Enterprise resource planning (ERP) refers to a type of software that companies use to manage day-to-day business activities such as accounting, procurement, project management, risk management and compliance, and supply chain operations.

An ERP helps companies run successful businesses by connecting their financial and operational systems to a central database. These systems eliminate the need for manual data entry, reduce the likelihood of errors, and provide real-time access to data and scalability. These help by streamlining processes and improving overall efficiency and visibility.

But what happens if they FAIL?

ERP systems are critical to the functioning of many businesses. A failure of such systems results in the disruption of various sectors such as accounting, finance, inventory management etc.

Let us look at the TOP 10 WORST ERP Failures of all time. Note that there have been many other ERP disasters over the years, but these are our top 10 due to the severe losses and consequences these had on the companies involved. 

1. FoxMeyer’s Billion-Dollar Blunder, 1996

FoxMeyer Corporation was a pharmaceutical distribution company based in Texas, USA. Founded in 1981, the company became the fourth-largest drug wholesaler in the United States by the mid-1990s. Due to increased competition and declining profit margins, the company implemented a new ERP system in 1993 to integrate all its operations and streamline its supply chain. It decided to revamp not only its IT systems but also all of its distribution facilities.

The implementation proved to be a massive undertaking. Integrating 70 different legacy systems and creating more than 1,500 interfaces turned out to be more than what they could chew. Poor communication between FoxMeyer and SAP, inadequate testing, and a lack of support from key employees led to the project’s downfall. The system was unable to handle the volume of data that FoxMeyer was generating. As a result, orders were lost, shipments were delayed, and customer complaints began to pile up.

Despite the attempts to fix the system, the problems didn’t go away. As a result, the company filed for bankruptcy after suffering losses of over $1 billion due to the failed implementation, and to add insult to injury, its operating division was sold to rival McKesson.

2. Hershey’s Sweet ERP failure, 1999

Hershey’s is one of the largest confectionery manufacturers in the world. In 1999, it embarked on a mission to modernize its supply chain management by implementing a new enterprise resource planning (ERP) system. The idea was to increase efficiency and streamline its manufacturing and distribution processes, which would help the company save money and improve its bottom line.

However, the implementation of the new ERP system was a massive failure that resulted in significant losses and a damaged reputation. One of the major issues was the lack of proper planning and testing before going live with the new system. Hershey’s did not adequately train its employees, and the ERP system was incompatible with the company’s existing processes. This led to technical glitches and delays in orders, which caused lost sales and dissatisfied customers. Another critical mistake that Hershey’s made was that it timed its crossover during the busy Halloween candy holiday season. It was unreasonable for Hershey’s to expect that it would be able to meet peak demand when its employees had not yet been fully trained on the new systems and workflows.

The consequences of Hershey’s ERP system failure were severe. The company’s stock price fell by over 8%, resulting in a loss of $100 million in shareholder value. The failure also drew regulatory scrutiny and led to a delay in the company’s financial reporting.

3. Waste Management’s SAP Implementation Failure, 2005

Waste Management, a leading provider of waste management services in North America, decided to replace its legacy systems with an ERP system to improve efficiency and visibility in its operations. In 2005, the company selected SAP as the vendor for the new system, hoping to streamline its business processes and reduce costs.

The implementation of the SAP system at Waste Management faced several issues. There were several problems in the system, including inaccurate financial reporting, billing errors, and inadequate integration with other systems. As a result, the company had to revert to its old systems, causing significant disruption to its operations. Waste Management accused SAP of fraud, alleging that the vendor had made false statements about the capabilities of the system during the selection process. 

The implementation failure resulted in a charge of $500 million for Waste Management, which was related to failed implementation. The company also had to restate its financial statements for the years 2000-2005 due to accounting irregularities related to the failed implementation. Waste Management filed a lawsuit against SAP, seeking damages of $1 billion, which was later settled out of court for an undisclosed amount. The incident had a significant impact on the company’s reputation, and Waste Management’s CEO and CFO were forced to resign due to the scandal.

