Evaluating Erp Systems Failure: A Comparative Study

Table of Contents


This is not a valid paraphrase. A valid paraphrase of “Introduction” would be “Introduction of a topic”.

Task 1: Identifying Failure Types

Article 1: Is ERP to Blame for the FoxMeyer Drugs’ Bankruptcy?

Article 2 Examining ERP implementation from the perspective of a failure case.

Task 2 – Identify critical failures factors.

Article 1: Is ERP responsible for the bankruptcy of FoxMeyer Drugs?

Article 2 Examining ERP implementation from the perspective of a failure case.

Task 3: Cross Case Analysis

Task 4: Make recommendations

Article 1: Is ERP to Blame for the FoxMeyer Drugs’ Bankruptcy?

Article 2 Examining ERP implementation from the perspective of a failure case.

In summary,


This is an opening section that provides an overview of the topic.

This assignment is to compare two articles from two journals in order for you to better understand how the companies have implemented new ERP systems. I chose two titles from the provided list. “The FoxMeyer Drug’s bankruptcy: Was this a failure of the ERP?” (Judy E. Scott) and “Examining a Failure Case for ERP Implementation” by Ada Wong Harry Scarbrough Patrick Chau. Both cases have different contexts for the new ERP requirements. Both the geographical location and timeframe are different. By choosing these two, I’m hoping I’ve brought some diversity. In order to fulfill the assignment, I also included ten journal articles that discussed how ERP failed for different companies from various countries. Most of these articles, which are surprising, cite managerial and human factors rather than technical reasons as the cause for IS failure. I used Tony Feghali’s and Imad Zbib’s framework from 2007 as well Schmidt and al. (2001) framework. The ten articles were referenced in APA Sixth Edition.

Task 1 is to identify failure types. Article 1 The FoxMeyer Drugs’ bankruptcy was it a failure of an ERP system? Interaction Failures: These failures occur primarily due to user dissatisfaction. Users tend to abandon a system when it is not able to be used efficiently or does not meet their expectations. The workers at FoxMeyer feared that they would lose their jobs because of automation. It was clear that the morale of warehouse workers was low. First, the decision to close three warehouses and automate just one warehouse was a serious threat. They feared that they would lose control of their warehouses and processes. When the system had difficulty handling large volumes of transactions, they began damaging inventory and failed to fill orders. There was a lack of knowledge and skill within the company. FoxMeyer relied heavily on external consultants for the implementation of R/3 and integration with ERP. Lack of training led to high attrition and resistance by workers. The external consultants did not take any initiative to transfer knowledge either from the top management or warehouse workers. External consultants who were inexperienced, and unfamiliar with the system. The new system was implemented with no interaction between warehouse workers and the consultants.

Process failure: FoxMeyer’s budgeting and estimation methods were not the best. Inadequate management control of the implementation SAP Warehouse Automation and SAP R/3. They attempted to implement two interfaces at once. The plan to implement two systems at the same time, for most of the business’s important systems, was a failure. In 1994, the management underestimated R/3’s capacity. The SAP R/3 transaction volume was vastly lower than that of FoxMeyer’s original mainframe. Also, they fell behind on the control of risk associated with heavy automation. They also seem to have a budget that is not as safe ($65 Mn), because FoxMeyer was known for being a leader in cost. They set an unrealistic deadline of 18 months to complete the whole implementation. The first output was set at a high standard, but this wasn’t realistic given the phase of implementation. SAP’s project capacity increased by a large amount. This shows how the management did not maintain tight controls over the project scope. The business was also exposed to risk by adapting a relatively new techniqe, which had not proven successful. They failed to educate their users (vendors, workers) when adapting the new measures.

Correspondence failure: This failure can be attributed to the management’s perspective. “It’s not automation that failed. It wasn’t the failure of commercially available software. “It was an oversight in management.” FoxMeyer management at the higher levels was emotionally too involved in Delta III to continue doing business. FoxMeyer CIO Robert Brown took a lot of responsibility for the project, saying “We are gambling our company.” This was a huge investment by FoxMeyer. Senior management was putting in a lot of effort, but it wasn’t practical. Lower level management didn’t show any. The project cost increased due to the change in focus. According to the case, Woltz had warned management of the 18-month deadline for completion of the project. Also, they expected to save an additional $40 MN per year. The unrealistic scheduling goal is evident. Anderson Consulting and SAP chose not to cancel the Delta III project as they believed that doing so would bring them into disrepute and reduce their sales. Both senior managers and vendors had overestimated Delta III’s return.

