROI) analysis with defined metrics and timeframes

• Implementation amortization period determination and tracking

• Maintenance and operational cost forecasting using predictive models

• Risk assessment and contingency planning with financial implications

Performance Metrics

Implementation of standardized performance indicators:

• Cost per unit analysis tracking production efficiency gains

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• System utilization rate monitoring for resource optimization

• Productivity improvement metrics measuring operational enhancement

• Quality cost assessment evaluating defect reduction impact

• Efficiency gain quantification through standardized KPIs

Optimization Methodology

Structured cost optimization through:

• Modularized implementation strategies enabling phased deployment

• Scalable system architectures supporting future expansion

• Phased rollout concepts minimizing operational disruption

• Resource sharing models maximizing asset utilization

• Standardized implementation processes ensuring consistency

Quality Assurance

Integration of systematic control mechanisms:

• Validated cost capturing systems ensuring data accuracy

• Documented budget controls maintaining fiscal discipline

• Standardized project controlling processes tracking variances

• Performance tracking systems monitoring implementation progress

• Continuous cost monitoring enabling proactive management

KEY COMPONENTS AFFECTING IMPLEMENTATION COST

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ERP software implementation entails various statutory and variable costs, which encompass
licensing fees, infrastructure expenses, data conversion costs, custom development fees, testing
expenses, third-party integration charges, training expenditures, and post-implementation support
investments. Understanding these components is important to solid grasp the ERP
implementation cost breakdown. Here below, we explain key cost components one by one.

1. ERP Licensing Fees

The first and foremost cost component that ERP clients need to bear initially is the licensing fee
for the ERP software. Well, this cost varies from one software to another. Another factor
affecting the cost is the number of users and your chosen software version. Some ERP software
offers separate versions for small and medium businesses and large enterprises.

2. ERP Infrastructure, Servers And Network

Organizations need robust infrastructure, servers, and a reliable network to run an ERP system
effectively. The costs include purchasing or upgrading hardware, ensuring sufficient server
capacity and establishing a secure and efficient network infrastructure to support the ERP
implementation.

• Query successful

3. Data Conversion And Legacy Software Integration

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Integrating existing data from legacy systems into the new ERP solution is a critical and complex
task. Data conversion costs involve extracting, cleaning and transforming data to fit the new
system's requirements. Additionally, integrating the ERP software with existing legacy
applications or databases may require additional development efforts, leading to increased costs.

4. ERP Customization

Every organization has unique business processes and requirements. Customizing the ERP
software to align with specific needs often incurs additional costs. Custom ERP Solution
involves modifying or extending the ERP system's functionality, user interfaces, workflows or
reports to match the organization's specific operational workflows and industry standards.

5. ERP Testing

Thorough testing ensures the ERP system functions correctly and meets the organization's
requirements. This includes activities such as system integration testing, performance testing and
user acceptance testing. Costs associated with testing involve setting up test environments,
acquiring testing tools and allocating resources for testing activities.

• Query successful

6. Employee Training

Proper training is vital for employees to utilize the new ERP system effectively. Costs related to
employee training include developing training materials, conducting training sessions and
providing ongoing support to address user queries and concerns. Investing in comprehensive
training helps maximize user adoption and minimize errors during the implementation phase.

7. Post-Implementation Support

Last but not least, the cost component is the post-implementation support by the ERP vendor or
the ERP implementation company. Post-implementation support costs include maintenance
fees, help desk services, software updates, bug fixes, and vendor support contracts. Adequate
post-implementation support is crucial to sustain the ERP system’s functionality and address any
emerging issues promptly.

• Query successful

Based on the topics in the images you provided, which discuss the costs and components of an
ERP implementation, here is a case study that illustrates these concepts in a real-world scenario.

Case Study: A Manufacturing Company's ERP Implementation Journey

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A mid-sized manufacturing company, "InnovateTech," was facing several challenges due to its
outdated and fragmented systems. They were using a combination of standalone software for
accounting, spreadsheets for inventory management, and a separate system for production
planning. This led to a lack of real-time data, frequent errors, and an inability to get a clear,
consolidated view of their operations. To address these issues and position themselves for future
growth, they decided to implement a new Enterprise Resource Planning (ERP) system.

The ERP implementation followed a structured approach, and they encountered various cost
components, as outlined in the documents you provided:

1. Data Conversion and Legacy Software Integration:

• InnovateTech's first major hurdle was converting their old data. They had to extract all
customer, vendor, and product data from their multiple systems.

• The data was often inconsistent and contained duplicates, so they had to invest time and
resources in a "data cleaning" process.

• They also needed to integrate the new ERP with their legacy CAD (Computer-Aided
Design) software, which required a third-party developer to build a custom API, adding
to the total cost.

2. ERP Customization:

• While the new ERP system had many out-of-the-box features, InnovateTech's unique
manufacturing processes required significant customization.

• They needed a custom module to handle a specific quality control process that was
unique to their industry.

• The user interface was also customized to create specific dashboards for department
heads, allowing them to see key performance indicators (KPIs) at a glance. These
customizations were crucial for user adoption but also added a substantial amount to the
project's budget.

3. ERP Testing:

• InnovateTech formed a dedicated project team to conduct thorough testing.

• They created a test environment that mirrored their live operations to perform system
integration testing, performance testing, and user acceptance testing.
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• During this phase, they discovered several bugs and integration issues that were not
initially apparent. For example, a bug in the production planning module caused it to
miscalculate material requirements. The time and effort spent on testing and fixing these
issues prevented significant problems once the system went "live."

4. Employee Training:

• Recognizing that a new system is only as good as the employees who use it,
InnovateTech invested heavily in a comprehensive training program.

• They developed role-based training materials and conducted hands-on training sessions
for different departments, from the warehouse floor to the finance team.

• The training costs included not only the training sessions themselves but also the lost
productivity time of employees while they were learning the new system.

5. Post-Implementation Support:

• After the "go-live" date, InnovateTech signed a support contract with the ERP vendor.

• This post-implementation support covered ongoing maintenance fees, software updates,

and access to a help desk for any issues that arose.

• A few weeks after implementation, a minor bug was found in the inventory module that
was causing a discrepancy in stock counts. The quick response from the vendor's support
team was crucial in resolving the issue before it affected operations.

Conclusion:

InnovateTech's ERP implementation was a success because they understood and prepared for the
various cost components beyond just the software license. By budgeting for data conversion,
customization, rigorous testing, employee training, and post-implementation support, they were
able to streamline their operations, reduce errors, and gain the real-time visibility they needed to
make more informed business decisions and achieve their growth objectives.