We all like to hear about success stories. Especially about business applications, where through careful planning, problem solving, and teamwork, Company EFG overcame the odds and achieved greatness. Or how Company LMN did this, this, and this, and became a textbook example of how to do something. How inspirational!
But I think the best stories are the failures: the bigger the disaster, the better the drama. So, I collected some of the best known ERP fails over the years below:
1. U.S. Navy. U.S. Navy began implementing a new ERP system back in 2000 when they tried to integrate their existing subsystems (all 44 of them) into one single system. They tried four different pilot projects (each of them failed), and ended up spending over $1 billion. Nuts. Ultimately, the failure was due to a lack of coordination between project, poor process standards, no transaction standards, and exclusion of enduser for requirements. (Source)
2. HP. HP in 2004, was migrating to a new order-processing and supply chain system in their North America division. Things were going smoothly until a series of small problems snowballed into a massive one that ended up costing the company $160 million in lost revenue. There were three main issues in play: first, the project team had some difficulty working with other parts of the company; second, there were lots of data-integrity issues (Orders fell out between the legacy front-end system and the new system on the back end, which needed significant manual intervention); third, increased demand of products, which put more pressure on the new system. (Source)
3. Nike. In 2000, Nike invested $400 million in updating their ERP and supply chain system… Only to see $100 million in lost revenue and a 20% dip in stock price (not to mention a bunch of class action lawsuits) when they produced too much of one shoe and not enough of another. The new system was suppose to match supply and demand and run a tighter manufacturing cycle. But due to poor software testing and too much faith on the demand forecasting features of their new software, their plans backfired rather spectacularly. (Source)
What these cases show is that ERP implementation is very complex and things can go wrong very quickly with significant financial impact. But by keeping disaster stories in mind, you can watch out for common pitfalls.
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