Enterprise Resource Planning

* After seven years and $0.5 billion implementing their ERP system, Dow Chemical abandoned the project as the hardware was not appropriate. Initially they chose a mainframe-based solution and then had to start a new project worth a client/server architecture. * After investing hundreds of millions of dollars in an ERP system, Mobile Europe were forced to shelve the project. This is because their merger partner were not happy with the implementation. * FoxMeyer Drug believed their ERP system was the main reason why their company went bankrupt. * Applied Materials were forced to abandon their ERP system when they realised the scope of the organizational changes and modifications to their business processes required.

What’s common in these examples is how an ERP implementation can cause great distress to an organisation. Instead of providing benefits, failed implementations come at a great cost both financially and commercially. In the case of FoxMeyer Drug, the company actually went bankrupt. This might be an extreme case, but it is not uncommon to hear companies spend millions of dollars trying to correct a were implementation.

In general, most problems are caused by the company trading to change their business practices to match that of the ERP system. The company should fully comprehend how the ERP system will impact their business processes and mitigate against the associated risk.

There can also be various technical challenges. In the case of Dow Chemical, and incorrect hardware platform was selected with devastating consequences.

Another category of risk is that the company may not have the resources required to do the implementation properly. As mentioned in previous articles, consulting companies are usually used to implement the ERP systems. These companies can be very expensive. Also, the project can drag out for many years. This places great financial strain on the company and its soaks at skilled personnel who are unable to perform their usual tasks.

It is not the intention of this article to put you off an ERP implementation because the benefits can be substantial. Rather, we just wanted to highlight some of the things which can go wrong so that you are prepared. Pre-warned is pre-armed!!