3 Companies With ERP Success and 3 That Failed

¶ … ERP Fail and Succeed

In order to increase its productivity and compete favorably, any company has to implement an elaborate Enterprise Resource Planning (ERP) system. Failure to do this will lead into a weak company without high possibilities of attained stipulated short-term and long-term goals. By definition, an ERP system helps consolidate enterprise information and control all business processes in an organization. Implementing an ERP successfully is not that simple. Its success or failure is depended on a variety of factors hence starting the process without an elaborate plan makes you vulnerable to a great number of snares along the way (Vinatoru & Calota, 2014).

Since an ERP focuses on integration and management, the company stands a better chance at making resource usage and distribution more elaborate and timely. This will in turn increase the company's reputation, and hence, competitive edge in the market. Despite the fact this is a plausible reason as to why a company should adopt an ERP solution, most of the companies that use the system made the move due to a variety of other different reasons.

These include:

1. Business needs like the need to cut down on inventory costs, improve on order management and establish a transparent pricing policy for the sake of clients and employees

2. Technical issues like the need for one system that will handle the entire business process and replace multiple systems that have proven ineffective at the job.

3. A mix of the above mentioned factors whose result is constraining the company's profit margins.

With an ERP, a company can store its information and automate all its functional domains. This, however, does not mean that all ERP implementations are successful.

Causes of ERP Failure

According to statistics more than half of all launched ERP projects fail. This is a concerning 60% of failures in all tested implementations. The fact that failure is relative could however make things look better. A good example of a number of criteria options that could define failure include:

Functional Requirement Failures:

This will happen when the client does not find the functionalities needed in the system. This could lead to re-engineering or change of the system as a whole. Regardless of the solution taken, this will lead to an increase in cost, drop in quality and increased time to delivery. To avoid this, developers ought to investigate all the requirements adequately before implementing the solution. Using prototyping tools like use-cases and JAD would reduce on errors (Ghosh, 2012).

Management's Divided Attention:

Even though the management is the one that solicits for the ERP management, there are instances where their lack of dedication leads to the project's failure. In most cases, the managers are not aware of the project's scope hence they do not know how much they are subscribing to. Without enough commitment, the ERP is definitely bound to fail. In most cases, the top-level managers will delegate responsibilities to the low-level managers. Even though this is a management strategy, it will more often than not slow down the implementation process. The most success will only be realized if a top-level manager willing to commit to its success (Ghosh, 2012) spearheads the project.

Insufficient Training:

Every ERP user must be adequately trained before rolling out the system. They need to be aware of its capabilities and understand how to leverage these powers to make their work easier. This will ensure that each employee understands his or her responsibility in working well and delivering in a timely manner since the ERP focuses on the success of each individual for everything to run efficiently (Ghosh, 2012).

Improper Package Selection:

In the modern day market, finding an ERP package in the market is not hard. You could either purchase a complete system of the shelf or buy packages to constitute your own system. Even though this is cheaper, you stand at risk of choosing a package that does not meet all your needs as a company. This could be due to lack of technical information or a mere misunderstanding of your requirements (Ghosh, 2012).

Underestimations:

This applies to the time and effort needed to bring the project to completion. If the estimated completion date is passed, the business might have to incur an extra cost or perhaps loose on productivity and customer trust since things will not be going as planned. It is better to do an overestimation than an underestimation (Ghosh, 2012).

Incompatibility:

An ERP that does not fit to your current business process is worthless. It will either force the company to change its way of operation or cause gaps that could lead to poor synchrony in tasks and work processes. This results from assumptions and a poor understanding of the business' core operations (Ghosh, 2012).

