7 Common ERP Failures and How to Prevent Them

The legend goes like this…

ERP (Enterprise resource planning) is meant to provide a more organized and integrated space for your business operations. 

The reality, at least for some cases can be drastically different. 

But before you rush into blaming the software itself, let’s review the most famous ERP disasters and the reasons behind the failures. 

A small hint? It’s not ERP’s fault.

First things first, let’s go back to the basics

What’s ERP?

ERP is a system built to consolidate business processes in a single system. These processes could include finance operations, human resources activities, supply chain management, and everything in between. ERP's main goal is to increase every company's efficiency by storing its data in a centralized location. 

How does ERP work?

Before diving into all the bad things that have happened around ERP, let’s focus for a moment on the ways that ERP works for the benefit of businesses. 

As we just mentioned, ERP integrates various departments and functions into a single system, so the information can flow from one point to another without any pain. 

One of the key benefits of ERP is that you gain access to real-time information, something that comes in quite handy if you need to make a decision or review a strategy. 

Additionally, a good part of ERP systems come with built-in analytics tools that help you monitor performance and identify trends.

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Common Reasons Why ERP Fails 

Poor planning

Try to do something important in your life without a plan and see how that goes. For businesses, the lack of a solid strategy is a major problem, and with new software? Well, that’s just bad news. ERP projects tend to fail due to inadequate planning. If you don’t take the time to thoroughly assess your needs, you may select an ERP solution that doesn’t align with your business objectives. A successful ERP implementation starts with clear goals and a full understanding of your current processes. Just like you would do with any procurement system

No training 

ERP is a good system choice, that’s as much is true 

But ask yourself this question: Does ERP work on its own? Can it really function without the input and management of people? 

At least for now, the answer is no. 

So if your staff is not properly trained on how to use the new system, how could you expect them to adapt? Trying to use something that you don’t understand is a direct path to frustration and decreased productivity.

Underestimating time needed 

As obvious as it might look, some companies and project managers might fail to consider the time required to implement and learn about new software, having an awareness of the exact time you count on and the resources you can invest to make the transition as simple as possible is going to save you from a long list of headaches in the future. 

Data migration  

Migrating data from your current  systems to a new ERP system is something that while necessary can lead to significant issues if not handled carefully. And what happens if you don’t have your data complete?  Well, to begin with you could face operational disruptions and hinder decision-making. A well-planned data migration strategy is essential to ensure accuracy.

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7 Big ERP Disasters 

Okay, so that was a bit of theory, now to the fun part. 

What happens when ERP implementation or use goes wrong?

The Chocolate chaos 

Do you love chocolate? If you do, you surely know about The Hershey Company, if you don’t, odds are that you’d still be familiar with the name. That’s how big Hershey is.  And big were the problems the chocolate-maker company faced back in 1999. 

Yes, a lot has passed since then, but the lesson remains so important that we are still discussing it. You’ll see, in the period of 1999, it was expected that computer systems would be left obsolete soon if not upgraded, and that’s why Hershey rushed into completing the upgrade of its IT systems in less than 30 months. A tight deadline meant that project leaders had to skip essential steps, like testing for instance. 

To make things worse, Hershey decided to launch 3 different new systems at the same time.  The ERP, another for supply chain management, and another for customer service. The date chosen to go-live? Halloween, which just happens to be one of the busiest days in the chocolate industry. 

With no clear idea of what to do, employees were left dealing with multiple systems that instead of helping them, were only an obstacle to do their job. 

The result?

Hershey’s was unable to fulfill $100 million in orders for popular items like Kisses and Jolly Ranchers, and naturally,they reported losses of $150 million.

The lesson: Even if the world is ending, don’t skip the testing stage. Jokes aside, what happened with The Hershey Company teaches about the importance of proper planning and employment training. Without these factors, any new system implementation is going to be a mess. 

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Missing avocados

What’s a company to do when they don’t know exactly what’s going on in their inventory?

Go crazy first, lose money later. 

That could be the prologue of the ERP disaster Mission Produce faced back in 2021. The idea was a good one, they would implement a new ERP system so they could see more productivity in their operations and better financial reporting. 

Pretty normal, right?

It was, until at some point, things started to go south, suddenly it was impossible to tell how many avocados were in stock or if they were to be consumed.

The result?

Mission Produce didn’t have sufficient avocados to offer to their customers, desperate to not fail their clients, they went on sourcing avocados from other suppliers, something that as anyone can guess, hit directly their profit margins. Mission Produce’s CEO, explained the situation as a mix of challenges that weren’t expected at all. 

To keep things working the company had to invest a large amount of money to create new processes and even hired an ERP consultant to solve the problem. 

