Apr

Failed ERP Implementations – Snatching Victory from the Jaws of Defeat

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You’ve probably heard of Nike; the world’s largest supplier of athletic apparel (most notably shoes), one of the most adorned brands by top athletes, and headquartered practically next door to us at ECI in Beaverton, OR. However, you may not have heard how Nike became the poster child for failed ERP implementations – and subsequently came out on top.

How to Not Implement ERP

While the rest of the world recognizes Nike for their trademark “swoosh” and high-quality sports related products, the global IT sector once recognized Nike more for their botched ERP software debacle. At the start of the new millennium in June of 2000, Nike’s ERP system made a huge mistake; it mistakenly created thousands of orders for a type of shoe that the market didn’t want while simultaneously failing to create thousands of orders for the infamous Air Jordans that the market desperately craved. This “glitch”, as it is so nonchalantly referred to by Nike executives, cost the athletic apparel giant $100 million in lost sales – as well as horrifically decreased stock value and even a slue of class-action lawsuits.

The problem that caused this supply chain mishap was simply a mixture of a “glitch” in the factory orders side of their ERP system combined with the fact that Nike’s planners were apparently not adequately trained enough to operate the system prior to Go-Live. But what was this “glitch”? Nike was using historical sales figures and putting them into their ERP system in the hope that the demand-planning software would produce accurate numbers for what to do in the future. This is the basic principle of supply chain and demand-planning management, and back then it seemed like a rational approach – especially with all the major software vendors claiming a “set it and forget it” strategy would work.

As it turns out, demand planning is a little more fickle than this simplified method of using historical data to predict the future. Nike discovered this the hard way, but how they bounced back is what makes this failed ERP implementation a success story.

How to Implement ERP

Fortunately, Nike had top employees running the departments involved with this ERP mistake. This wasn’t a brick wall failure; they had years of experience and a clear business plan in place, which meant this technological hiccup was merely a speed bump in the grand scheme of things. Nike stopped using the demand planner for short and medium range planning and begun using their regular ERP system functionality to schedule production around orders and invoices instead. They still use the data gained from the intelligent predictive software, but they also ensure that historical data actually makes sense for the future with well trained individuals. This ERP gaff that made the news only affected the giant sports apparel company for a few months, in large part thanks to Nike’s excellent business savvy and preparation.

At it’s core, this is the essence of proper ERP implementations; planning, planning, planning. Even in the face of adversity or failure, if you prepare adequately and consider as many positive and negative scenarios as possible then you will be able to address even the biggest hurdles.

Many ERP implementations over the years since it’s widespread adoption have “failed”, depending on your measurements of success and failure. Some ERP’s simply didn’t meet the expectations of those who purchased it; others were not compatible with the other systems that needed to be connected; and some were catastrophic mistakes resulting from software that just didn’t work. Some of these problems could have been solved with appropriate planning and foresight, while others needed to be addressed after the fact. These two factors should always be considered when attempting a new or major upgrade to an ERP implementation.

How to Avoid and/or Cope with a Failed ERP

Planning is everything. I may have said the word planning a few (many) times during this post. That’s because it is one of the most important facets of an ERP implementation. It’s where you figure out what your pain points are, what goals you are trying to achieve, which software best suits your industry, who your implementation partner and team is going to be, what customizations need to be made, and how the roll out will affect your overall day-to-day business – among many other things. Sometimes the planning phase is not given enough focus or even ignored completely; this can lead to disappointment at best, and complete ERP failure at worst. We at ECI created a short and informative graphic to lay out the basic steps of the planning phase of an ERP implementation and encourage you to take a look. Some of the steps may seem obvious, but you would be surprised by how many businesses skip one or more of these steps.

With all that being said about planning, sometimes an ERP implementation can take a turn for the worse regardless. Maybe there was an incompatibility glitch in the software that was not addressed early enough, or perhaps some act of nature shut down a server, or maybe it just doesn’t do everything you wanted it to (despite all the planning). The steps you take at this point are integral to moving forward with as little disruption to your business – and budget – as possible. This is where you would need to take a look at the situation and crunch some numbers.

  • Determine how much it would cost your company to keep the current ERP software as it is, taking into account the areas you are not happy with and how much they are effecting your bottom line.
  • Calculate the costs of “repairing” or further customizing the ERP software so the end result is closer to what you wanted or envisioned, taking into account the internal or external technical hours and dollars needed to get there. You would need to factor in ongoing support as well.
  • Weigh the benefits of starting from scratch with an entirely new ERP implementation, taking into consideration how much time and money you would save versus attempting to bandage the old system.

Every ERP situation is different, and there are more detailed nuances regarding the above that I did not get into. However, as daunting a task as it may seem, starting anew is often the best approach to a failed ERP implementation. That is for your company to decide – and plan for from the beginning.

Failed ERP implementations don’t need to occur provided you have planned accordingly. Ensure everyone involved has a clear understanding of the business objectives you want to achieve. Carefully collect the right people for your team, and keep them informed along the way. Include your end-users so they are ready and prepared for the potential changes (and benefits) of using this new technology – as well as pointing out early on what their needs are that may have been overlooked. Be sure to test, test, test – this is just as if not more important than plan, plan, plan.

When done right, an ERP implementation can improve your business processes, create a more productive and active workforce, and produce higher profits as well as lowering costs. All this hinges on a thorough and meticulously crafted ERP implementation plan, before you even begin looking for a new software. A common idiom in modern culture is “Hope for the Best, Plan for the Worst”. When it comes to ERP implementations that can make or break your business, we find a simple alteration is more apt; “Plan for the Best, Plan for the Worst”.

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