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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Enterprise Resource Planning

Introduction

Any technology should work for humans but not the way round is a common saying. For any company ERP is like central nervous system, it need to be maintained healthy for better growth and results. Several factors could cause ERP system failures such as: having just a plan rather a good plan, under estimating the resources, overwhelming on consultants, insufficient testing, no on job training for users and customization of system neglecting security.

ERP Implementations Failure

Hershey's Failure

Background:

• Hershey's also known as the Hershey Foods Corporation is the largest chocolate manufacturer in the North America.

• The homeland of the Hershey's Chocolate world is its headquarters situated in Hershey, Pennsylvania.

• Mr. Milton S. Hershey started the business in 1876 and Hershey Company was established in 1894.

• Hershey's sales are roughly 4:1 ratio chocolate and non-chocolate products with competitors like Mars, Nestle, Palmer and Russell Stover.

ERP Failure and Reasons:

• For better competition and enhanced customer service, Hershey's selected SAP R/3 ERP Software with an overall cost of 10 Million and time schedule of 4Years.

• Hershey's demanded for 2.5year implementation time and decided to go with Big bang approach instead of phased approach.

• Due to which problems related to order handling, shipping and procurement started to arise resulting in loss of credibility and failure in committed deliveries.

• Hershey's went air in 1999 and officially announced about problems due to failure of ERP systems resulting in prices to plunge by 8% on same day.

• The failure costed the company for $150 million in sales. Profits for third quarter of 1999 dropped by 19% and sales declined by 12%.

• Reasons for Failure are Over-Squeezing the time period to 2.5 Years, implementation of Big Bang approach over Phased approach are the key factors.

Lessons and Conclusion:

• The first lesson learnt from the failure was to never over-squeeze implementation schedule time, which will overlook critical issues and safety zones likes testing phases will be neglected.

• The second lesson learned is to emphasize employees on new business process such that sufficient knowledge on technology emphasis errors due to less trained users.

• As a project manager I would have opted for four Years of implementation schedule time and have followed the phased approach.

• I would have verified the warning signs of implementation schedule and way of approach used while implementing the ERP systems.

Hewlett-Packard Failure:

Background:

• The Hewlett-Packard (HP) Company is an American multinational IT company with its headquartered in Palo Alto, California.

• The company was founded by Bill Hewlett and David Packard in California in 1938.

• It developed and provided hardware as well as software components for customers in government, health and education sectors.

• It is specialized in manufacturing computing, data storage and networking hardware.

ERP Failure and Reasons:

• HP has implemented mySAP ERP and the migration resulted in decreased revenues. SAP has already rolled out 4 times and this was number 5.

• Gilles Bouchard, Executive Vice-president (EVP) of global operations is responsible for both the supply chain and ERP software implementations.

• HP revealed that execution technical glitches and issue with contingency planner were the main reasons for ERP failure. There were also other issues like data integration, demand forecasting and poor planning.

• Due to unstable data integrity and increase in demand caused backlogs and improper routing of orders till the end of August 2004.

• Migration of data has ended up costing $160 million dollars in backlogged orders and lost revenues, which is more than five times the project estimated to cost in 2004.

• Reasons for failure are large number of rollouts while implementing mySAP, technical glitches during execution and issues with planning and integration.

Lessons and Conclusion:

• The first lesson learnt from the failure is that too much pressure and careless planning of implementation resulted in many rollouts.

• The second lesson was that as per analysts the Company culture did not support active involvement of employees which acts as drawback to get valuable suggestion from employees.

• Even though HP has spent huge amounts of money to makeup the failure impact, it was unable to speed up the delayed orders.

• As a project manager I believe success of any implementation will depend upon the planning such that business process and technical aspects need to be balanced.

• I would have verified the warnings of software loops and chances of glitches and schedule date for planning, integration and execution.

Nike Failure

Background:

• Nike is an American based Multinational corporation aimed at design, manufacture, develop and marketing of footwear, apparel, accessories and services.

• The company has its headquarters near Beaverton, Oregon, in the Portland metropolitan area.

• The company was first founded as the Blue Ribbon Sports in 1964 by Bill Bowerman and Phil Knight and announced officially as Nike in 1971.

• Nike is the world's largest suppliers of shoes and apparel and also a manufacturer of sports equipment with leading business in sports materials.

ERP Failure and Reasons:

• Nike decided to implement supply chain management i2 software, a major competitor in the field of ERP systems.

