5 Notorious ERP Implementation Failures (& Why They Flopped)
Don't Rush the Process: Timelines are important, sure, but doing it right is MORE important. Don't sacrifice "right" for "fast".
Test, Test - This Thing On?: Ensure your system-wide testing process is bulletproof — or, like Nike, watch your stock drop 20%.
Communication is Key: Walk through every process you wish to replace with your vendor, and a member of your tech team. Be clear on what needs to stay, then flexible with the rest.
Don't Get Lazy: Even if you've implemented similar systems in the past, treat each project as an investigation; don't take anything for granted.
Greatest teacher, failure is.
Jedi Grandmaster, Yoda
We all know that we learn more from our failures than our successes. But the problem is, failures are pretty painful in the short term. Especially when you’re talking about an ERP implementation failure, which represents a lot of time and money down the drain.
One of the best ways to get the educational gain without the financial pain, is to learn from the failures of others. That’s why, in this article, I’m going to be looking at some of the biggest ERP implementation failures in history, and dissect why it is that they failed.
So, as you start thinking about which specific ERP software is best for you, let’s also take time to consider the big picture mistakes you want to avoid.
1. Hershey’s ERP Disaster
For the first example on the list, we’re going back a few years to the late 1990s. While the music and fashion was different, the mistakes Hershey made when implementing an ERP remain timeless.
What Happened
Hershey's implementation plan for their new ERP was to replace a long list of legacy systems that were being used across the company. Errors in the implementation process meant that the company wasn’t able to use old systems or new to process orders for weeks, resulting in a $100 million loss in sales.
When it comes to ERP implementation risks, this is pretty much worst-case scenario.
The failure caused the stock price to plummet, and it took many years for the company to recover.
What Caused It
The failure was a textbook case study of how not to run an ERP implementation. The process was required 48 months to complete, but Hershey forced the implementation team to get it done in 30, to be ready before Y2K. This simply wasn’t enough time.
This meant that many aspects of the transition were rushed, inadequate testing was undertaken, and limited training was provided to staff.
Who Was Responsible
The blame lies mainly at the feet of senior management, who pushed for an unrealistic deadline, without allocating additional resources to ensure that the right training was being undertaken to smooth the transition.
How It Could’ve Been Prevented
The whole debacle would have been avoided if it had been given a realistic time frame, with sufficient testing of the ERP software before going live. This would have ensured that the platform was fully operational and ready to receive orders — y’know, the $100 million of them that were waiting.
2. Nike's Supply Chain Software Fail
Next on our list is Nike, whose botched ERP implementation not only caused the company major issues, but also came with an eye-watering implementation cost of around $400 million.
In the words of Nike Chairman, President, and CEO, Phil Knight, “This is what you get for $400 million, huh?”
What Happened
Nike’s ERP implementation resulted in wildly inaccurate forecasting outputs. Part of the new system was designed to automate parts of the supply chain, including inventory and order management. In short, it didn’t work, resulting in excess inventory for certain items and insufficient inventory for others.
It cost $100 million in lost sales, and the resulting financial performance caused a 20% drop in Nike’s stock price.
What Caused It
The integration of the new ERP software with Nike's existing systems wasn’t tested adequately, leading to system-wide inaccuracies. The primary cause was a glitch in their demand-planning software, which failed to correctly forecast the demand for Nike’s vast range of products.
After the fact, it was clear that the project suffered from a lack of coordination and communication between the IT team and business units. There was also an underestimation of the complexity involved in integrating the new software into Nike’s existing ERP infrastructure.
Who Was Responsible
As this was mainly a technical issue, the IT and project management teams bore significant responsibility for insufficient testing and poor integration strategies. That’s particularly egregious given the large budget attributed to the project.
With that said, senior management also played a role by not ensuring adequate oversight of that budget, which should have been more than sufficient to get the job done right.
How It Could’ve Been Prevented
Comprehensive end-to-end testing (you’re probably noticing a theme here) of the new demand-planning software within the actual operational environment would have identified the issues before it went live.
Implementing a phased rollout, rather than a big-bang approach, would have allowed Nike to detect and resolve problems on a smaller scale.
Improved communication and coordination between the IT department and business units would also have gone a long way to identify and avoid these problems earlier.
3. Lidl's Abandoned ERP Project
Nike’s $400 million ERP implementation cost might seem huge, but Lidl’s abandoned ERP implementation cost them even more. After 7 years, the discount supermarket chain abandoned their ERP implementation project after spending over €500 million (US$545 million) on it.
Company: Lidl.
Mistake: Big.
What Happened
Lidl invested €500 million into an ERP project, hoping to enhance business processes and improve data consistency. But the project was abandoned because the new system couldn’t accommodate Lidl’s unique processes, which required them to customize the entire ERP system, from the ground up.
What Caused It
It’s essentially a case of round peg, square hole. Some seemingly simple aspects of Lidl’s operating procedures just weren’t compatible with the standard retail software of the ERP. For example, Lidl’s existing inventory management system used purchase prices, whereas the ERP used retail prices.
Lidl wasn’t prepared to make changes to their data processes, so the software needed to be customized.
