Three of the Biggest Disasters in ERP History

ERP systems should make life easier by providing operational insight across your entire enterprise. Its functions will ideally support more accurate forecasting, easier product lifecycle management and superior inventory control.

That’s assuming everything, from initial system setup to the collaborative processes that different business teams build around the ERP, work as intended. In many cases, it doesn’t. There is no shortage of stories about how a key technical mishap, flawed vendor relationship or other issue led to an ERP implementation-related disaster. In fact, Gartner has estimated that 3 in 4 ERP implementations fail, due to a variety of reasons including difficulties in selecting the right solutions and struggles with time and budget overruns.

Going through the long history of ERP implementations, we’ve selected three that highlight what can go wrong. Read on for a look at 3 entries in the ERP Disaster Hall of Fame.

1. The $200+ million upgrade in Australia

That number might sound small relative to the billion-dollar lawsuits over botched ERP implementations that have become more common, but it caused immense pain for Woolworth’s Australia (Woolie’s) and its customers in 2015. Until then, Woolie’s had relied on an in-house system built decades ago.

It had decided to upgrade to a modern solution at the price of $200 million over six years, but once the transition was complete, there was a clear problem: The profit and loss reports for individual stores were no longer easily available, now taking up to 18 months to generate. The company eventually had to write off more than $766 million in related losses.  Additionally, Woolie’s faced the challenge of making a huge shift while many senior staffers were leaving the company, resulting in limited knowledge and documentation of the company’s key processes.

Takeaway: Test all of your critical reports and requirements to make sure they are working before you start using the new or upgraded system. Another key takeover is to ensure you have dedicated and knowledgeable staffers for the ERP transition.

2. The back to school meltdown in Massachusetts

Online registration systems at colleges and universities are relatively new, having only gained traction in the late 2000s. Before that, it was common for students to research classes in a physical catalog, fill out a schedule card that they sent to the registrar, and look up class locations in a directory. Accordingly, the shift to real ERPs was a huge change, and not one that went over smoothly everywhere.

At the University of Massachusetts, Amherst, a 2004 switchover to a new ERP resulted in some major technical hiccups that autumn. Many classes were half-full on their first days since online registration was unavailable, forcing the university to revert to an in-person workflow that resulted in long lines.

Takeaway: Going from a patchwork of siloed legacy systems to a new ERP can be disruptive. It’s often worth exploring options for middleware that can stitch together old and new applications for a smooth transition. Another key takeaway is to review all manual process that made the previous process work with disjointed systems to properly identify any gaps. The new system might require additional processes outside of the system for the new solution to be successful.

3. The (Hershey’s) Kiss, of Death

“There is no doubt that 1999 was a difficult and disappointing year for Hershey Foods as sales and earnings fell significantly short of our, as well as the market’s, expectations…this was largely the result of customer service and order fulfillment problems stemming from the July 1999 start-up of the final phase of new business systems and processes in these areas.” — Kenneth L. Wolfe, former chairman and chief executive officer, Hershey Foods, 1999

Initially, the roll out appeared to be smooth, but slowly problems pertaining to order fulfillment and shipping started to arise. Several consignments were shipped behind schedule, and even when late, some deliveries were incomplete. However, it was too late for Hershey to respond to this problem. The old logistics system that had been in place was pulled down, making way for the new one; which could not function as required. Without any data about the products in its hands, Hershey was often forced to call up customers and inquire about the details of the quantity they received and ordered.

Takeaway: Be careful with a big-bang approach to ERP implementation, and not having a team in place that can walk you through every step of the way. In this approach, the software was to be implemented at one go, instead of a phased approach of implementing one module at a time, testing it, and then taking up the next module. The phased approach allows a company to find and correct bugs before moving on to the next phase.

Avoiding ERP pitfalls through a new approach to integration

It’s not unusual for ERP projects to face challenges. However, it is possible to mitigate the associated risks by enlisting the guidance of a trusted partner like Inspirage. As integrated supply chain experts, we will work closely with your team to make sure all of your business and technical requirements are met. Visit our resource center for additional background or contact us directly.

Michael Pearson

Michael Pearson | Key Contributor

Michael Pearson is a Vice President, Solutions Management for Inspirage responsible for business development and client account relationships. With 25+ years of SCM systems implementation experience, Michael has considerable expertise in project management, strategic management, business re-engineering and best practice applications. Prior to joining Inspirage, he spent thirteen years in leadership positions with consulting firms specializing in Oracle Applications where he held positions in consulting, project management, and practice management.