This week’s discussion topic continues our discussion of ERP failures. As you will recall, an ERP system is comprised of a number of base modules that are combined to create an enterprise-wide application that companies rely on every day. Despite the critical role and ERP system plays, many companies continue to fail when in it comes to implementing them.
The Internet is full of war stories that tell the tale of failed ERP projects. According to Panorama’s study as cited by Krigsman (2010), “57% of ERP implementations take longer than expected. This challenge is partly attributed to the fact that many companies … either had unrealistic expectations regarding timeframes and/or did not account for key project activities in their implementation planning processes.”
Replacing multiple legacy applications with a single ERP system is driven by the complexity, risk, and integrated nature of the business processes they automate. These systems touch almost every aspect of a company and the ones that fail are the ones that become urban legends on the Internet.
As stated in the syllabus, your initial response is due before our f2f session. You are required to respond to at least two other classmates before Sunday.
Krigsman, M. (2010, February 3). ERP failure: New research and statistics. ZDNet. Retrieved April 15, 2014, from http://www.zdnet.com/blog/projectfailures/erp-failure-new-research-and-statistics/8253
To respond to this discussion, read the below article from 360 Cloud Solutions and then select one of the companies and research what went wrong with the implementation. To help you determine the problems your selected company encountered, consider this list of 10 reasons for ERP failures:
The complete article is available at 10 reasons for ERP Implementation failures. There are other opinions on why projects fail, and you are welcome to use them. The only requirement for this discussion is that you provide some quantifiable facts about why the company failed and describe what they did after the project failed.
Top Six ERP Implementation Failures
Posted by Melissa Monahan
Enterprise Resource Planning (ERP) implementations should smoothly integrate both internal and external information management across the organization that implements them, and yet many organizations that utilize ERP end up running into failure. It is believed that as many as 29 percent of all ERP implementations end up failing, and there are some well-known examples in the news that reinforce this belief. Here is a look at some of the top ERP implementation failure incidents that have occurred recently.
Perhaps one of the best known ERP implementation failure incidents hitting the news occurred during the Halloween season in 1999. Due to mishap after mishap involving the company’s SAP ERP, CRM and supply chain applications, the company failed to deliver $100 million dollars’ worth of Hershey Kisses during the season, which resulted in a startling 8 percent stock dip.
Back in 2000 and 2001, Nike spent $400 million dollars updating their supply chain system and ERP implementation. They were surprised to find that what it got them was a ghastly 20 percent dip in their stock, $100 million dollars in lost revenues and a myriad of class action lawsuits. Where did they go wrong? They implemented a new demand-planning software solution without testing it, and everything went awry. Rather than helping Nike match their supply with demand, narrowing their sneaker manufacturing cycle, they ended up ordering low-selling sneakers in place of high demand ones, collapsing the supply chain.
While it is not uncommon for small disasters or issues to occur during the rollout of a new ERP system, total ERP implementation failure can occur when too many of these little issues occur all at once. Moving all of the company’s North American divisions into a single centralized ERP system ended up costing the company $160 million dollars in backlogged orders and lost revenues, more than five times what the project was estimated to cost in 2004.
Waste Management began an 18 month installation process in 2005 that turned into a $100 million dollar legal battle which has been going on since 2008. Waste Management filed suit against SAP executives who apparently participated in fraud leading to a massive ERP implementation failure.
FoxMeyer Drugs, a $5 billion dollar company implemented a $100 million dollar ERP system and went completely bankrupt not long after. Did the two have a correlation? They launched the Delta III project in 1993, and implementation began between 1994 and 1995. By 1996, FoxMeyer had been driven into bankruptcy, and by 1997 the pharmaceuticals company was suing SAP, the ERP project vendor as well as Andersen Consulting, responsible for integrating the system for $500 million dollars apiece.
Perhaps most startling, the United States Navy has sunk $1 billion dollars into four different ERP pilot projects since 1998, and all four have failed. These projects were based on SAP AG software. All four installations turned out to be incompatible and redundant, ultimately failing to meet the requirements of the Navy. While in this case the only cost was the money spent on purchasing the programs, this is an ERP implementation failure of epic proportions.
Learn From the Past Mistakes of Others
These are just a few of the serious ERP implementation failure occurrences that have happened over the past few decades. Businesses and organizations must look upon these examples, and use everything these companies and organizations learned through experimentation and failure to rise above and find greater success with an ERP implementation. ERP implementations can be successful without failure, but only when the right system is implemented by the right people to do the job.
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