The lesson: For ERP to work, you have to figure out first what your business needs, what are your current strengths, and what are your pain points. Are there some difficulties that could get worse? Set clear goals from the beginning based on the historical data of your company. 

Smeared makeup

Revlon is a large and global company, if you go to shopping for cosmetics in any part of the world, there’s a high chance that you’ll find the Revlon name somewhere in the aisle. 

So how the heck did they mess up their ERP implementation?

Lack of knowledge 

When Revlon acquired Elizabeth Arden, sometime close to 2016, they were using Microsoft Dynamics AX for their ERP needs. Elizabeth Arden, on the other hand, worked with Oracle Fusion Applications, so Revlon thought that it was a good idea to switch to a new provider: SAP S/4HANA to have a better level of integration. 

Unfortunately for them, problems with the new ERP didn’t wait to arise, the part that was most affected was their manufacturing facility in North Carolina.

The result?

Revlon couldn’t fulfill $64 million in orders.

The lesson: Software solutions are only useful as long as everyone involved knows how to use them. You wouldn’t buy a car for yourself if you didn’t know how to drive.  The same logic goes for businesses and ERP implementations.  Allocate all the time needed for training, rushing this stage as we are already seeing, is a recipe for chaos and financial losses. 

A brewery dispute

You know the phrase it’s not you, it’s me?

Well, for MillerCoors, a brewery based in Chicago, the situation was reversed. 

MillerCoors had a problem: They were working with just too many systems at the same time, something that was putting at risk their operational efficiency. Based on this, the company decided it was high time to use the benefits of an integrated SAP system. So far so good. 

To carry out this transition with ease, MillerCoors hired the services of an external tech company, HCL Technologies. The story should have ended there, but unfortunately soon after HCL took over the project the results didn’t meet expectations. A new project timeframe was agreed upon, something that would cost MilerCoors more money, but they were determined to trust HCL's abilities to solve the problem.

Long story short, HCL’s work was still deficient, it forced MillerCoors to terminate their contract and file a lawsuit for $100 million in damages.

The lesson: Choosing the right partners is the basis for any successful project if you are going to rely on the expertise of an external company to implement ERP in your business, check and double-check its reputation and past performance so you can be 100% sure that they meet your criteria. 

Just do it…realistically.

Nike might have had developed a killer marketing slogan with their Just do it but when they decided to invest $400 million to upgrade its ERP systems, there was nothing to celebrate. 

The result?

$100 million in lost sales and a 20% drop in stock price because they  struggled to fulfill orders for Air Jordan footwear.

Apparently the people in charge of the project couldn’t set realistic goals so they had high expectations for the implementation, which paired with a poorly planned strategy to monitor perfomance caused Nike to fail dramatically. 

The lesson: Be clear with your goals from the beginning, it doesn’t matter if you are a small business owner or the head of a giant like Nike, if you don’t align your objectives with the reality of what’s offered by the system you are choosing, you are signing in for disappointment and numbers in red. 

Going against time

On some occasions,  you might force yourself and your team to push against time and make a double effort to reach a tight deadline. On some occasions, it works, but when the project at hand is a new system that basically combines all of your operations in one platform, then it’s probably a bad idea. If not, ask National Grid. 

National Grid is a gas and electric utility business that chose to replace its outdated system with a new ERP to handle better their operations and improve efficiency. The system had a specific deadline to go live, November 5, 2012, just a week after Hurricane Sandy. If this date wasn’t respected, the extra costs could rise to $50 million, delaying the project for another five months. 

This didn’t look good, nonetheless, National Grid decided to push against the odds and rushed to launch a system that was far from being ready.

The result?

One problem after another

National Grid faced $8 million in overpayments and had to spend $12 million in settlements due to underpayments and related mistakes. 

The lesson: Know your limits, pausing your projects is never going to be your first option, but under some exceptional circumstances is the best thing you can do for the sake of your business. If after extensive analysis, you find that a deadline is impossible, then ly need to set a new time frame it's time to stop and rethink your strategy. 

Shifting priorities 

When you are a business leader or a project manager, you must be able to tell when it's the right time to move forward and when the smartest thing to do is put a hold on the project. 

Invacare, a company that manufactures medical devices knows a thing or two about it. 

The original plan was to upgrade their SAP system, however, when one of the business’s key units started to struggle with the new system, facing limitations in ordering online and causing delays in the management of accounts receivable, it was necessary to make immediate changes, so to give priority to making critical changes according to their market’s demands, the upgrade of the system was paused .

The lesson: We believe that this is probably one of the most important key takeaways business leaders can learn. It’s more than okay to be open-minded and stay flexible when it comes to making changes that can impact your whole organization. If something that you thought could work proves to be more of a nuisance than a benefit, it can be paused or stopped altogether.

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