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-todate 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-atonce”, 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