A Recipe and Ingredients for ERP Failure
Introduction
An Enterprise Resource Planning (ERP) system covers the techniques and concepts employed for the integrated management of businesses as a whole from the viewpoint of effective use of management resources, to improve the efficiency of an enterprise. They have many conveniences either straight and oblique. The direct avails include improved efficiency, message integration for better decision making, faster response period to customer queries etc. The oblique benefits include better corporate image, improved customer goodwill, customer satisfaction, and so on.
Many organizations and businesses in the world today as part of their strategic evolution plan, advocate for ERP solutions which would assist to re-engineer their business processes in order to accomplish their long-term goals.
The ERP market is quite competitive and fast growing market, which is attributed to three primary factors:
a)ERP vendors are chronic to inflate market presence by attempting new petitions such as afford fetter management (SCM), sales coerce automation, client relationship management (CRM) and people resource.
b)To sustain their fast growth, ERP vendors sell more copyrights into their installed base.
c)While ERP originated in the manufacturing mall, ERP usage has spread to nearly each type of undertaking including retail, utilities, the public sector and healthcare unions.
Among the industry players include SAP (Systeme Anwendungen Produkte), Oracle, QAD, SSA, Jenzabar, Datatel, Peoplesoft, Baan, JD Edwards, Scala, Navision, Sungard just to say but a few. Even within themselves they categorise each other into High-end and low-end range. In Kenya a cross segment of companies are absolutely on the warpath of enterprise or planning to invest in an ERP business solution. The future ambition see fierce combat for market share resorting to mergers and gain for strategic and competitive advantage.
There is many hype when the vendors are out to migrate their products, and will all sell and tell you about their success stories and how you will leapfrog into your vision. They not acquaint you of any failures of such ERP projects, and there seems to be no care paid to lessons learnt from the prominent FoxMeyer Corporation scenario, which lead to its bankruptcy and the lengthy valid battles in the courtrooms with their consultants thereafter. ��My basic conviction is that you don��t make decisions because they are cozy, you don��t make them because they are cheap, you don��t make them because they are fashionable but you make them because they are right��- Theordore Hesburgh.
If not properly blueprinted for,
tory burch walker fringe boots, the investment may drive you out of business. The epicenter for the problems that rock the corporate globe as far as ERP alternatively in general IT project failure is concerned has remained the same over the years.
The emulating examples are typical of the projects that failed from statistics available from The Standish team CHAOS database
��The Hershey foods ERP system implementation failure lead to massive delivery problems and wastage of 27% market
��The FoxMeyer narcotic ERP system implementation failure guide to the collapse of the entire company
��The IRS project on taxpayer compliance took over a decade to complete and cost the nation unanticipated $50 billion
��The Oregon Department of Motor Vehicle conversion to new software took eight years to complete and public outcry finally annihilated the whole project
��State of Florida welfare system was plagued with many computational errors and $260 million in overpayments
��AMR Corp, Budget Rent A Car, Hiltons Corporation, Marriott �� confirm�� project crumbled having spend over $125 million over 4 years
��Snap-On Inc project to convert to a new order-entry costed the tools enterprise $50 million in lost sales for the 1st half of 1998
��Greyhound Lines Inc. ��Trips�� reservation and bus-dispatch system�� failed having spent $6 million
��Norfolk Southern Corp. ��Systems integration with merger target Consolidated Rail Corp��. failed having lost more than $113 million in business
��Oxford Health Plans Inc. ��New billing and claims-processing system based on Unix International and Oracle Corp. databases�� resulted in hordes of doctors and patients petulant almost disbursement delays and peccadilloes.
��Universal Oil Products Project �� Software for estimating project costs and figuring engineering specifications�� resulted in unusable systems
IT projects regularly fall short �C and quite few are relinquished fully. Many IT failures have to do with perceptions and expectations rather than absolute bankruptcy of purpose. Most of the so called failures are better classified as ��discouraging successes�� accidents wherein the major intention is accomplished, but not without a nice handle of frustration and inefficiency �C and a acid taste in the jaws of numerous users.
