While the business world is filled with a handful of success stories, it is also full of stories about failures and disasters. Even the most popular and established companies have dealt with some mishaps, particularly in ERP implementation.
Implementing enterprise resource planning (ERP) software is a massive decision for any business big or small. It can aid in managing day-to-day activities such as accounting, procurement, project management, risk management and compliance, and supply chain operations.
However, such a system can also strike fear and cause costly issues when not implemented effectively. Take it from the massive ERP disasters that Nike, Avon, Hewlett-Packard, and Waste Management have experienced.
Keep reading to find out what lessons can the above companies’ failure stories can teach businesses that are looking to invest in an ERP system.
Lesson #1: Test Every Aspect of the ERP Software
Who would have thought that a big player in the sportswear industry like Nike have had their chips? Yes, the multinational shoe and apparel brand has a story about failure.
Back in 2000, Nike did a $400 million upgrade to its supply chain and ERP systems. Sadly, the upgrades in the i2 software contained a glitch, resulting in $100 million lost sales and a 20 percent stock dip.
This ERP disaster should serve as a warning to all businesses. It is important to test every aspect of the ERP application before it goes to lives. Doing this helps to determine if the ERP software meets the business’ needs and produces the desired output.
As what Nike’s famous slogan says, “Just do it!”. Check it now or face the costly consequences later.
Lesson #2: Align the Software to Your Processes
Avon Products Inc., one of the world’s leading beauty companies, is known for its unwavering success. You did your research well if you’re aware that it also faced failure at one point.
In 2013, the makeup giant began an ERP project to implement an SAP-based order management system in its four regions. After rolling out the system for testing in Canada, the company found that the ERP application doesn’t perform its intended purposes.
Avon’s sales representatives had difficulties logging into the new website and accepting orders on it. This discouraged the reps from utilizing the system, causing Avon to lose as many as 16,000 makeup sellers across Canada.
This scenario implies the importance of aligning a particular system for the business. It helps to ask questions such as “Can it keep my business running?” or “Will my staff find it useful?” before implementing it.
Lesson #3: Make a Detailed Implementation Plan
Hewlett Packard also has a disastrous attempt at implementing multiple enterprise systems across their offices.
While its intention of transitioning the region into a simplified group of ERP applications is a clever idea, the company failed to look at the possible effects on team collaboration and the software per se.
The communication and software broke down just when the demand for HP’s products increases, which caused the project to fail. The failed project cost over $160 million—a copious amount of money that can overhaul its business processes and drive costs down.
Gilles Bouchard, HP’s Executive Vice President, noted that the company should have made a contingency plan for four, five, or six weeks. That is what HP’s ERP failure warns businesses about: to have a detailed action plan in place.
Lesson #4: Manage Communications Effectively
Like the first three companies, Waste Management Inc. rolled out an ERP implementation plan to improve productivity and save time, as well as costs.
Unfortunately, things did not turn out well for the trash disposal company. The 18-month enterprise resource planning deal with SAP ended in disaster. WM claimed that they had been fooled by the SAP sales team because the demo they presented did not materialize.
SAP, on the other hand, said that the project failure had been entirely due to Waste Management’s inability to provide key information and delegate adept employees to the project. After a court trial, the case was finally settled in 2010.
To avoid falling into this trap, businesses should maintain clear communications with the ERP software vendor. Both parties should be on the same page to complete the project successfully.
The Bottom Line
Implementing an ERP software solution may offer its users a wide range of benefits. It can help to improve reporting, increase work efficiency, reduce costs, and streamline processes, among others.
But no matter how useful the tool is, ERP implementation fiascos would still be possible—the above ERP failure stories are enough evidence. So if you’re planning to invest in such a system, make sure to keep the above lessons in mind.
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