Unsuccessful ERP case studies (common pitfalls to avoid)

By now, you've probably heard about Cadbury and Nestle SA's ERP implementation success stories, but not every ERP implementation succeeds, and it's crucial to understand the pitfalls to avoid. Here are two examples of ERP implementation failures that highlight the importance of careful planning and execution.

Hershey's

An expensive lesson on the importance of synergy; this case study reviews the failure of Hershey, a 147-year-old confectioner, headquartered in Hershey, Pennsylvania. The enterprise saw the implementation of an ERP platform as being central to its future growth. Consequently, rather than approaching its business challenge based on an iterative approach, it decided to execute a holistic plan, involving every operating center in the company.

SAP was then selected for a $10 million systems upgrade; however, management problems emerged immediately. The impact of this decision represented complete chaos, where the company was unable to conduct business because virtually every process, policy, and operating mechanism was in flux simultaneously.

This resulted in a loss of $150 million in revenue, a 19% reduction in share price and a 12% reduction in international market share.

Key takeaway: Poor management can scupper implementation, even when you have selected the perfect system.

PG&E 

As a major energy utility, San Francisco’s Pacific Gas and Electric should have known better. Its Oracle ERP implementation had gone well, and there had been no problems of note; until it came time to test the system. A manager had chosen a live information database to use during pre-launch testing, although no one thought that the regime would uncover any sensitive company information.

Unfortunately, this was untrue and consequently created a host of costly recovery programs, in addition to losing public confidence in the company’s brand.

Key takeaway: Brief your staff on exactly what they should do and not do. Don't get non-specialist staff to carry out specialist roles.

Woolworth’s Australia

In 2015, Woolworth’s moved from a thirty-year-old in-house ERP to SAP. Then, after a six-year $200 million rollout, suppliers had to wait up to 18 months for payment, and store managers lost their profit and loss reports that were tailored for individual stores.

High-profile supply disruptions caused by this contributed to a 2016 write-down of $766 million and the layoff of hundreds of employees.  

Nevertheless, after making fixing IT issues a priority. Woolworth’s completed a subsequent roll-out of SAP’s SuccessFactors HCM software in August 2016. Potentially the biggest payroll system implementation ever in Australia, CEO Brad Banducci described it as going “far less painfully than our ERP systems.”

Key takeaway: figure out if your issue is fixable before abandoning the project completely. Sometimes soldiering through is your best bet.

Indiana University

A $52 million installation of PeopleSoft at Indiana University left thousands of students without access to promised financial aid. The school began work in 1998 to replace in-house systems that were twenty years old. It turned out that the new software was more sensitive than the old. If there was a discrepancy between what a lending institution had shown and what the university’s own systems calculated, the system simply blocked transactions.

On further examination, the university realized key processes didn’t fit well with the structure of the ERP, which was designed for a wide range of organizations. Despite initial teething issues, Indiana University stuck with PeopleSoft and eliminated these issues by revising and streamlining key processes.

Key takeaway: it’s not you, it’s me! Before blaming poor-quality software, see if there’s anything you can do to make your ERP a better match.

ScanSource

ScanSource is one of the largest providers of barcode scanners for the retail industry. They are based in South Carolina.  In 2009, ScanSource reached an agreement with Avanade to implement Microsoft Dynamics AX.

Then in 2013, ScanSource filed a suit against Avanade, alleging a ‘bait and switch’. The cost of the project had grown by four times the original amount, and the timeframe of the project was now triple the original scope. So, what happened?

Vistex Solutions eventually implemented SAP ERP at ScanSource. On February 2, 2015, ScanSource began using the application in Europe to support its growing business, as the ERP system enhanced business processes and created efficiencies to meet the needs of its operations globally. With a new stable platform, ScanSource began running more efficiently and effectively, making the company ready for future growth.

Key takeaway: know when enough is enough. And know when your vendor is breaking contractual obligations with regard to project cost and time inflation.

Final thoughts

Overall, good project management skills are critical in turning around ERP failure. ERP projects are expensive and take years to complete. Requirements will evolve, and time and expenses must be managed carefully. When there is a mismatch, the project manager must quickly determine if the project will self-correct (one extreme) or should be abandoned (another extreme).