Project risks
The FoxMeyer Corporation Delta III project had the following project risks
i)Environmental- the management had little or no control. They depended 100% on consultants and vendors who dimmed them from gaining control. The focus of the project dramatically changed prompting the projects costs to escalate
ii)Execution- the project lacked skilled and educated workers. FoxMeyer did not have the required skills in-house and was depending on Andersen consulting to appliance SAP R/3 and integrate it with an automated warehouse system from Pinnacle. Over 50 consultants were ignorant and their turnover was high.
iii)Scope- FoxMeyer was an early adopter of SAP R/3. After the project began,
Hunter Limited Edition Leather Wellies, FoxMeyer signed a large contract to supply campus health system consortium (UHC). This event exacerbated the need for the unprecedented volume of transactions on their HP waiters which they could not cope
iv)Customer command �C the commitment from the altitude management and users. This was not the circumstance fhardly everme of the senior management. There was a morale problem amid some of its storage workmen. The peak warehouse automation integrated with SAP R/3 threatened their jobs. With the closing of the three warehouses, the conversion to the first automated warehouse was a catastrophe. Disgruntled workmen marred inventory, and orders were not filled, and mistakes occurred as the new system skirmished with volumes of transactions
Project Factors
Factors namely property apt escalation of costs contain but not limited to
a)Project factors- there was a knowledge that persisted investment could produce a great payoff. FoxMeyer anticipated a saving of $40 million annually.
b)Psychological factors- the consultants had prior history of success that encouraged them to continue the project. ��we delivered one effective system, fair as we have for thousands of additional clients�� (Computergram worldwide 1998). This established the impression that the project would radically improve the company��s critical actions. FoxMeyer morsel extra that what it could chew but embarking on a hasty trace project with unskilled staff.
c)Social factors- the consulting company did not externally defend the project. De-escalating the project via abandonment would have averaged bad publicity
d)Organization factors-The advocates for the project later were forced to resign because of the delays in realizing the projected savings. A change in management was needed in order to control the increasing costs �C which was also late.
Recipe for failure
��When the treatment is not controlling the scope of the project particularly when you expect the consultant to provide a sorcery bullet, is a recipe for failure.
��Changing the sails in midstream, by definite deliverables expected among a third of the documented times and volumes is a recipe for failure.
��By engaging in other corporate projects competing for the poor finances midway,
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��By not having proper alteration management policies and programs, is a recipe for failure
��By going for consultants without prior experience or ERP solutions in which you are the only company within your industry, could be a recipe for failure
��If you do not have a learning convey inscribed in the consulting contract, is a recipe for failure
��If the vendor does not comprehend your business, is a recipe for failure
��If the project has no clear periods, deliverables and quality control components, is a recipe for failure
��If you have not re-engineered your business processes to be compatible with the capabilities of the technology, is a recipe for failure
��Having multiple vendors within the one project, is a recipe for failure
��Not having an external project audit council, is a recipe for failure
��Not having a clear end-user exercising procedure to transfer capabilities to workers,
five finger socks, is a recipe for failure
��Having the project escape as a ��one-man show��, is a recipe for failure
��Having the management over- committed (excessively intent, reminding unrealistic deadlines), is recipe for failure
��Team membership not creature accountable for deeds, is recipe for failure
��Low morale within group, is recipe for failure
��Unclear statement of prerequisite, is a recipe for failure
��In no standard implementation theory use, is a recipe for failure
��Inadequate requirements definition (new processes are not adequately
addressed), is a recipe for failure
��Poor ERP package selection (the package does not residence the basic
business functions of the consumer), is a recipe for failure
��Inadequate resources employed by the client, is a recipe for failure
��Internal resistance to changing the 'old' processes, is a recipe for failure
��A needy eligible between the software and users procedures, is a recipe for failure
��A base up approximate is employed (the process is not outlooked as a top
management prerogative), is a recipe for failure
��The client does not properly address and plan for the expenses comprised, is a recipe for failure
��If anybody functional gaps have not been identified (GAP analysis), is a recipe as failure
��If the implementation does not take into list future scientific convergence, is a recipe for failure
Conclusion
The courses learnt from the failed ERP projects should be a wake-up shriek for enterprises currently in ERP projects or contemplating to go that direction. The lessons learnt tin as well,
tory burch wallets, serve as a harbinger for failure or bankruptcy at serving as the jetty for launching the rocket to propel you out of the business orbit. The experiences highlighted invest a litmus test ashore how to dodge ERP failure. There is 1 terminal appearance to be thought in any degree of project failure. All success is rooted in either fortune or failure. If you begin with luck, you learn nothing but arrogance. However, whether you begin with failure and learn to evaluate it, you too learn to succeed. Failure begets knowledge. Out of knowledge you acquisition knowledge, and it is with wisdom that you can convert truly successful.
References
Alexis Leon, ��ERP Demystified��, 2000
Judy E Scott, ��The FoxMeyer Drugs Bankruptcy��, 2004
Kim watch ��Future Watch��, 2000
Lloyd Rain �� IT Project Failures��, 2005
Computerworld ��Top 10 Corporate Information Technology Failures��, 2000
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