Companies Succeeding in Implementing ERPs

Alcoa

Alcoa is an aluminum company founded in the 1880s. It is currently the world's biggest electrolytic aluminum, aluminum oxide and related products producer. It is also an active participant in aluminum recycling and reuse. Its products include aluminum wheels, body sheets, household membranes etc. And are used in aerospace, packaging, building and the commercial transport or industrial plans (Profile, 2011)

The company started its first ERP implementation efforts in 2001. Currently, it runs a couple of successful modules with the most notable being in its financial, Order to Cash (OTC), Requisition to Pay (RTP) and human resource management departments. Since it is a worldwide company, implementing the system took quite some time and effort. The company's first 50 branches in Europe reported increases in efficiency and productivity once the system was properly introduced and in use (Profile, 2011). The company now runs the ERP in other countries like North America, Australia, Asia and South America.

Lesson Learnt

Correct implementation of ERP is crucial for success in business. The OTC system at Alcoa has been very successful because ERP management has been given priority by the company. Without it, the company could not have witnessed success in all the realms that the company operates in.

How to do it better

Despite the fact the ERP implementation at Alcoa has been characterized by notable success, the company should have accelerated its implementation process to ensure that the duration taken to get the returns was minimized.

Warning Signs

For Alcoa, the correct use of ERP has allowed it to manage its platforms such that any possible warnings relating to failures have been covered up.

Capital One Financial Corp.

This is the first capital finance company on the list. Its adoption began in 1995 when it ventured into the credit card business. It had to adopt a totally different management system since it sought to implement a new philosophy, the philosophy Based on Information Strategy.

Currently, Capital One Financial Corp. is among America's top ten credit card companies. In 2004, it had over 15,000 employees and a turnover of $1.5 billion. Its ERP implementation took a new turn in 2000 when it started implementing the PeopleSoft ERP. It uses modules like financial management modules, human resource, supply chain and asset management modules (Profile, 2011).

Its implementation was in phases. Its first leg, however, only became stable after it began the second leg implementation. The goal behind all its implementations is creating a new solution that will streamline operations and handle its client base more effectively. By doing this, the company increases on customer satisfaction hence drawing more people to itself.

Lesson Learnt

ERP execution through financial strategies and PeopleSoft ERP led to positive growth in Capital One Financial Corp. It is through these strategies that the company emerged to be the leading credit card companies. Therefore, such strategies are necessary for business growth.

How to do it better

It took a long time for PeopleSoft ERP to be implemented. Moreover, the company faced a delay in moving to the second phase in the implementation. This needs to be avoided and certainly can be avoided with proper planning and focus.

Warning Signs

For a company that has successfully implemented the ERP strategy, it faced delay signs indicating that the process requires structured ERP for success.

Colgate Palmolive

Colgate-palm is an international consumer company based in New York USA and reaches out to over 200 countries with a total of 40,000 employees on its inventory. The company focuses on oral care, household care and personal care products. With a couple of reputable products like Colgate, Ajax and Protex, Colgate-palm must be benefiting from its elaborate ERP solution.

Colgate uses a SAP ERP system with special attention to a couple of modules that would strengthen its existing business plan. These include a supplies chain module to manage its vast chain stores, a human resource module for its huge employee's base and a financial management module to take care of its finances. A notable inclusion of a self-service module shows how dedication could make an ERP effective without adding on the number of in-house employees (Profile, 2011).

Its ERP implementation efforts date back to 1996. Up to date, it has already implemented up to two upgrades with the current system running on a SAP R. 3 series. Moreover, the company has a plan to do a mySAP senior upgrade and an expansion on its SAP portal. Its SAP business warehouse has over 6TB worth of data and currently has over 15000 instances of SERP use (Profile, 2011).

Lesson Learnt

Establishment of supply chain module using ERP by Colgate has played a crucial part in the making the company successful among the competitors. Therefore the ERP plan acts as an enabler for the success of Colgate.

How to do it better

Colgate should have mobilized more resources in the distribution chain to ensure that the already implemented ERP strategies get maximum utilization in the company. That way, the company could have enjoyed more benefits.

Warning Signs

The self-service acted as an indicator that the company could get better returns without adding the in-house employees. This acted as a good sign towards implementation of ERP.

Failed Companies Case Studies

Lumber Liquidators

This is a huge institution with over 225 stores and an estimate $650 million in revenue for the year 2012. The company is the top hardwood floor retailer in the whole of United States. Despite such a catalog, the company still failed in implementing an ERP system it chose to try.