4. HP’s costly ERP experiment, 2004 

In 2004, HP embarked on a massive overhaul of its IT systems, which included a new ERP system from SAP. The goal was to consolidate HP’s disparate IT systems and streamline its supply chain, resulting in cost savings and increased efficiency.

The ERP implementation faced significant challenges from the beginning. The project got delayed due to software and hardware issues, and the team kept changing constantly. The new system caused disruptions to HP’s supply chain, including manufacturing delays, missed shipments, and order cancellations. The system also had trouble accurately tracking inventory, resulting in overstocked warehouses and lost sales. One of the major issues with the implementation was the lack of adequate testing and training. The system went live without proper testing and employee training, resulting in a lack of understanding of how to use the new system, leading to significant errors and delays.

The ERP implementation cost HP $160 million in lost profits and additional expenses. The company’s stock price also took a hit, dropping 10% in the weeks following the implementation. The company’s reputation was also damaged, with customers complaining about missed shipments and poor service. The CEO at the time, Carly Fiorina, faced significant criticism for the failed implementation and was ultimately ousted from the company in 2005.

5. Lidl’s SAP implementation failure, 2018

In 2018, Lidl, a German discount supermarket chain, aimed to streamline its supply chain management and enhance its financial and inventory controls. The company planned to implement a new SAP-based enterprise resource planning (ERP) system to achieve this objective.

However, after the implementation of the SAP system, the company faced significant difficulties with its supply chain, causing operational disruptions and financial losses. The issues resulted from a malfunction in the software that led to incorrect inventory management, leading to a shortage of products on the shelves and the accumulation of unsold products. The system’s inability to perform as expected caused significant operational disruptions and long-term damage to Lidl’s reputation. The company’s logistics network was severely affected, with delivery and supply chain operations being delayed, and in-store stocking hampered, leading to customer dissatisfaction.

Lidl faced a write-off of more than €500 million ($566 million) due to the SAP implementation failure. The company faced additional costs related to the implementation, such as hiring external consultants and fixing software glitches. Furthermore, the incident damaged the company’s reputation and consumer trust.

6. National Grid’s SAP implementation failure, 2011

National Grid is a UK-based multinational electricity and gas utility company. In 2008, the company embarked on an SAP implementation project to replace its ageing legacy systems with a new ERP system that would improve its business processes and support future growth. The new system was intended to improve the company’s business processes and increase efficiency.

The SAP implementation project faced several issues that contributed to its failure. One of the main problems was the lack of testing and training for the new system, which resulted in significant user resistance and adoption issues. Additionally, National Grid’s ambitious timeline for the project put pressure on the implementation team to cut corners, resulting in inadequate data quality and system integration issues. The company also struggled with data conversion, as the legacy systems had a large amount of data that needed to be migrated to the new system. Poor data quality and inconsistent data standards made this process challenging, leading to further delays and cost overruns.

National Grid’s SAP implementation failure resulted in an estimated £122 million (approximately $169 million) loss for the company. The financial impact was due to several factors, including the cost of the project, the write-off of capitalised assets, and the cost of remediation.

The project’s failure led to several legal disputes, including a lawsuit against the project’s contractor, which resulted in a settlement of £25 million (approximately $34.5 million). National Grid also faced scrutiny from investors and regulators, who were concerned about the company’s ability to manage its operations effectively.

The failure of the SAP implementation project prompted National Grid to take a more cautious approach to future technology investments. The company revised its IT strategy and implemented a new governance framework to improve project oversight and management. National Grid also invested in its internal IT capabilities, hiring new staff and developing in-house expertise to reduce reliance on third-party vendors. The company suffered losses of £122 million (approx. $169 million) due to the failed implementation, and its CEO resigned.

7. Revlon’s SAP implementation failure, 2018:

In 2019, Revlon, a major cosmetics company, aimed to implement a new SAP ERP system to integrate its financial, supply chain, and manufacturing operations. The goal was to improve its efficiency, reduce costs, and streamline its operations.

