The objective of implementing an ERP system is smoothly integrating data and processes across an organization, yet many companies end up running into failure during the implementation. In fact, it is believed that as many as 29% of all ERP implementations end up failing, and there are some well-known examples that reinforce this stat. Here is a look at some of the biggest ERP implementation failures and how they impacted the companies’ bottom lines.
1. Hershey’s Not-So-Sweet Blunder
Perhaps one of the best-known ERP implementation failures occurred at Hershey’s 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, resulting in a startling 8% stock dip.
2. Nike’s Supply Chain Issues
Back in 2000 and 2001, Nike spent $400 million dollars updating their supply chain system and ERP. They were surprised to find that what it got them was a ghastly 20% dip in their stock, $100 million dollars in lost revenues, and a myriad of class-action lawsuits. Where did they go wrong? They implemented and launched a new demand-planning solution without appropriate testing and everything went awry. Rather than helping Nike match their supply with demand and shortening their manufacturing cycle, they ended up ordering low-selling sneakers in place of high demand ones, collapsing the supply chain.
3. Hewlett Packard’s Disaster
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. This is what happened at Hewlett Packard. 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.
4. Waste Management’s Trashed System
Waste Management began an 18-month installation process in 2005 that turned into a $100 million dollar legal battle which lasted from 2008 through 2010. Waste Management filed suit against SAP executives who apparently participated in fraud leading to a massive ERP implementation failure.
5. FoxMeyer Drugs’ Bankruptcy
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.
6. The Navy’s $1 Billion Dollar Blunder
Perhaps most startling, the United States Navy sunk $1 billion dollars into four different ERP pilot projects since 1998, and all four have failed. All four installations, which were based on SAP AG software. 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.
The big guys—they’re just like us! 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, but only when the right system is implemented by the right people to do the job. Learn from the past and don’t be a stat.