Any time a business undergoes a transformation, there’s opportunity for major growth. Yet, the opposite could also hold true if the rollout isn’t managed correctly. This is especially the case with ERP implementations.
While most ERP projects are designed to help companies improve efficiencies, reduce costs and meet customer expectations, there are plenty of projects that don’t exactly go as planned. When this happens, the consequences can be serious and long-term.
Are you considering a new ERP system? If so, it helps to take a cue from others who have been there. Today, we’re sharing a few ERP success and failure stories to prepare you for the journey ahead. Read on to learn the steps to take, and the ones to avoid.
How to Differentiate Between ERP Success and Failure
The 2020 ERP Report
This report summarizes our independent research into organizations' selection and implementation decisions and their project results.
Yet, when we talk about a successful ERP project, what do we mean? In many cases, if a project is on-time and on-budget, that’s enough to consider it successful, but that isn’t the case with ERP. To measure true ERP ROI, it’s important to define and quantify how your ERP project team will gauge success in terms of specific ERP business benefits.
In other words, what outcomes do you expect to achieve by moving to ERP? For instance, do you want to reduce overhead and lower inventory costs? What about improving supply chain visibility or quickening your time to market?
It’s important to set key performance indicators (KPIs) at the outset and share them with key stakeholders. This way, you can track results and see if your project is truly delivering the value you expect.
ERP Failure Stories
While no one likes to dwell on the negative, ERP failure stories can provide important insights into the challenges and obstacles that many organizations face when implementing a new enterprise-wide software solution.
To that end, let’s take a look at three recent ERP projects that failed to deliver the ROI the client expected, resulting in a high-profile failure that led to reputational damage, financial setbacks and ERP lawsuits.
As a result of multiple business acquisitions and brewing industry consolidation, MillerCoors was running seven unique instances of SAP ERP by 2014. Amid the chaos, the newly merged company hired an IT services firm to roll out a more unified structure designed to serve the entire enterprise.
However, what should have been a seamless transition was anything but. The initial rollout resulted in several issues, including:
- Eight critical severity defects
- 47 high-severity defects
- Thousands of other issues and problems
Three years later, in March 2017, the project had failed so badly that MillerCoors sued the firm for $100 million. The claim? The firm hadn’t allocated the proper resources to the project and made promises it couldn’t keep.
In response, the firm countersued, claiming that internal mismanagement issues led to the project’s downfall. Later, it was revealed that the ERP contracts, which were released with the legal documents, were loosely based on a pre-existing “general services” agreement that was poorly defined.
A few takeaways and lessons learned from this ERP failure include:
- Always get the specific details of your ERP contract in writing
- Ensure the IT firm you partner with has dedicated resources to assign to your project
- Ensure internal management buy-in and participation in an ERP rollout
When nationwide grocery chain Lidl partnered with SAP, the two German giants should have found great success from the start. However, that wasn’t the case.
In 2011, the two teams started working together to transition Lidl away from its legacy systems and onto a more unified ERP platform. Yet, by 2018 the project was so far gone that Lidl scrapped it altogether.
Though there were many issues that led to the fallout, one challenge was Lidl’s unique pricing structure. While most companies base their inventory systems on the retail price they charge for their goods, Lidl has always taken a different approach. They use the price they pay for the goods as their metric.
This single quirk required a customized SAP solution, which triggered a domino effect of implementation issues. In addition, there were issues with executive turnover in Lidl’s IT department, as well as challenges with the consultancy tasked with overseeing the implementation.
With this failure, we learn that:
- It’s important to relay ERP customizations at the very beginning of a project
- Clients and ERP providers should set expectations early on so there are no surprises
- IT leaders play a major role in a successful ERP project and should support the company’s goals
ERP Success Stories
We can’t include a list of high-profile failures without mentioning some ERP successes! Here are a few to inspire and encourage you as you begin your own implementation.
By any measure, LG is an industry giant. With nearly 115 subsidiaries and more than 82,000 employees working in 40 countries, the company needed a solution to consolidate and centralize its HR operations.
When LG attempted to unify using legacy systems, the challenges were enormous. Issues ranged from sky-high maintenance costs to inefficient decision making, manual processes and more. An ERP platform was in order, and Oracle fit the bill.
Out of the gate, the ERP solution had to be robust enough to solve all of LG’s existing pain points, which were mostly attributed to its location-specific programs and processes. A few top issues included:
- Reporting obstacles at the top level
- A lack of transparency and automation
- A disengaged workforce
- Few, localized resources for employee development
- Decision making difficulties
The five-year project was spread out into five planned phases. At the completion, LG was able to achieve the following benefits, among others:
- Expansive data hosting
- Simple scalability
- Cost savings
- Seamless data migration
- Centralized access and control
- Real-time reporting
- Better-informed decision making
From this ERP “win”, we can take away the following ERP implementation success factors:
- Always express your operational needs at the start of an ERP project, however expansive they might be
- Set clear objectives at the beginning
- Don’t rush an ERP implementation but stagger into phases if feasible
B2B Product Supply Company
We’ll wrap up this list of ERP successes with one of our own. One of our past engagements involved helping a B2B Product Supply Company navigate from a manual, paper-based setup to an automated ERP solution.
Before we came on board, the company relied on Microsoft Excel and Order Tracker to handle its ERP requirements. Although the setup was rudimentary, the company was experiencing impressive growth. To meet customer expectations and meet sales demand, it was time for a modern upgrade.
Our ERP consulting firm was chosen to help lead this company into a successful ERP implementation. In the initial stages, we used our ERP selection methodology to determine which ERP software to select. In addition, we performed business process reengineering to accommodate the new setup and help the company improve operational efficiencies.
A few of the lessons learned during this project include:
- It’s critical to define goals and obstacles up-front (e.g. current processes, pain points, ERP business requirements)
- You should evaluate ERP vendors carefully and weigh their offerings against your business needs
A new ERP system requires changes to your existing business processes and workflows
Learn from These ERP Success and Failure Stories
When you’re in the initial stages of planning an ERP implementation, the road ahead might seem riddled with potholes. Yet, it doesn’t have to be this way. When you learn from these ERP success and failure stories, you can ensure that your project achieves the business goals you expect.
While you might experience hiccups along the way, a firm foundation sets the stage for a profitable, rewarding journey. Request a free consultation below to learn how to successfully select and implement ERP software.