The Fundamental Reasons Behind The 

Failure Of ERP System

SYSM 6309 Advanced Requirements Engineering

By
Shilpa Siddavvanahally
 ERP
 In ERP solution there is only one
database that is used by all
departments, such as Sales,
Production, Finance and Accounting,
Maintenance and Engineering,
Purchasing, etc.
 ERP applications contain several
modules. Each module consists of the
best business practice that can be
implemented for the company. ERP
helps to break down barriers between
departments within a company.
 By utilizing an ERP system, all
departments have access to the up-to-
date information that is needed to
operate smoothly within any
manufacturing environment.
 IMPORTANCE OF ERP
 ERP takes a customer order and provides a
software road map for automating the
customer order into the path and fulfilling it.
 When a customer service representative
enters a customer order into an ERP system,
he has all the information necessary to
complete the order
For example:
 The customer's credit rating, order history
from the finance, the company's inventory
from the warehouse module and the
shipping dock's trucking schedule from the
logistics module
FOR EXAMPLE:

Customer
Customer . Reps
 PROBLEM

 The biggest mistake from the electronics

company was not realizing the issue in the
early stages and spending 3 million dollars
over a period of 3 years without any
accomplishment

 Lack of top management involvement is

one of the reason for the failure of ERP
implementation.

 Inadequate definition of quality functional

requirements was a major problem
 PROBLEM

 Poor ERP package selection because of not

defining the requirements systematically.

 As the requirements defined by the electronics

company were not optimum, the consultants
couldn’t come up with a optimum solution.
 SOLUTION

 Identifying the right requirements will reduce most of the

problems in an ERP implementation.
 Internal auditors can help organizations lay the foundation
for any new initiative with their knowledge of the company,
its requirements and business processes.
 Top management involvement in communicating the
importance of ERP implementation will help in gaining the
support and commitment of employees.
 Proper project planning which has a comprehensive
scheduling, budget management, resource allocation,
quality management and cost control will increase the
success ratio of implementation.
A SUCCESSFUL DEPLOYMENT OF AN ERP SYSTEM:
A CASE STUDY OF A SMALL GREEK COMPANY
A BRIEF OVERVIEW
 The company imports and supplies the Greek market with a
wide range of products
 The Greek financial crisis and the competition from global
market provided an opportunity to adopt an ERP system.
 In order to improve its services, the company decided to
upgrade its inventory management process
 Introduction of an ERP solution seemed to be appropriate so
that it can set up a common platform for accounting,
inventory and materials management to communicate.
SUCCESS FACTOR
• Consistent support of top management
• Had clear goals and objectives that were essential to guide
ongoing organizational efforts for ERP implementation.
• Explained and justified the significance of the project to their
employees.

• Consultants undertook the directorship of the project

and project team worked very closely with the consultants
• Selected package was a user-friendly one and users were very satisfied
with it .

• Training during technology implementation influenced user

attitudes, performance and acceptance of the new system
• The company tried to introduce a new system, fortunately not “all-at-
once”, rather in a span of 8 months of preparation.
 A CASE STUDY ON HERSHEY'S ERP
IMPLEMENTATION FAILURE
Why Hershey’s Decided to implement ERP :
 Hershey’s redesigned the whole process keeping
customer in mind, to enhance their competitiveness,
and to enhance their customer service.
 Hershey’s need of an efficient and reliable logistics
system to cater large number of seasonal requirement
 Decided to switch over to the ERP system by April
1999.
 The software from Manugistics was to provide for transport
management, production, forecasting and scheduling.
 The software from Siebel was to support Hershey in
managing customer relations and in tracking the
effectiveness of the company's marketing
WHAT WENT WRONG?
WHAT WENT WRONG?
 SQUEEZED DEADLINES
 Project originally scheduled for 4 years
 Company forced the implementation to 30 months

 WRONG TIMING
 The company went live at their busiest time
 Released the solution just before the Halloween

 BIG- BANG IMPLEMENTATION

 To quicken the implementation, Hershey's opted for big bang
implementation
 Simultaneously implemented a customer relations package and a
logistics package even without testing some of the modules
 Orders from many retailers and distributors could not be filled, even though
Hershey's had the finished product stocked in its warehouses.
LESSON LEARNED
 Paying close attention to scheduling, careful timing and
planning of the project are important

 Major enterprise applications (CRM, Logistics, etc.)

should be implemented one at a time

 Top management should keep a close watch and work

for a common goal
 QUESTIONS