Language barrier prevented the consultants hired to implement ERP from communicating well with the staff at the operational and middle levels. Even though the project leader was aware of the problem, he failed to provide much assistance, wasting two months in implementation. This is a sign of the low motivation level amongst staff. The system’s functionality was insufficient. They failed to consider the importance of understanding their business process as well the capabilities and limitations of a prospective ERP system. The business analysts who were involved in the business did not have the necessary experience to accurately address the business requirements. The system is abandoned by staff who leave the business because of its complexity.

Process failure: Insufficient resources were allocated to implement the entire new system. Budget allocated for ERP adoption was lower than needed. Initially, top management, project managers and consultants set the deadline at six months. This was obviously inadequate. It was clearly inadequate. Consultants were not well-versed in technology and could not configure the system. Many bugs resulted, which contributed to the cancellation of the project. To cope with the increased workload, there were fewer staff available to support the project. Staff were unable to handle the pressure and complexity. A high workload and stress caused some staff to resign. The company was forced to hire and train new consultants on the new ERP system. The project took longer than anticipated and cost more money.

Correspondence Failed: Senior and middle management did not take into consideration the negative effects or setbacks that this new ERP system could have on a business. All management levels were unrealistic and didn’t consider potential risks or re-engineering of business processes for the new ERP. The management assumed that they could solve the problems slowly, but this was a bad decision. The vendors were also guilty of the same mistakes. Vendors have not tested the system thoroughly enough before they deliver it to the firm.

Task 2 – Identifying critical factors of failure. Article 1 – Was ERP responsible for the bankruptcy of FoxMeyer Drugs?

Delta III used technologies that were new at the time. Vendors didn’t have enough time before the introduction of the product to test it thoroughly. FoxMeyer’s business system was used as a test platform by the decision to implement both new systems at once. It would be better to have waited at least until the technology proved itself on the market. Or they could have implemented a new technology to test its success.

Mismanagement of changes (PM-related factor)

FoxMeyer’s production on the mainframe was 420,000 orders per day. The new system had a maximum capacity of 10,000 orders each night. The system was not implemented properly because the company did not take into consideration the actual demand versus system capability. During the implementation phase, they tried to increase production without altering the business environment. As a result of the massive costs that were incurred in relation to the new systems, their focus as a leader on cost has changed dramatically. They failed to effectively manage the changes.

Staffing issues (related to PM)

Lack of internal skills was also a major factor in the failure of this project. FoxMeyer relied on external consultants to implement and operate ERP. They failed to train the in-house employees or did not hire experts with knowledge of similar systems. It was clear that external consultants were not committed to the project without adequate staffing. FoxMeyer paid high fees for consultants who were not experienced. They would have had to pay a high fee for inexperienced guidance if the staff were experienced and trained.

Planning IS is of poor quality (i.e. Planning, estimation and monitoring are all poor (managerial factors)

From all perceptions, time estimations, production budgets and profit forecasting, the expectations at the senior level were unrealistic. Even though they had noticed losses at several stages, the senior managers believed they would eventually break even and begin to earn profit. Then, they should have thought twice. FoxMeyer ignored the warnings of Woltz, who had warned them against the strict deadline.

Lack of Team Skills (Organisational Issues)

Communication is essential to any project or business. It should be the very first step when starting a project. It’s a good way to create teams, share ideas and gain a broader perspective. Consultants and staff here failed to do this very thing. During initial implementation phase, the communication between project team and consultants was extremely low. The staff was unable to understand the Indian consultants, who spoke English well but with a strong accent. The staff was unable to grasp ERP concepts and functionality. The staff could have been under immense pressure if they didn’t understand the basic concepts of the new technology. The project manager, who was aware of this problem, did not take any action. This resulted in the loss of two months from the six-month execution schedule. It shows that the manager has a poor understanding of how to work with a team.

