SMEs Struggle With ERP Projects

June 24, 2022

Small merchants in the US are struggling to get to grips with spiralling delays and costs of major ERP projects.

Leaders from over 500 small-to-medium sized retailers took part in Brightpearl’s study, which found that major ERP projects take six months longer than they were told to get live.

Merchants can expect an average 195-day delay to major back-office software projects that can typically take months or years to finish, even when completed on schedule.

Researchers also found that ERP investments cost almost a third (34%) more than predicted at the outset of the project.

According to the data, within the last 12 months more than a quarter of firms (27%) have attempted to implement an ERP system as an end-to-end solution for their retail needs.

However, 4 in 10 brands (38%) have experienced a ‘major failure’ when trying to implement their ERP system.

Half of SME merchants have reported problems (53%), with 63% of medium brands and 38% of large brands running into problems with ERP project failure.

Bigger brands do experience more issues than average, SME retailers can rarely afford the delays, spiralling costs or total project failure increasingly associated with major ERP projects.

“Implementing any major back-office software is a significant investment,” said Sara Arthrell, CMO at Brightpearl. “SME retailers cannot afford failure, and yet ERP adoption is a high stakes gamble where the risk of failure is uncomfortably high. Even if these projects are successful, implementing these systems officially takes longer and costs more than customers are told to expect.”

While many retailers have experienced ERP challenges over the past year, the sectors most impacted by issues include electronics & components (62%), sports, leisure and hobbies (56%), luxury goods (50%) – with each category experiencing a greater than 50% failure rate with embarking on an ERP project.

The key reasons for ERP failure, according to the data, includes ongoing integration issues (27%), a lack of scalability and flexibility (25%), being a poor fit for a retail brand (17%), and a lack of expert implementation consultants to help guide the process (15%).

Jorge Henriques, COO of Bond Touch, a brand which sells emotional wearable bracelets, is not surprised at the problems modern ERPs are presenting to growing brands. He says: “ERP systems take forever to set up and we would have needed lots of costly custom-built integrations to make it work for us. We wanted to have the flexibility to decide what’s best for our business and quickly scale up or down depending on our needs. It was clear a big ERP system could never offer that kind of scalability.”

Brightpearl believes SME businesses should now consider opting for different retail solutions which address the key causes of failure from the outset, to remove risks that the project might go long, cost more or ultimately fail.

Sara Arthrell added: “Businesses should do a checklist of key requirements any back-office solution should have before making a major investment in it, whether that’s being purpose built for retail, coming equipped with native integrations, being fully scoped so you know the costs and timeframe of project, or having a team of experts on hand to guide the implementation process from start to finish. In a volatile and ever-changing retail environment, de-risking major back-office software decisions as much as possible is the best way to protect your business.”