Lennon Harding-Wade Lennon leads our Finance Transformation team. He specialises in supporting ERP programmes of work with global retail clients, private equity and professional services businesses. Typical mandates range from Business Analysts to Programme Director and CTO skillsets, as well as integration-focused advisory and strategy roles.

The Staggering Cost of ERP Failure

5 min read

Enterprise Resource Planning (ERP) systems play a pivotal role in streamlining business processes and driving efficiency. However, a poorly executed ERP implementation can lead to significant financial and operational setbacks. According to Gartner, ERP implementations’ failure rates can exceed 75%, so the potential consequences are severe. 

In this blog, we’ll explore the importance of thorough planning in ensuring a successful ERP implementation. We’ll also delve into notable ERP disasters to understand the critical lessons that can be learned from these high-profile failures. Join us as we navigate the challenges of ERP implementations and uncover strategies to maximise your return on investment.

Mastering ERP Basics

A successful ERP implementation lies on a well-planned and executed strategy. An effective ERP system should streamline your organisation’s operations, reducing manual workload and allowing you to focus on other critical aspects of your business. Before embarking on this project, it’s crucial to understand the processes involved in the rollout, as well as the costs associated with software development and maintenance over time.

Tackling the complexities of implementation requires reliable services to ensure a seamless transition for your business. A robust ERP project management approach can significantly ease the process, enabling you to make informed decisions and mitigate potential challenges. Having a strong in-house ERP team or partnering with a reputable ERP consultancy or service provider can prove invaluable in this regard, as they can offer real-time support and guidance throughout your journey. By understanding the fundamentals of ERP systems and selecting the right resources, you can lay a strong foundation for a successful and efficient implementation.

How Much Does ERP Cost?

ERP has a reputation for being difficult and expensive to implement, not because it actually is when planned correctly, but due to a number of high-profile examples of organisations who have got it spectacularly wrong meaning that the software’s colourful history is littered with some very public, expensive horror stories.

These cautionary tales highlight the potential pitfalls of inadequate planning and execution. Despite these setbacks, a growing number of companies are accepting the cost of ERP implementation, embracing ERP as a vital component of their digital transformation efforts and demonstrating that success is attainable with the right approach. So in this section, we’ll be highlighting what not to do.

Here are half a dozen notable ERP disasters from well known large companies. Here’s hoping you’ll learn from their mistakes!

Top 6 ERP Implementation Failures (and what they cost)

Lessons from Nike, Lidl, Revlon and other Cautionary Tales

It’s worth noting that even though most of these failed implementations are on a scale way larger than most businesses would ever need to consider, the fundamentals of what not to do remain the same. Each one highlights the importance of getting certain basic steps right.

Select the Ideal ERP System

Revlon (SAP ERP)

Selecting the right ERP software is crucial to the success of your implementation. Both Revlon and Elizabeth Arden had previously undergone successful ERP implementations with Microsoft Dynamics AX and Oracle Fusion, respectively. However, when Revlon acquired Elizabeth Arden, they decided to switch both companies to a new ERP system, SAP HANA, during a time of significant operational changes. This decision led to a disastrous go-live, causing a major manufacturing facility to come to a halt, resulting in millions of lost sales and a plummeting stock price. The negative ROI on this implementation highlights the importance of carefully evaluating ERP vendors and solutions, such as NetSuite or other cloud-based SaaS offerings, to ensure they align with your business needs.

Partner with a Reliable Integration Expert

Molson Coors ERP Failure

A reliable integration partner is essential for a smooth ERP implementation. Molson Coors experienced this first-hand when they spent $100 million to unify their seven different versions of SAP software. They chose HCL as their integration partner, but the project ultimately failed due to the inability of the teams to collaborate effectively, leading to legal disputes between the two parties. This example highlights the need for proper change management and a strong partnership with your integration partner.

Time Your ERP Implementation Wisely

National Grid SAP ERP failure

Timing is critical when deploying a new ERP system. National Grid invested $1 billion in an SAP implementation that was already overdue. Pressured by the mounting costs, they decided to go live during the aftermath of Hurricane Sandy, which proved to be a disastrous decision. The company was forced to spend an additional $100 million to stabilise essential functions such as employee pay and financial reporting. This case demonstrates the importance of carefully considering the timing of your ERP implementation, taking into account external factors that could impact the success of the project.

