Top ERP Failures – Enterprise Resources Planning.

1. Hershey’s ERP Failure (1999)

• System: SAP R/3
• Cost: Estimated $100 million in lost sales and additional costs
• Background: Hershey’s failure occurred during the company’s attempt to transition to a new ERP system from SAP, which included modules for production, order management, and inventory. The company chose to go live just before Halloween, their peak season, which was a major mistake.
• Issues:
  • The project was rushed, with little time for adequate testing or training.
  • Integration between the legacy systems (including a custom system for order management) and SAP was not properly managed.
  • The cutover to the new system led to inaccurate inventory data and distribution errors, meaning the company couldn’t fulfill orders on time.
• Consequences: Hershey’s faced serious disruptions in delivering products to retail stores, especially at a time of high demand, which led to missed sales opportunities, estimated at $100 million. The company faced an immediate loss of customer trust, and the failure contributed to a 20% dip in stock prices.

2. Nike’s ERP Failure (2000)

• System: i2 Technologies (Supply Chain Management ERP)
• Cost: Estimated $100 million in losses
• Background: Nike’s ERP failure stemmed from the company’s attempt to implement a new supply chain management system designed by i2 Technologies. The goal was to better manage inventory and demand forecasting.
• Issues:
  • Demand Forecasting Errors: The system relied heavily on complex forecasting models that predicted consumer demand, but the system made inaccurate predictions.
  • Production Problems: As a result of these inaccuracies, Nike produced too many shoes that didn’t align with actual consumer demand, leading to an overstock of certain models.
  • Integration Issues: There were challenges in integrating the new ERP system with Nike’s legacy systems.
• Consequences: Nike was left with millions of dollars of unsold inventory, and the company had to discount products heavily, damaging their brand image. They also faced a significant loss in revenue, estimated to be around $100 million.

3. Target Canada ERP Failure (2013)

• System: SAP
• Cost: $2 billion in losses
• Background: Target’s attempt to expand into Canada was hindered by a massive ERP failure that crippled its operations from the start.
• Issues:
  • Inventory Management Failures: SAP’s ERP system failed to sync inventory data accurately between the warehouses and retail locations. As a result, shelves were often empty, or excess stock was sitting in warehouses.
  • Underestimated Complexity: The scale of integrating Target’s US operations with Canadian stores was vastly underestimated, and the software wasn’t configured to handle regional complexities.
  • Data Issues: Problems with data migration meant that orders were either delayed or lost.
  • System Instability: The system was not properly tested before launch, leading to frequent crashes and operational inefficiencies.
• Consequences: The ERP failure caused significant customer dissatisfaction due to poor stock availability and delayed shipments. This issue, combined with other logistical problems, contributed to Target’s exit from Canada in 2015, costing the company an estimated $2 billion.

4. The UK’s National Health Service (NHS) ERP Failure (2002-2011)

• System: McKesson’s iSoft (part of the National Programme for IT)
• Cost: £10 billion (approximately $18 billion)
• Background: The NHS embarked on an ambitious project to digitize patient records across England. The plan was to create a centralized system for patient data, which would be accessible to health professionals nationwide.
• Issues:
  • Scope Creep: The project grew in scope as it progressed, making it increasingly difficult to manage. The complexity of integrating various hospitals, trusts, and other stakeholders with the system was underestimated.
  • Vendor Issues: iSoft, the vendor for the patient record system, faced multiple challenges, including poor system design and inability to meet the NHS’s requirements.
  • Data Inaccuracy: The system failed to deliver accurate patient data, which led to a lack of trust among healthcare professionals.
• Consequences: The project became infamous for its massive cost overruns and technical failures. Eventually, the entire initiative was abandoned in 2011 after a decade of failures, costing taxpayers billions of pounds.

5. Waste Management ERP Failure (2005)

• System: SAP R/3
• Cost: $100 million
• Background: Waste Management, a US-based waste disposal company, undertook an SAP R/3 implementation to modernize its financial and operational systems.
• Issues:
  • Poor Planning: Waste Management’s project lacked clear planning and proper evaluation of how the SAP system would integrate with their existing operations.
  • User Resistance: Employees were not properly trained, and many resisted the change, especially in financial reporting and billing.
  • Data Integrity Problems: The migration of financial data from legacy systems to SAP created serious data integrity issues.
• Consequences: Billing errors and delayed invoicing cost the company millions of dollars. Waste Management had to write off the entire project, citing major inefficiencies and inaccuracies in financial reporting.