Like all the other companies on this list, Revlon failed to understand the risks associated with its transformation. Revlon experienced shipping delays and lost sales due to production stoppages at its North Carolina plant – the location of the first phase of its SAP go-live. The company launched its new ERP system in the U.S., which caused its manufacturing facility in Oxford, N.C. to experience service level disruptions. It impacted the Company’s ability to manufacture certain goods and fulfil shipments for some time. 

Revlon’s SAP failure had a significant financial impact on the company. The company had to delay the release of its financial statements and restate its financial results for the first two quarters of 2020 due to system failures. The restatement resulted in a $32 million reduction in the company’s reported net sales for the first quarter of 2020 and a $50 million reduction for the second quarter. In addition, the company incurred significant costs associated with the implementation of the new system, the remediation efforts, and the legal fees associated with the lawsuits and investigations. The company also faced a decline in its stock price and market value due to the negative publicity and financial impact of the system failures.

8. Nike’s ERP failure; the costly shoe drop of $400 million, 2000

In 2000, Nike, a major athletic footwear and apparel company, aimed to implement a new ERP system to upgrade its supply chain and inventory management operations. The goal was to improve its efficiency, reduce costs, and streamline its operations.

The implementation of the new ERP system faced numerous issues, leading to a disaster for Nike. Poor planning and management, technical glitches and lack of training of employees plagued the project.

Nike’s ERP failure had a significant financial impact on the company. The company’s revenue decreased by 20% in the quarter following the implementation of the new system. The company’s stock price also declined, and it faced a loss of market value due to the negative publicity and financial impact of the system failures. Additionally, Nike had to spend millions of dollars to fix the technical problems and implement new processes, and it faced significant legal fees associated with the lawsuits and investigations. Overall, Nike’s ERP failure had a significant and long-lasting financial impact on the company.

9. Ingram Micro’s SAP implementation failure, 2016

In 2016, Ingram Micro, a global technology distributor, aimed to implement a new SAP ERP system to upgrade its financial, supply chain, and customer management operations. The goal was to improve its efficiency, reduce costs, and streamline its operations.

The implementation of the new SAP ERP system faced numerous issues, leading to a disaster for Ingram Micro. There were several reasons for the failure of the system. Lack of proper testing and training, technical glitches and malfunctions resulted in the failed implementation of the new system. This resulted in inaccurate financial reporting, incorrect customer invoicing, difficulties in tracking inventory, and delays and problems in order processing, shipping, and billing. 

The company faced a loss of sales, a decline in customer confidence, and damage to its reputation. In addition, Ingram Micro faced numerous lawsuits and government investigations related to inaccurate financial reporting, resulting in significant financial penalties and legal fees. The company’s revenue decreased by 6% in the quarter following the implementation of the new system. The company also faced a loss of market value due to the negative publicity and financial impact of the system failures. Additionally, Ingram Micro had to spend millions of dollars to fix the technical problems and implement new processes, and it faced significant legal fees associated with the lawsuits and investigations. The company suffered losses of $250 million due to the failed implementation, and its CEO resigned. Overall, Ingram Micro’s SAP implementation failure had a significant and long-lasting financial impact on the company. 

10. Target’s failed expansion: a $2 billion ERP mistake, 2013

Target aimed to replace its legacy systems with a modern, integrated system that would streamline operations, reduce costs, and provide real-time data insights. The company invested $1.4 billion in the project, which involved the implementation of a new supply chain management system, point of sale (POS) software, and other business applications.

Target’s ERP implementation faced several challenges, including poor assignment management, inadequate testing, and insufficient training for employees. When the new system went live in 2013, it caused significant disruptions to Target’s supply chain and caused inventory issues, which resulted in lost sales and frustrated customers. The POS software also had glitches, which led to long checkout lines and a decline in customer satisfaction. The data breach that occurred in the same year added to Target’s woes and affected the company’s reputation.

The company reported a $941 million loss in the fourth quarter of 2013, and its stock price dropped by 10% following the announcement. Target also spent an additional $61 million in the first quarter of 2014 to address the aftermath of the data breach. The company’s reputation was tarnished, and it took several years for Target to recover from the incident fully. In total, the ERP disaster cost Target over $2 billion in lost sales, remediation costs, and legal settlements.