Ensure Business Processes Influence the Tech, Not Vice Versa

Lidl SAP Failure

When Lidl and SAP embarked on an ERP implementation to upgrade Lidl’s inventory system, they failed to recognise a fundamental difference in business processes: Lidl’s preferred method of basing inventory on the price paid, rather than retail price. After seven years and €500 million spent, the project was scrapped due to this customisation issue. This highlights the need for open communication and alignment between the ERP vendor and the organisation to ensure the software supports critical business processes.

Identify and Mitigate Risk

Vodafone £4.6 million fine

Vodafone’s attempt to consolidate their CRM systems serves as a cautionary tale for identifying and mitigating risks during an ERP implementation. Their project resulted in a £4.6 million fine due to improperly migrated customer accounts and subsequent impacts on customer service. This case underscores the importance of thorough risk assessment and mitigation throughout the implementation process.

Test and Test Again

Hershey’s rushed SAP implementation serves as a reminder of the importance of extensive testing. Their decision to go live during their busiest season, Halloween, without adequately testing the integration of supply chain elements led to $100 million in undelivered orders and an 8% drop in stock price. This example highlights the need for thorough testing and a well-planned rollout strategy.

Hershey SAP ERP Failure

In summary, the success of an ERP implementation depends on various factors, including the choice of ERP software, the integration partner, project timing, alignment of business processes and technology, risk management, and comprehensive testing. By considering these elements and learning from the experiences of others, organisations can minimise the costs of ERP implementation and maximise the return on their investment.

Why do ERP Implementations Fail?

The journey to implementing a successful ERP system can be riddled with challenges, but with careful planning and execution, organisations can avoid the pitfalls of ERP failure. By studying the high-profile failures in this blog, we can extract valuable insights into the critical elements of a successful ERP implementation.

Unlocking Secrets to ERP Success

Embarking on an ERP implementation journey may seem daunting, but unlocking the secrets to success lies in understanding the critical factors that contribute to failure. By learning from the mistakes of others, your organisation can rise above the challenges and achieve a successful implementation. Here are our key lessons from these case studies to unlocking ERP success.

Image by <a href="https://www.freepik.com/free-photo/close-up-hand-holding-keys-indoors_12067039.htm#query=unlock&position=8&from_view=search&track=sph">Freepik</a>

An Artful Balance: Planning and Analysis

The backbone of a triumphant ERP implementation is meticulous planning and analysis. Recognising your organisation’s unique needs and requirements paves the way for selecting the perfect software that aligns with your business goals.

Embracing Change: Mastering Change Management

Change management is the guiding force that navigates an organisation through the ERP transition. Emphasising communication, training, and employee engagement can help overcome resistance, making the implementation process seamless and efficient.

Perfect Timing: The Key to a Smooth Launch

The launch of an ERP system can make or break its success. Avoiding peak business periods and external challenges ensures that the implementation proceeds without straining your resources.

Harmony in Motion: Aligning Business Processes

Tailoring your ERP system to support your organisation’s unique business processes is crucial for success. Creating harmony between technology and processes will prevent customisation challenges, conserve resources, and avert project failure.

Fortune Favours the Prepared: Risk Management

Preparation for ERP

Identifying and mitigating risks throughout the ERP implementation journey is essential for sailing through potential pitfalls. A thorough risk assessment and a proactive approach will keep costly mistakes and disruptions at bay.

A Stitch in Time: Testing and Quality Assurance

Thorough testing and quality assurance are the final safeguards that guarantee your ERP system meets the organisation’s requirements. This crucial step ensures a flawless launch, free of system glitches and undelivered orders.

Embracing Opportunities for Growth and Efficiency

Throughout this blog, we have explored the complexities of ERP implementation, emphasising the significance of learning from past failures and adopting a strategic approach to achieve success. By examining the cautionary tales and understanding the crucial factors that contribute to ERP success, organisations can transform their operations, enhance efficiency, and drive growth.

<a href="https://www.freepik.com/free-photo/coin-wooden-table_5508846.htm#query=growth&position=15&from_view=search&track=sph">Image by jcomp</a> on Freepik

At The Consultancy Group, our mission is to empower organisations to unlock their full potential through successful ERP implementation with the right talent. Our expert team of professionals is committed to providing guidance, support, and best-in-class recruitment services tailored to your unique needs.

Don’t leave your organisation’s future to chance; let The Consultancy Group help you navigate the ERP landscape and achieve the success your business deserves. Reach out to our team of experts today and embark on your journey towards increased efficiency, growth, and digital transformation.

Lennon Harding-Wade Lennon leads our Finance Transformation team. He specialises in supporting ERP programmes of work with global retail clients, private equity and professional services businesses. Typical mandates range from Business Analysts to Programme Director and CTO skillsets, as well as integration-focused advisory and strategy roles.