Famous ERP Failures: 3 Unsuccessful Implementations (and Lessons Learned)

July 11, 2024 xavier chaudhary

blog/famous-erp-failures-3-unsuccessful-implementations-and-lessons-learned

2024-07-11

Enterprise Resource Planning (ERP) systems are designed to integrate and streamline business processes across an organization. However, despite their potential benefits, ERP implementations can sometimes go awry, leading to significant operational disruptions and financial losses. This article explores three recent ERP failures, examining the causes, what went wrong, and the lessons learned.

1. Hershey’s SAP Failure

Overview: In 1999, Hershey Foods Corporation faced a critical ERP failure when it attempted to implement an SAP ERP system in conjunction with other supply chain and customer relationship management software from Siebel and Manugistics.

What Went Wrong:

Aggressive Timeline: Hershey aimed to implement the new system within a span of 30 months, an ambitious timeline given the project's complexity.
Go-Live Timing: The system went live during Hershey’s busiest season, just before Halloween, Thanksgiving, and Christmas. This timing exacerbated any issues and left little room for error.
Inadequate Testing: The integration and user acceptance testing phases were rushed, leading to significant undiscovered issues that surfaced post-implementation.

Consequences:

The ERP system failed to function correctly, leading to severe distribution problems.

Hershey was unable to fulfill $100 million worth of orders, resulting in lost sales and a 19% drop in quarterly profits.

The company also faced a stock price drop and long-term damage to its reputation.

Lessons Learned:

Realistic Timelines: Implementing an ERP system requires a realistic timeline that allows for thorough testing and troubleshooting.
Critical Season Avoidance: Avoid going live during peak business periods to minimize the risk of operational disruptions.
Comprehensive Testing: Extensive testing, including end-to-end and user acceptance tests, is crucial to identify and resolve potential issues before going live.

2. National Grid’s ERP Failure

Overview: In 2012, National Grid, a major utility company in the UK and the US, experienced an ERP failure during its SAP implementation, which resulted in significant financial and operational issues.

What Went Wrong:

Insufficient Training: Employees received inadequate training on the new system, leading to widespread confusion and errors.
Integration Issues: The new ERP system struggled to integrate with existing systems, leading to data inconsistencies and operational disruptions.
Project Management Failures: Poor project management practices, including underestimating the complexity of the implementation and inadequate risk management, contributed to the failure.

Consequences:

The ERP failure cost National Grid around $1 billion in operational inefficiencies, lost productivity, and additional project expenses.

The company also faced a prolonged period of operational disruption and employee dissatisfaction.

Lessons Learned:

Comprehensive Training: Ensure that all employees receive thorough training on the new system to facilitate a smooth transition and reduce errors.
Seamless Integration: Plan and execute the integration of the new ERP system with existing systems carefully to avoid data inconsistencies and operational disruptions.
Robust Project Management: Effective project management, including realistic planning, risk management, and stakeholder communication, is essential for successful ERP implementations.

3. Waste Management’s Oracle ERP Failure

Overview: In 2005, Waste Management, one of the largest waste disposal companies in the US, embarked on an ERP implementation with Oracle, which eventually led to a legal battle over alleged fraud and failure.

What Went Wrong:

Misrepresentation of Capabilities: Waste Management claimed that Oracle misrepresented the capabilities of its ERP software, leading to unrealistic expectations.
Customization Challenges: The project required extensive customization to meet Waste Management’s specific needs, which increased complexity and cost.
Project Management and Communication Failures: There were significant breakdowns in project management and communication between the two parties, leading to delays and unresolved issues.

Consequences:

Waste Management sued Oracle for $500 million, alleging fraud and seeking damages for the failed implementation.

The legal battle highlighted the severe financial and operational impacts of ERP project failures at the time, and is not the first nor last legal battle of its nature.

Lessons Learned:

Clear Expectations: Establish clear, realistic expectations about the ERP system's capabilities and ensure both parties understand the project scope.
Customization Caution: Be wary of extensive customizations that can complicate the implementation and increase costs.
Effective Communication: Maintain open and effective communication between all stakeholders to address issues promptly and keep the project on track.

Key Takeaways

Set realistic timelines
Avoid critical seasons for go-live
Adapt processes to fit the new ERP system, opposed to contorting the ERP to fit current processes
Provide comprehensive training and change management

Want to steer clear of a failed implementation altogether? Talk with our team to find out how Red Pill Labs can help.