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Business Transformation

Why ERP Implementations Fail and How to Avoid Costly Mistakes

Wednesday, June 12, 2024

Implementing an ERP system requires careful planning, strong leadership, and dedicated resources. Even major corporations like Lidl and MillerCoors have faced challenges in this area. Here are six key reasons ERP implementations often fail and tips to ensure your project succeeds. Even though some of these examples go a long way, organizations still struggle with the same challenges.

  1. Lack of Leadership and Dedicated Resources
    Strong leadership and resource allocation are crucial for a successful ERP implementation. With top management support, projects can avoid delays and resource shortages.
    Example: Lidl’s €500 Million Failure In 2011, Lidl embarked on a seven-year ERP project that was eventually abandoned, costing the company €500 million. The project suffered from constant executive team changes, leading to a loss of momentum and direction.
    Tip: Ensure continuous leadership buy-in and allocate a dedicated, experienced team primarily focused on the ERP project.
  1. Inadequate Planning and Unrealistic Timelines
    Failing to plan is planning to fail.” Adequate planning and realistic timelines are essential to avoid costly rework and delays.
    Example: Select Comfort’s $83M Loss In 2015, Select Comfort went live with a new ERP system prematurely due to investor pressure, resulting in $83 million in lost sales.
    Example: Hershey’s Halloween Debacle In 1999, Hershey’s ERP rollout on Halloween led to a $100 million order processing failure, causing a significant drop in profits and sales.
    Tip: Set realistic timelines and ensure the ERP team has the support to focus on the project without external pressures.
  1. Ineffective Change Management
    Effective change management is vital to help employees understand and adapt to new systems and processes.
    Example: Avon’s $125 Million Project Failure In 2013, Avon faced a massive failure due to inadequate change management, leading to the resignation of a third of its sales reps.
    Tip: Implement a structured change management process that communicates the new ERP system’s benefits and impacts to all employees.
  1. Inefficient Master Data Management
    Proper data management is crucial to avoid errors and ensure the quality of business decision-making.
    Example: Target Canada’s Data Disaster When Target launched in Canada in 2013, poor data quality in their new ERP system led to significant operational issues.
    Tip: Cleanse and validate data before migration to ensure accuracy and reliability in the new ERP system.
  1. Inadequate Testing of the System
    Thorough testing is essential to identify and resolve issues before going live.
    Example: Nike’s $100 Million Supply Chain Failure In 2001, Nike’s inadequately tested supply chain software led to a $100 million loss in revenue due to incorrect inventory orders.
    Tip: Conduct rigorous testing of all functionalities and processes to minimize unexpected issues post-implementation.
  1. Working with the Wrong Partner
    Choosing the right implementation partner is crucial for the success of your ERP project.
    Example: MillerCoors vs. HCL Technologies In 2014, MillerCoors sued HCL Technologies for $100 million due to inadequate planning and expertise mismatch, which led to numerous project issues.
    Tip: Select an experienced partner with the right skills and knowledge for your specific ERP project needs.

Considering a New Global ERP Solution?

Embarking on an international ERP implementation is a significant undertaking that requires careful consideration and planning. Despite the initial challenges, a successful ERP system can lead to increased profits, improved customer satisfaction, and sustainable business growth.

Please reach out to Pipol.

To ensure the success of your ERP implementation project, you can contact Pipol today. Our experienced team can support you every step of the way, helping you achieve your project goals efficiently and cost-effectively.

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