ERP System Development Process: Key Tips
The development and implementation of an enterprise resource planning (ERP) system is an expensive measure that can take months or even years to implement. And according to the report of Panorama Consulting Solutions 2018, every fifth such project ends in failure. Today, we look at the six most notorious failures of integration of ERP-systems, in order to understand what went wrong in each case and how it was possible to avoid the deplorable outcome.
Failure anatomy. In 2016, the largest supermarket chain in Australia, Woolworths, reported a record loss due to the transition to a new ERP system. The network giant lost about 2 billion Australian dollars due to what experts called the "loss of corporate memory".
And such experts must be confident in their future. So, in the example with Woolworths, people decided to quit because they were not sure whether they would have a job in a year or not and would need them in principle after the implementation of ERP. Imagine yourself in their place: you create a system that will do your work - automatically, faster and more accurately. What is your main task? To find a new job, and quickly!
Failure anatomy. In 2012, the Washington State Council of Community and Technical Colleges hired Ciber to deploy PeopleSoft ERP in 34 community colleges. The project was allocated $ 100 million (which was collected from students as a 2% tax) and it was planned that it would be fully implemented by 2015.
But by 2015, only a test launch of the system at three colleges (Tacoma, Spokane and Spokane Falls) was possible, and this was a complete failure. In addition to standard problems with bugs and glitches, it turned out that business processes in schools were not standardized. Because of this, the cost of the project has increased to $ 115 million, and the duration of its implementation was delayed until 2020. And the story would have ended on this, if not the Ciber bankruptcy.
Tip. From this example, you can make three recommendations for companies that implement ERP-systems in their business:
Before the introduction of the new ERP system, problems related to inaccuracy of data were solved on the spot or simply ignored. For example, back in 2012, Target had serious problems with cargo transportation:
Tip. Target experience says that before you run a project to develop and implement ERP, you need to solve the old problems of your business. And this is especially important if they concern to processes related to ERP processes.
In order not to go on the path of Target, before starting the development, think about such questions:
It’s unclear how a “demo” database got into the network. Chris Vickery believes that PG&E failed to protect the system during deployment or made negligence in granting access to information, which was used by hackers or simply curious individuals.
Tip. The history of the leakage of the PG&E database teaches us to treat production data responsibly. This is a valuable resource, the protection of which must be approached with the utmost responsibility, even if you transfer it to partners or service providers. In the case of PG&E, the best solution would be to use “fake” data (as they claimed), since transferring it to third parties does not pose any threat to you and your customers.
Failure anatomy. In February 2000, Nike shares collapsed by 20%, and the company lost 100 million lost profits due to an error in the ERP platform forecasting system developed by i2 Technologies. Nike paid $ 400 million for this software.
The software company analyzed the software, found no errors, and sued Nike. Later it turned out that Nike’s management was not sufficiently trained in how to use the system, because of which an incorrect forecast was created at the level of factory orders. Then, according to Roland Wolfram, Nike's vice president of global operations and technology (2004), this “ripple” of inaccuracies spread to the supply chain and caused a large “wave” of inaccuracies.
Tip. From Nike's experience, you need to get two things:
Tip. HP could have avoided most of the problems if they tried a new system on a small scale and only after that all services and departments were transferred to it.