What does Nike, the US Air Force and the UK NHS all have in common?
They have experienced the pain of a failed ERP project. And when ERP goes wrong, it goes really wrong. As enterprise resource planning systems usually touch many points within an organisation, a rocky implementation can result in widespread outages, customer order issues and manufacturing and delivery delays.
Here are some of the most monumental ERP failures over recent years:
1) Nike’s software sneaker snag
In 2000, Nike invested $400 million in a warehouse order fulfilment system but instead ended up with over $100m in sales losses and a 20% drop in their stock market value due to a glitch in upgrading their ERP software. This left stores unable to fill orders, creating a PR disaster.
The ERP project failure resulted in Nike delivering too many Air Garnett sneakers than the world wanted and too few Air Jordans, meaning that Nike didn’t capitalise on a great sales opportunity for Nike Air Jordans.
As Nike’s Vice President of Global Operations and Technology, Roland Wolfram, put it, Nike become the ‘poster child’ for failed software implementations.
2) UK NHS project left feeling under the weather
A national project to implement a new patient record system for the UK NHS was abandoned and reportedly cost the UK taxpayer in the region of £10bn.
This number doesn’t even include the future costs of a new ERP system to replace the failed project, which could run into many millions of pounds more.
After the project was launched in 2002, it struggled on until 2011 when it was officially dismantled. The provider, CSC, was accused of “poor performance” and a “failure to deliver”. In 2013, over ten years after the project was started, no NHS trust had a functioning care records system delivered through the original project scope.
3) US Air Force flying low with a $1bn failed ERP project
The US Air Force spectacularly spent over $1bn over seven years on an ERP system that was eventually deemed to have no “significant military capability”.
The four causes highlighted which caused the failure of the project were:
- Governance – there was apparently a “confusing” and “ineffectual” governance structure throughout the project delivery.
- Tactics, techniques and procedures – the team implementing the solution were eventually found to have underestimated how complicated and enormous the scale of deploying the solution was. In simple terms, they were in over their heads.
- Difficulty of implementing change – there was significant staff churn throughout the project; 6 different program managers in 8 years, 5 Programme Exec Officers in 6 years and over 10 organisational constructs. No one knew who was in charge.
These factors resulted in a chaotic and confused approach to the implementation which ultimately contributed to its failure. Find out more detail here: http://spectrum.ieee.org/riskfactor/aerospace/military/the-us-air-force-explains-its-billion-ecss-bonfire
4) Hershey Foods gets it teeth into a tough (and costly) project
Investors balked when the CEO of Hershey Foods announced in 2009 that the company was facing issues with its new ERP implementation, preventing it from delivering $100 million dollars’ worth of stock. Hershey Foods’ stock price consequently fell 8% and investors were concerned that a failed a software implementation could result in the breaking up of a Fortune 500 company.
The software implementation and delivery was mainly delivered by SAP, Siebel and Manugistics. Both SAP and Siebel affirm that there were no issues with their software, and that the cause of the issue was more likely to be the ‘big bang’ approach employed by Hershey Foods.
This case not only highlights how complex large scale ERP projects can be, but also about how companies must make smart choices about when they choose to go-live with their new ERP systems (i.e. not before a busy sales period as Hershey did).
Read a detailed case study on the Hershey Foods ERP project here: http://www.academia.edu/4630187/ERP_Implementation_Failure_Hershey_Foods_Corporation
5) Time ran out for New York City’s CityTime project
New York City’s CityTime project to implement a system of timekeeping and payroll for municipal workers resulted in a criminal investigation into a wide-ranging fraud scheme involving the project implementation.
The outcome of the investigation ended with 8 convictions and the return of half a billion dollars back to the City.
A report on the failed ERP implementation highlighted failures to control the scope and cost of the project and an inability to hold contractors and service providers accountable as critical to the overall failure of the project.
The project was originally budgeted to cost $63 million but the real costs end up being closer to $700 million!
Read further detail about the doomed program: http://www.nyc.gov/html/doi/downloads/pdf/2014/July-2014/pr13citytime_72514.pdf
6) HP eating its own dog food in a major ERP fail
In 2004, HP announced that its third quarter profits had dropped by 5% in its Enterprise Server and Storage division, attributed to problems faced in migrating to a centralised SAP ERP system.
The total cost of the ERP implementation failure including backlogs and lost revenues was cited at $160m – more than five times the cost of implementing the ERP project originally. One of the original objectives for implementing the solution had in fact been cost savings!
As a result, industry analysts predictably questioned HP’s supposed expertise around SAP ERP implementations after its own project failure. Customer orders were trapped in old ERP systems and created huge backlogs in product and ordering systems.
Many analysts suspected the issues lay with the project’s execution rather than fundamental flaws with the software itself, however as HP and SAP are close partners and deliver many joint ERP projects, HP declined from publically blaming SAP.
Read a case study on the project failure: http://astro.temple.edu/~wurban/Case%20Studies/HP’s%20ERP%20Failure.pdf
Do you think we missed any?
Image courtesy of Gary [Flickr] (https://www.flickr.com/photos/kwantis/)