Enterprise Resource Planning Implementation Success and Failure Stories

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Today we would look into the case studies of Hershey, Cadbury, and Nike. Also, we would theoretically reveal what it takes to be a better than an average Consultant. Also, we would have a sneak peek on Waterfall, Agile and Bi-Model strategies.

What is ERP and Its Importance?

What is SAP?

Enterprise resource planning (ERP) is Business Process Management software that allows a company to use a system of integrated applications to manage the business and automate back office functions related to services, technologies and human resources.
ERP is used by a company to store and manage data from all stages of the business including:

  • Production planning, cost and
  • Development
  • Manufacturing
  • Marketing and Sales
  • Inventory Management
  • Shipping and Payment

Why is ERP Essential for Business?

  • ERP provides an integrated real-time view of core business process, using a common database maintained by a Database Management System
  • ERP Systems helps track business resources –cash, raw materials, production capacity and the Status of Business commitments: Orders, Purchase Orders
  • It facilitates data-share across various departments (Manufacturing, Purchasing, Sales, Accounting etc.)
  • Helps seamless Integration of Information flow between all business functions, and manages Connections to outside Stakeholders

Case 1: Success Story – ERP Implementation

  • Cadbury was on a vertical growth and the existing systems could not keep pace with the fast growth of the company
  • ERP added efficiency and matched the ever increasing fast-paced growth
  • ERP Implementation brought in a new Warehouse Management System and introduces a structure to branch offices and the depots
  • The initial implementation took time -> the successive implementation took lesser time -> Less cost ->huge advantage in saving cost (in the implementation phase itself)
  • The reaction from competition does not matter -> It’s not a change that was advertised to the market. This is an internal process restructuring
  • The company also has built in a robust regular feedback system to monitor the changes and check if they go according to the initial plan. The entire implementation is cross-functional and hence it is important that there is a high increase in the efficiency
  • The ERP vendor selection -> helped the process occur in a streamlined Fashion -> avoided any possible chances of hiccups during the initial implementation phase
  • The system has also been deployed up to the vendors. They have a portal called vendor connect where they can see their inventory movement and make plans accordingly
  • It was considered as low cost and high result implementation which by itself highlights the success and benefits Sweet Implementation. Isn’t it? 🙂

 

 

Case 2: Failure Story – ERP Implementation

It is not always a fairy tale ending. After all, everything is not a bed of roses. Let us take another Chocolate company and see what they did wrong. Comparing similar industries makes thing easier.

  • The management of Hershey approved a project named Enterprise21 in late 1996
  • Hershey zeroed down SAPs R/3 ERP software, Manugistics SCM software, and Seibel’s CRM software. IBM Global Services was selected as the Integration Partner
  • Overall project cost was $10 Million USD
  • Recommended time for the Project was 4 years and Hershey demanded it to be completed in 2.5 years
  • The idea was to go Big Bang rather than in Phases (like Rel 1, Rel 2 or Go Live 1, Go Live 2)

What went wrong?

  • Underestimation of implementation complexity and tight schedule
  • Big Bang Approach
  • No system testing in name of cost saving. Eventually leading failure to implement the ERP software on time, costing the company $ 150 million
  • No proper planning: Cutovers and Go-Live were scheduled in Hershey’s busiest business periods

Key Learnings

  • ERP Implementation Project should not be forced into an Unrealistic timeline
  • Testing Phases are Safety Valves and should not be compromised
  • Never Plan cutover and Go live at busiest seasons. By scheduling it in at off peak hours the company gives itself more slack time to iron out undetected system issues
  • Even in best case implementation scenarios, companies should still expect steep learning curves and operational performance dips
  • In many cases, its is even advisable to reduce orders in and around the cutover period. It is aimed at minimizing exposure to damage caused by potentially undetected errors and less than perfectly trainer user

Case 3: Turning Failure into Success – Story at Nike

Reasons why it was not woking?

  • Third party integration
  • Inexperienced consultants
  • Customization
  • Forecast to far
  • Pilot test
  • Inadequate Information
  • Changing Market Conditions
  • Compliance Issues

How they made it work?

  • Define a business Goal
  • Re-engineer Process
  • Keep an Eye on the price
  • Just Do it Over
  • Implementation is a complex scenario
  • Evaluate Pros and Cos
  • Adaptability
  • The importance of Pilot test
  • Continuous Assesment

If you Fail to Plan, You Plan to Fail

If you fail to Plan, You plan to Fail

What does it take to be a good consultant?