6. Lufthansa’s ERP Implementation Failure (2009)

• System: SAP
• Cost: Estimated $200 million
• Background: Lufthansa, one of Europe’s largest airlines, began implementing SAP to streamline financial, logistics, and operational systems.
• Issues:
  • Overruns and Delays: The implementation suffered from major delays, and the budget quickly ballooned.
  • Data Migration Problems: The airline faced issues when migrating data, especially for inventory and procurement management, resulting in operational disruptions.
  • Lack of Change Management: The workforce was not adequately trained, and many employees struggled to adapt to the new system, leading to inefficiency.
• Consequences: The airline had to delay and reorganize its project multiple times. Despite the significant investment, it failed to meet the initial goals, including improving operational efficiency and integrating supply chain management.

7. FoxMeyer Drugs ERP Failure (1990s)

• System: SAP R/3
• Cost: Bankruptcy (about $100 million in losses)
• Background: FoxMeyer, a pharmaceutical distributor, implemented SAP’s R/3 system in an attempt to modernize its business operations.
• Issues:
  • Inadequate Testing and Integration: FoxMeyer struggled to integrate SAP’s ERP system with their existing processes, leading to billing mistakes and inventory inaccuracies.
  • Supply Chain Issues: The system didn’t provide the expected efficiencies in inventory management and order processing, causing disruption to supply chain operations.
  • Underestimating System Complexity: FoxMeyer underestimated the complexity of the system’s implementation, which led to a breakdown in operations.
• Consequences: The ERP failure led to a dramatic loss of sales and customer confidence. This failure ultimately contributed to FoxMeyer filing for bankruptcy in 1996.

8. Boeing’s 787 Dreamliner ERP Failure (2007-2013)

• System: In-house ERP system
• Cost: Estimated $2 billion+
• Background: Boeing developed an ERP system to handle the complexity of its supply chain for the 787 Dreamliner. The system was designed to manage a network of thousands of suppliers worldwide.
• Issues:
  • Supply Chain Mismanagement: The ERP system failed to monitor and control the quality of parts and materials from suppliers, leading to significant production delays.
  • Poor Communication: Boeing’s system did not effectively communicate with suppliers or provide real-time visibility into the production process.
  • Inadequate Testing: The system was not adequately tested before it went live, which contributed to many of the operational problems.
• Consequences: Boeing faced delays in aircraft production, and the Dreamliner’s initial delivery was delayed by over three years. The company had to spend billions to rectify the ERP-related issues.

9. City of Atlanta ERP Failure (2018)

• System: SAP
• Cost: $20 million+
• Background: The City of Atlanta’s ERP project was impacted when a major ransomware attack caused significant disruptions to their newly implemented SAP system.
• Issues:
  • Security Flaws: The ransomware attack exploited vulnerabilities in the city’s IT infrastructure, paralyzing critical systems, including the SAP ERP.
  • Inadequate Disaster Recovery: The city’s disaster recovery plans were not robust enough to handle such an attack, leading to prolonged downtime.
  • ERP Misconfiguration: Even before the ransomware attack, the city’s ERP system was not optimized for its specific needs, and system configurations were inadequate.
• Consequences: The ransomware attack brought the city’s operations to a standstill, including payment systems and tax revenue collection. It took several months to restore normal operations, leading to millions of dollars in costs.

10. University of California, San Francisco (UCSF) ERP Failure (2018)

• System: Oracle PeopleSoft
• Cost: Estimated over $100 million
• Background: UCSF undertook a project to implement Oracle PeopleSoft for its HR and financial systems in an attempt to modernize its infrastructure.
• Issues:
  • System Integration Failures: Data migration and integration with existing systems caused delays and errors in critical operations, such as payroll and finance.
  • Customization Challenges: The customizations to the PeopleSoft system were not properly tested or understood, leading to data and process discrepancies.
  • Inadequate Support: Lack of sufficient training and change management caused frustration among users.
• Consequences: The system’s failure led to operational disruptions, including delayed payroll processing, vendor payments, and employee dissatisfaction. The university was forced to invest significant additional resources to stabilize the system.

Summary of Common Failures Across These Cases:

• Unrealistic Timelines and Budgets: Many companies attempted to implement ERP systems under tight deadlines, often resulting in insufficient testing and rushed deployments.
• Poor Change Management: Resistance to change and lack of user training were key drivers of failure in many cases.
• Inadequate Data Migration: Transferring data from legacy systems without proper checks often led to errors, misalignment, or corruption of data.
• Over-Customization and Complexity: Trying to make the ERP system fit every detail of a company’s unique processes instead of adapting existing processes to the system led to costly complications.
• Lack of Executive Support: Projects without buy-in from top management often suffered from lack of resources, poor decision-making, and weak leadership.

These failures emphasize the critical importance of proper planning, testing, stakeholder involvement, and realistic expectations in ERP implementations.