• In February, 2001, Nike went air and announced implementing a new complex supply chain management planning system results into several issues.

• Phil Knight, CEO, announced in a quarterly meeting that supply chain problems has caused problems with inventory.

• Nike cited that software problems, glitches and  integration issues causing $100 million revenue shortfall

• In significant cases, Nike slashed prices to get rid of additional inventory keeping additional focus margins and profits, which resulted in knocking 20% of company stocks.

• The main reasons for the failure are using the big bang approach rather than the phased approach.

• As per analysts it is provided that Nike didn't implement the software change as the way it was recommended.

Lessons and Conclusion:

• The first lesson learnt from the failure was never rush the programmers to provide the software in a short span of time which resulted in lot of bugs and errors.

• The second lesson learnt from the mistake was always adopting a mixed approach is a failure, since Nike turned the whole business into new system rather than step by step or part by part approach.

• As a project manager I would have implemented the adoption of supply chain management as step by step rather than whole system and would have provide enough time for programmers to design the software.

• I would have verified the warnings of implementation process and time schedule defined for building the software.

ERP Implementation Success

Cadbury Success:

Background:

• Cadbury is a British multinational confectionery, American company owned by Mondelez International.

• It is the second largest confectionery brand in the world after Wrigley's.

• Cadbury was founder by John Cadbury in 1824 in Birmingham, United Kingdom.

• Currently, Cadbury India operates in four categories namely Chocolate Confectionery, Milk Food Drinks, Candy and Gum category. In the Chocolate Confectionery business, Cadbury has maintained its undisputed leadership over the years.

ERP Success Scenario

• Cadbury along with Kraft had implemented SAP ERP 6.0 (System Analysis and Program Development) which is one of the largest global ERP implementations.

• After the installation of ERP system, the efficiency of company has increased resulting in more inventory to pileup.

• This adopted U.K based computer system is part of a five-year transformation project, termed as "Probe", with its overall aim to integrate the Cadbury company's supply chain, purchasing, manufacturing, distribution, sales and marketing systems globally.

• Even though the project turned out success at the end of the day but during its first implementation in Australia in 2002, severe problems and delays were witnessed.

Lessons and Conclusion:

• Cadbury was a fast growing company and there were few inefficiencies observed with the existing system. After implementation, ERP added efficiency and guided to lead issues in a faster growth.

• The main lesson to be learn from this implementation is to always build a new system on past strengths of the company such that competition will not be lost in the market.

• The cost analysis has been made phase by phase such that initial implementation took time and successive implementation take less time and cost.

• The second lesson learnt from the implementation is to conduct regular feedback monitoring such that changes were being tracked as per the initial plan.

• In my opinion restructuring internally and even at supplier level makes the implementation smooth and more efficient. Due to tracking of the implementation phases and regular monitoring of feedback resulted in successful implementation.

LG Electronics Success

Background:

• LG Electronics is a giant South Korean multinational electronics company which is a member of LG Group.

• The company was founded by Koo In-hwoi in 1958 with its headquarters in Yeouido-dong, Seoul.

• The company operates mainly through five divisions: entertainment, mobiles, Air conditioning, home appliances and energy solution.

• LG Electronics is the second in the world with largest television manufacturing unit with its CEO as Koo Bon-joon.

ERP Success Scenario:

• LG Company has 114 subsidiaries across 40 countries with more than 80000 employees. It has decided to harmonize the HR functions across the globe and decided to implement ERP system.

• As a part of ERP solution, several factors benefited LG Electronics such as: e-learning, staff portal, performance management and data monitoring systems.

• The implementation of ERP system took a span of five years from 2002-2006 in five planned phases with clear objectives to migrate the data globally.

• LG Electronics now enjoys the benefits of fully automated ERP system for Human Resource Management Systems and enhances to further updates as needed.

• With the implementation of ERP system, LG Electronics benefited in real time reporting, Data Transparency, Centralized Servers, Easy usage and accessibility with increased productivity and efficiency.

Lessons and Conclusion:

• The first lesson learnt from the success story is that phase approach always results in success implementation.

• ERP system always benefits for a giant company and increases its efficiency and productivity.

• The second lesson learnt from the implementation is that for issue like limited resources, challenged decision making, disengaged employees with optimum resources ERP route is the best suited system.

• In my opinion the reason for the successful implementation is the phased planning of migrating the data globally with clear set of objectives and challenges.

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