This desire to keep their existing operational methods in place also caused problems with data migration, with Lidl’s insistence on maintaining its specific data structures, rather than adapting to the ERP’s model, creating further complications.
Who Was Responsible
Both Lidl’s management and the ERP vendor share onus for this failure. Lidl’s management was at fault for poor project oversight and not being flexible enough to adapt their processes to the new system. The ERP provider, on the other hand, failed to customize their software to meet Lidl’s specific needs adequately (or manage expectations on whether it was practically possible).
The project team also played a role by not effectively bridging the gap between the business requirements and the technical capabilities of the ERP system.
How It Could’ve Been Prevented
There needed to be a far more detailed analysis of the project before it started. The significant technical differences between Lidl’s processes and the data management used by the ERP provider should’ve been at least hinted at before they started.
There also should have been greater flexibility and willingness to adapt on Lidl’s part, so that their business processes could be aligned with the standardized procedures of the ERP system.
Implementing a more iterative and phased approach to the project would have allowed Lidl to identify and address issues progressively, rather than facing a massive setback after seven years.
Ensuring robust change management practices and involving all stakeholders in the decision-making process could have facilitated a smoother transition, successful project, and monetary waste that was less than the GDP of São Tomé and Príncipe.
4. Hewlett-Packard's Centralization Woes
Showing that ERP failures can hit any industry, I now move on to tech. Hewlett-Packard (HP) encountered a major ERP implementation failure during its attempt to centralize its North American order processing system. This project aimed to consolidate a number of legacy systems into a single ERP system.
Interestingly, this was the 35th time HP had conducted an implementation like this.
What Happened
It’s a lot of little things that added up. Not one or two of them would have created the problem, but the combination of them created a bigger problem than we expected.
The botched ERP implementation led to severe disruptions in HP's order fulfillment process, resulting in a $160 million loss in revenue. The failure caused significant delays in shipping and order processing, which strained customer relationships and impacted the company's reputation.
What Caused It
Bouchard put it down to three main categories of problem:
- Working within silos
- Data-integrity issues
- Increased demand for products during implementation
Who Was Responsible
This failure was as a result of many smaller problems adding up to create major disruption. In that instance, it’s the project management team who are likely the most responsible for the failure, as it’s their job to work through these problems and ensure there are sufficient resources to address them.
How It Could’ve Been Prevented
It comes down to a more thorough planning process, and ongoing review from the project management team. There’s every chance that the fact they had successfully completed 34 previous projects resulted in overconfidence, causing them to lose focus on the details of this particular implementation.
5. Revlon’s ERP Implementation Breakdown
In 2018, Revlon experienced a major ERP implementation failure during its attempt to modernize and integrate its operations across North America. As with many ERP projects, the aim was to consolidate Revlon’s various legacy systems into a single, streamlined platform to improve efficiency.
What Happened
The new ERP system caused major problems in the company’s supply chain, leaving their manufacturing processes short, and stopping them from being able to fill orders for a number of key customers. To try and make up for the delays and keep those customers happy, Revlon decided to spend even more money on expedited shipping, which further compounded the financial impact.
On top of the operational impact, Revlon was then delayed in announcing their financial results, which caused the stock to drop almost 7% in just 24 hours and caused shareholders to launch a lawsuit against the company. They finished Q4 of 2018 with a net loss of over $70 million.
What Caused It
To put it bluntly, the ERP solution didn’t work in the way that it was supposed to. The root cause of the problem, again, comes down to insufficient testing and validation before taking the system live.
The system was not properly integrated with Revlon’s existing processes, leading to data errors and operational breakdowns.
Who Was Responsible
The project management team was responsible for not ensuring adequate testing and validation of the system before go-live. A lengthy and comprehensive testing stage should be built into any ERP implementation project, so that these types of issues can be avoided before they occur.
The ERP provider, implementation team, and any external implementation partner being hired should have been able to foresee these potential problems, then insist on further testing and validation.
How It Could’ve Been Prevented
The simplest and most sensible solution would have been to trial the new technology in a smaller component of the business. A company the size of Revlon has many different business units that could have been used as a testing ground before taking the system live across North America.
And, of course, I need to throw shade at the project managers here, too. They should have set up a more thorough testing process to identify these problems before they occurred. At the very least, we know they didn’t get their success bonus that year…
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So, what does this all mean for your ERP implementation? Well, regardless of whether you’re looking for an ERP for a small business or a multinational corporation, there are common lessons that can be learned from these failures:
- Set Realistic Timelines - Avoid rushing the implementation process.
- Comprehensive Testing - Thoroughly test the system before going live.
- Effective Communication - Ensure clear coordination between all teams.
- Flexibility - Be willing to adapt business processes and workflows to fit the new system.
- Detailed Planning - Prioritize a meticulous project plan and data management strategy.
- Phased Rollouts - Implement the ERP system gradually to identify issues early.
- Invest in Training - Provide comprehensive training for all users.
- Involve Stakeholders - Get buy-in from all relevant stakeholders and manage change effectively.
By following these guidelines, you can give yourself the best chance for a smooth and successful ERP implementation.
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