  • Functional/Technical Consultant – both should know the other part + must be able to understand business
  • Consultants are there to lead NOT to be led by clients
  • Clients can explain the business. Consultants should understand but redesign (if needed) so that it is better
  • ERP implementation ->  Has 3 components: i) strategy ii) software iii) hardware plan  ……. full life cycle of data
  • How to load master data, how to interface regularly with the non-sap systems and finally how to archive
  • Traditional Waterfall method and New Agile method. The one thing which you may not know is importance of data load

Agile Vs Waterfall

Agile Vs Waterfall

Read moreA Quick Overview of Agile Methodologies in SAP

Get the below answers (to be a good consultant)

  • What are the key systems?
  • What affect do they have on key processes?
  • Which locations are impacted?
  • Which organizations and roles are responsible?
  • What data is affected?
  • Is there any additional technology required?
  • Which business capabilities are affected?
  • High Business Criticality
  • High IT Alignment

You must know all Business Processes that have high criticality and all Applications that are supporting critical business processes for the environment you are working in.Or at least know the person whom you can reach out to for the same in the case of issues.

A Consultants  Approach

* It should be in Iteration and Continual Improvement Process.

Bimodal – Introduction

Bimodal IT strategy calls for two parallel tracks that support rapid application development for digital innovation priorities, alongside existing application maintenance and operational stabilization projects.

  • Mode 1 is traditional, emphasizing scalability, efficiency, safety, and accuracy
  • Mode 2 is non-sequential, emphasizing agility and speed
BiModal IT

* courtesy – Gartner CIO Agenda Insight 2015

What are the Impacts of Bimodal?

De-Couple Mode 1 & Mode 2

• Legacy systems
– Are responsible for an organization’s most critical processes
– Manage fundamental data
– Are valued for reliability, availability, serviceability, and security.

Often nearly impossible with brownfield environments to
– Experiment with innovation
– Introduce cloud services

Hope this article was able to throw some insight on the good and the bad implementation projects and some corrective measures which need to be in place in case of any unforeseen issues.

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You might also like: SAP HANA from Space Level

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About the Author

Vinay Singh
Vinay Singh

Qualification: BE from Bharati Vidyapeeth, India.
MBA from Mannheim Business School, Germany.
SAP BI/HANA Experience since 2006.

Author of books : ‘Real Time Analytics with SAP HANA‘ & ‘Creating and Using Advanced DSOs in SAP BW on SAP HANA‘.

Find more about him on LinkedIn.

4 Comments on "Enterprise Resource Planning Implementation Success and Failure Stories"

  1. Curious to know what anecdotal evidence you have on the three brands and the conclusion of thier success ? Do you knoe Nike went from 6billion to 30 billion using the same ERP common across the globe ? Please define the initial failures and its attribution to consultants. What evidence you have ? In fact the consultants who came in 2000 stayed on for years delivering multiple go lives. Rest of what is presented is generic common sense details.

    • Dear Hody – Thank you for taking some time off and providing the feedback.

      You are right. Nike was quick to recover and convert to a success story (we wanted to stress the same thing. Nike turned the wave and quickly changed the near failure to success). And we are sure the good consultants (and some not so good in the crowd) must have stayed for quite long for all the future go lives.
      Through this post, we just wanted to brush off the tip so that the readers know that even big organizations with billions of dollars can go wrong and then the readers can themselves dive deep into the topic (if interested).

      For evidence, you can find these stories as classic case studies examples in renowned B’Schools all over the world.

      Regards,
      Team SAPYard.

  2. Dear Mahesh – Thank you so much for sharing your story. It must have taken a lot of effort and time for you to convince and get the work done. Congratulations for the success.

    Yes, sometimes Technical is very secondary. The business process is usually the driver.

    Regards,
    Raju.

  3. During initial phase, many not familiar with SAP terms and complex GUI as all in my company are familiar with Tally Software. I have convinced them and management that i will help employees to understand each and aspect from vendor master creation, material master creation, G/L creation, recon a/c creation, Purchase process, sales process, generating my own idea what report they need etc etc. it took good effort and effort paid off and it took 1.5 years to get things done and thanks to management which give flexible time during implementation. :-).

    Thanks Sapyard for this excellent post, this was needed for many SAP engineers as many purely concentration technical’s which is secondary, business process is very important for ERP implementation.

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