In this article I would like to discuss the fourth factor giving rise to ERP implementation failure – “lack of precision configuration or, more accurately ‘sloppy configuration’” with a weight of 14%
Sloppy Configuration – a Practical Example
The client was a medium size mining company operating on two continents.
They had implemented a world class Tier 1 ERP using a Big Four consultancy.
At the time I was introduced to the client the ERP was to all intents and purposes non-functional and the business was being run with spreadsheets.
The situation was summed up by the CEO who said to me in my initial briefing interview with him with reference to a new mine they were developing “at present we have one tunnel and they cannot tell me the cost of developing that tunnel, in a year from now I will have fifty tunnels, what am I going to do then?”
I conducted my usual investigation starting with interviews from the top down.
The Project Sponsor was the Legal Director, they had a strong contract that disempowered the implementer and he had delegated the project to a relatively young and inexperienced IT Manager. Based on what I have shared before you will understand that this is a double whammy of bad practice.
The network performance was shocking, the response time for the overseas mine was over 2 minutes from clicking a button. Another critical factor causing failure.
There was zero Engineering Approach, the project was haphazard and badly run.
There had been no laboratory, they just hacked it and ran live.
So, fundamentally the project failed on every single factor that I identify!
The culmination of the poor governance and the reason that they could not get costs out for the current tunnel was that the Chart of Accounts was the worst I had ever seen.
The mid-level accountant responsible for the mess proudly informed me that he had obtained Charts of Accounts from three other mining companies and the resulting Chart of Accounts was a lumping together of those – he had included everything he had found in every chart in no structure either in terms of business logic or accounting logic. A sequential list as he had received the data.
A senior accounts professional with an Accounting degree had been attempting for six months to produce financial statements but was unable to get them to reconcile.
The configuration of the Plant Maintenance module and the Projects module was also sloppy.
Following is a short extract from the Chart of Accounts that ran to well over 1,000 accounts:
| 500528 | Waste Material Consumed |
| 500530 | Loss from valuation of external materials |
| 500540 | Loss from valuation of own materials |
| 500550 | Losses – Inventory variance – consignment sale |
| 500560 | Safety Clothing |
| 500565 | Safety Equipment |
| 500570 | Sand and Stone |
| 500575 | Scraper Rope |
| 500585 | Scrapers |
| 500585 | Services |
| 500590 | Signs |
| 500595 | Skips & Cages |
| 500600 | Finished Goods Inventory Offset |
| 500605 | Smelting and Refining |
| 500610 | Production Order Settlement — Variance |
| 500615 | Steel Other |
| 500620 | Steel Sections |
| 500625 | Steel Sheets and Plates |
Notice the complete lack of logic of any form. No hierarchy, no structure in the numbering or the content – I have highlighted a few anomalies that stand out.
Smelting and Refining is an Asset amounting to tens of millions of pounds, Skips and Cages is a much smaller asset, Sand and Stone is a consumable in the production of concrete and is an expense against a project cost, Safety Clothing is a consumable. There is absolutely zero logical relationship between these items row by row and the level of detail is also highly variable.
The entire Chart of Accounts was like this – no sign of any business or accounting knowledge or insight.
Closer inspection of the complete Chart revealed that it was simply mechanically impossible to produce any sort of meaningful financial statements or analysis. The head bookkeeper had produced her own summarised digest of the relevant accounts but even that was a mess.
The only solution was a complete green fields reset of the ERP and implementation from base zero.
By the time I was engaged it was too late, a few months later the company went into liquidation.
This case study demonstrates what happens with sloppy configuration – it is entirely possible to destroy a potentially profitable business!
If you find what I share of interest and desire more information please email me and I will share more detailed information.
Next week I plan to discusshow effective precision configuration can deliver huge benefits and increased profitability and is critical for success – the fourth factor required for success.
For more information about the services I am offering please visit www.The-ERP-Doctor.com
Context for Reference
For ease of reference the full list of factors is as follows:
Factors causing failure
The seven factors causing failure are:
1. Mythology, hype and tradition – 30%
2. Inappropriate or ineffective executive custody, governance and corporate policy – 19%
3. Lack of effective strategic alignment and strategic solution architecture – 16%
4. Lack of Precision Configuration – Sloppy Configuration – 14%
5. Failure to address soft issues, business engagement and change impacts – 12%
6. Lack of an Engineering Approach – 6%
7. Technology Issues – sub-optimal or defective software, hardware, network, etc – 3%
The percentages represent the extent to which each of these factors has played a part in the investigations I have undertaken. It is important to note that the factors with the lower weights are still very important but that if the higher weighted factors fail it does not help to get the lower weighted factors right.
Critical factors for success
The seven critical factors for success are:
1. Effective Executive Custody – 25%
2. Effective Strategic definition and alignment – the Essence of the business – 22%
3. Effective Engineering solution design and implementation approach – 17%
4. Effective Precision Configuration – 16%
5. Effective Business Simulation Laboratory operation (war games) – 12%
6. Effective Business Integration, training, change facilitation, process specification – 6%
7. Reliable technology – 2%
Conclusion
From consideration of the above it will be apparent that the real issue is not the ERP product, all the mainstream products are capable of delivering a quality outcome, it is the quality of the implementation and therefore the capabilities of the implementer that are critical.
In the weeks ahead I plan to continue to share the headlines of my thoughts on each of the above and the lessons that I have learned in terms of how to implement ERP and other business system projects in a manner that ensures a successful outcome.
My offering
I offer technology agnostic services in terms of:
a. Instruction and training in how to apply these methods.
b. Troubleshooting projects that are in difficulty and providing guidance to turn them around.
c. Strategic project leadership services achieving a high level of executive engagement and delivering high quality business relevant outcomes.
d. “Precision configuration” – a very rigorous approach to the detailed content of master data and other validation lists and other elements of the configuration.The lack of this was a major factor in the above failure, I will discuss this in more detail in due course.
e. Comprehensive, robust, tender based, ERP and other major systems procurement.
If you would like further information please reply to this email and we can get on Zoom to discuss.
You can also visit https://www.the-erp-doctor.net/ for a catalogue of method and technique that evidences the full spectrum of my knowledge and experience in this field.