Technical Factor: Inadequacy

The consultants provided poor service. They only had a minimum of expertise on Hong Kong’s market and its new ERP system. They failed in their efforts to carry out a market analysis to better understand how the Indian business model differs from that of Hong Kong. They did not identify the gap between their current business systems and future ERP functionalities. Instead, they copied the exact version of an Indian branch. Business Process Engineering was not taken into consideration. Business analyst expertise was also lacking among the consultants hired. Their accent made it impossible for them to explain their ERP concepts to operational staff. The vendors didn’t test enough the new systems before they were introduced to the market. The technical environment was also unsuitable for implementing new IS.

Unrealistic management expectations (Cultural factors)

They were so sanguine that they overlooked the potential downsides and negative impacts of an ERP system. They didn’t realize the importance of reengineering business processes to cope with the new ERP system. The project was to be implemented in six month with a budget initially of $1.3M. The two budgets were insufficient to complete the project.

The high turnover rate in the IS team (managerial Factor)

The employees working on the ERP project faced a lot of pressure. In addition to communication problems with consultants, they were required to attend a training day-long and then have to finish their work. The workload was not shared by additional staff. The project was too complex and the staff were unable to cope with the increased workload. Many employees started to quit in between the programs. Several left right after ERP training. The company had no choice but to hire and train new employees at short notice.

Cross Case Comparison (Task 3). Cross case comparison is one of the research techniques that we use to help us compare articles and reports and understand their similarities and differences. This helps us understand how the authors have approached their articles. It helps us understand how geographical and temporal factors influence research. In 1999, Judy Scott wrote the first article for this assignment. In 2004, Ada Wong Harry Scarbrough Patrick Chau wrote the second. In both instances, senior management made very high and unrealistic expectations. The staff/consultant who dealt with the new IS was either from the vendor or another branch and had very little knowledge of the system in question. Both cases also had a poor budget and allocation of time. These are mostly mistakes made by managers, not technical issues.

Compare the differences between these two situations. They are almost 5 year apart in age. In five years, authors can make improvements to their research methods. The latter article’s methodology focused more on what is happening at different phases, while the former looked at things through different stakeholders perspectives.

Task 4: RecommendationsArticle 1: The FoxMeyer Drug’ bankruptcy: Was it a Failure of ERP?

The two systems would not have been implemented simultaneously if I had been the CIO of FoxMeyer. I would implement one system on a small-scale and then see what happens, the impact it has on the business, and how easy or difficult it is for staff to adapt. If the small-scale system shows positive results for your business, you should expand to larger scale. Even if your system worked on a small-scale, it’s best to monitor the results at each stage. I would also continue to monitor effects after the implementation for a few months and then begin the second phase of implementation.

In-house skills: After developing a plan, educating employees within the company is crucial. My software vendors should conduct workshops so that my employees can see the benefits of automation through the eyes of senior-level management. The employees should receive training on how to operate the new system and be told about the changes that will occur in their work once the implementation is complete. This will ensure that the staff are safe in their jobs and FoxMeyer has internal skills instead of relying on consultants.

Article 2 Examining ERP implementation from the perspective of a failure case.

Business Process Reengineering: Business Process Reengineering involves fundamentally remodeling main business processes. This is done to improve efficiency. The company would have been better off comparing Indian market requirements with Hong Kong’s, and understanding the differences between India and Hong Kong. It will enable the company redesign the Indian branch offices to fit the Hong Kong market, or create a brand new model.

I would be more careful in selecting consultants to work on my project. They should also have experience in a similar market and system. Communication is also important as it helps to build a team, and understand the nature of the system.

ConclusionBefore beginning any ERP or IS project, it’s always best to research the business environment. This includes understanding the current business requirements, the current system capacity, and the potential benefits of the future system. A new system may be in vain if these factors are not properly understood. For the successful integration of a new system and the existing system, it is also important to hire and educate current employees. Both cases were hampered by these two reasons.


  • jaycunningham

    Jay Cunningham is a 36-year-old educational blogger and professor. He has written for various publications and online platforms, focusing on topics such as teaching and learning, assessment, and higher education. He has also served as an adjunct professor at several universities.