Horror Stories of ERP after Implementation

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ERP Characteristics

ERP characteristics data integration and support for best practices can be beneficial for organizations that implement ERP. However, there are also ERP horror stories, examples of ERP implementation. This cost more than ever expected. This even endangered the continuity of organization that attempted to implement ERP

Horror Stories

A well known horror story concerns the large multinational pharmaceutical company Fox Meyer Drugs. Company had annual revenue of around five billion US$. This was one of the five largest companies in its industry in the US. In 1993, company decided to implement an ERP system. As the company experienced rapid growth and the existing system could not handle the increasing numbers of transactions. The project was carried out under high time pressure with the support of the company’s top management. The shop floor, however, did not support the project, for fear of the loss of jobs that might be a result of standardized and more efficient processes. After the ERP system went live under high pressure, it could only handle ten thousand of the required forty two thousand transactions per day. The failure to handle transactions eventually led to the bankruptcy of Fox Meter Drugs in 1996

The ERP implementation at Dell in the mid 1990s also did not progress according to plan. After two years of adaptations to the standard ERP system, CIO Jerry Gregoire decided to terminate the implementation project. In these years, Dell had introduced a revolutionary business model of direct distribution to customers via the Internet, without the dealer network that was customary in the industry at that time. ERP is based on the use of best practice process, while Dell developed company specific innovative processes. For Dell, EROP was therefore not the right strategic choice.

ERP horror stories also occur in Europe. Hagemeyer was a Dutch listed trading company. It was founded in 1900 by the Hagemeyer brothers. At the company’s centennial in 2000 the company changed direction. The company wanted to focus on business to business markets and supported the new strategic direction by worldwide ERP implementation. After initial successful go lives in various countries. The implementation in the largest market, the UK, did not work out. Insight into inventory positions was lacking because the information in the integrated ERP system was unreliable, which for a trading company of course in an untenable situations. The company’s revenue shrank with 34 percent in four years. The company had to write off at least one hundred million Euro of its ERP investment. In 2004 bankruptcy could only just be avoided. A new CEO was appointed. The company deviated from the new strategy. It was only in 2006 that it became profitable again. This was too late to guarantee the independent future of the company. In 2007 Hagemeyer was acquired by its long time competitor, the French company Rexel.

Hagemeyer is not unique in The Netherlands. A few examples of companies that also had to write off tens of millions of their ERP investments are Wessanen, KLM and Vopak. Office furniture manufacturer Samas had to issue extra shares in 2007 when its ERP implementations failed. On the the public offering of the new shares was announce, the Samas share lost twelve percent of its value.

In other countries ERP is not always successful either. In 2004 the Belgian company D’Ieteren had to accept a write off of forty five million Euro of the ERP investment of its subsidiary Avis