Top 5 ERP Failures

For many businesses, the idea of implementing an enterprise resource planning solution — or ERP — is very interesting. Unifying all the various processes from all the different business units — including finance, HR, support and procurement — into one streamlined system holds a lot of promise. It can significantly speed up processes, facilitate data management and enhance communication. As a result, it can reduce operating costs, improve collaboration between units and help make the company more competitive.

Yet when it comes to ERP implementation, you simply can’t be too cautious. The process involves reviewing all your legacy systems and either replacing them within the new system or integrating them into it. When you have files, processes and systems that have been built and expanded over many years, this process is a highly complex one — and one that can easily be derailed by factors such as faulty planning, human error and system incompatibilities.

As such, ERP implementation is frequently hampered by errors, delays and cost overruns. Even worse: According to a 2015 study, 21% of surveyed companies stated that their ERP rollout was a failure. By other estimates, this number should be 29%, considering the fact that not all companies go public about their mistakes. And of course, ERP failures cost millions — and sometimes even billions — of dollars in faulty software, subpar service, lost business and troubleshooting.

Before you decide on an ERP solution, take a look at these top 5 ERP failures — that way, you can learn from other companies’ mistakes:

1. Washington State’s community college system: When the community college system wanted to roll out an ERP solution to unify its 34 campuses, it didn’t take into account that each of those campuses had its own specific processes. Standardizing them caused a significant delay — during which the contractor who was employed to implement the solution filed for bankruptcy. It was bought by another company, which promptly cancelled the contract with the community college system and sued it, claiming that the school was to blame.
2. Nike: Over the course of 2000 and 2001, Nike implemented a $400 million ERP solution that was intended to better allow the company to match supply and demand, and subsequently shorten their sneaker manufacturing cycle. Unfortunately, they didn’t test the ERP solution before it went live — and ended up placing orders for low-demand sneakers instead of high-demand ones. The result? A series of class action law suits, a $100 million revenue loss and a 20% dip in stock value.
3. Hershey: In 1999, Hershey suffered a massive failure in its ERP solution. As a result, the company failed to deliver an estimated $100 million worth of Hershey’s Kisses right in the middle of Halloween season — leading its stock to plummet by eight percent.
4. Hewlett Packard: When Hewlett Packard moved all of its North American divisions into one ERP solution, they encountered a host of small problems. In the end, backlogged orders and lost revenues cost the company approximately $160 million.
5. Target Canada: After successfully implementing an ERP solution in the U.S., Target decided to do the same in Canada. However, when the system launched, it quickly failed, and the supply chain collapsed. It turned out that 70% of the items in the systems had been tagged with incorrect prices, manufacturers and dimensions.

These ERP failures all cost the companies a considerable amount of money while at the same time adversely impacting their ability to properly function. Yet with good, careful planning and the right support, your ERP implementation can occur relatively quickly and without disasters. For more information on smooth, successful ERP implementation, contact us today.