According to a press release, mishandling of an implemented ERP led to a 45% drop in productivity in comparison to 2011. The company admits that the ERP adequately meets all its business needs only that it had not taken enough time to prepare for it. It relates its failure to lack of adequate employee training before the ERP was rolled out (Ghosh, 2012).

Lesson Learnt

Improper handling of ERP strategies leads to failure. This is what Lumber Liquidators learnt in 2011. However, the company did admit that the ERP adequately meets all its business needs.

How to do it better

The company should have offered more emphasis on ERP implementation to avoid the drop in productivity. This emphasis should have been directed towards proper planning and also proper allocation of resources.

Warning Signs

The drop in productivity in 2011 acted as strong indicators that the company was about to face major failures. Therefore, this forced the company to take actions in the right direction.

HP

In 2001, HP was rightfully the second biggest computer manufacturer in the world. It was also the market leader in desktop computers, peripherals and servers. While its computing products accounted for over 80% of its sales, the company also had a general electronics, telecommunications and measurement systems line (ICMR, 2005).

It's reasonable pricing and undisputable quality made it the ideal company. HP had a decentralized marketing and manufacture line on each of its products. In 1990s, the electronics boom forced it to revisit its business plan to keep up with the competition and demand. It kept its low-price approach but swapped its plan to cater for mass production.

This increase in demand throughout prompted the adoption of a SAP R/3 as a replacement to its existing legacy systems (ICMR, 2005). However, since it was ill prepared and was not ready to balance the demand with changes in infrastructure, the adoption of the new ERP system did not sit well with its production.

Industry Standard Server (ISS) is one of the biggest branches of HP. Its migration to the ERP was completed in May 2004. This migration would be the 35th and in line with HP's Business Process Architecture project. In this project, HP sought to cut down on its 35 ERP systems and remain with a maximum of four ERP code systems worldwide whilst reducing its applications from 3,500 to 1,500.

In this approach, HP wanted to use a business process model into combining its IT branch with its business objectives. This would allow it to implement an autonomous order management system. Even though the company reduced its order management systems to an acceptable 7, it was still short of its target and sought to increase on its efficiency by trying a SAP Fusion Order Management system (ICMR, 2005).

Lesson Learnt

ERP is necessary in handling increasing demand of goods and services. When HP faced increased demands, it adopted the ERP measures that helped it to reach more customers with ease. Before that, it faced a lot of challenges which made them adopt these new measures.

How to do it better

Since HP has a variety of selling products, the company could have used ERP for all its products to maximize the benefits enjoyed since it also has a large customer base.

Warning Signs

HP was short of its target and sought to increase on its efficiency by trying a SAP Fusion Order Management system. This reduction indicated that some improvements on ERP were necessary.

Hershey

When its attempt to implement an ERP went sour, Hershey saw the worst sections of its business ever. The attempt led to an operational paralysis that led to a 19% cut in quarterly profits and an astonishing 8% drop in stock prices.

Due to the seriousness of this fail, I have used Hershey's ERP adoption failure as a case study on how to implement an effective ERP system and how you can mitigate any exposure to damages and related loses. Here are the facts about Hershey's ERP implementation:

• Hershey sought to improve its legacy IT systems into an integrated ERP system in 1996

• It decided to work with the R13 ERP software from SAP, a Manugistic's chain management system and a Seibel customer relationship solution.

• Despite the desired 48-month implementation forecast, Hershey insisted on a 30-month duration so as to roll out the system with its Y2K solution

• The go live period Hershey insisted on not only violated the comfortable time frame but also coincided with its busiest time of the year (Pemeco, n.d.).

Choosing a good ERP system and designing a change schedule to go with it is a tricky activity. It needs a lot of research and preparation regardless of how massive or small your company could be. Approaching an ERP implementation with a lot of care will ensure that you do not go through the simplest or the most hurtful failures (Donovan, 2011).