ERP transformation is a huge undertaking and it can be tempting to put it off for as long as possible. However, the consequences of delaying the move to cloud ERP can be dire.
Enterprise resource planning (ERP) transformation is a pressing issue for IT leaders. The next generation of ERP tools is here and new platforms offer a variety of features that provide users with a competitive edge, while laggards face being left behind.
Still, ERP tools touch every part of your organization and replacing yours is akin to surgically transplanting an organ. With the effort involved, it can be tempting to delay your transformation until the right moment.
The problem is that there may never be a right moment and waiting too long can result in disaster. Below, we'll explore some case studies of companies that delayed upgrading their ERP platform too long and what they faced as a result.
Enterprise resource planning (ERP) transformation can be pressing, but it still takes time. This is a lesson that Hersheys learned all too well in 1999.
At the time, the industry was deeply concerned about the so-called Y2K bug that many feared would destroy IT systems the world over as the year ended. This turned out not to be the case, but thinking the worst, Hersheys rushed through an ERP transformation at the last moment.
An earlier start could have made the deadline, but Hersheys instead tried to complete an ERP transformation that should have taken 48 months in just 30 months. As a result, Hersheys failed to fulfill around US $100 million in orders, lost 19% in quarterly profits, and its stock price dropped 8%.
Enterprise resource planning (ERP) transformation is a huge project. Adding additional work on top of that can make it simply impossible.
Health insurer, Cover Oregon, embarked on a sorely needed replacement of their existing ERP system in 2012. Unfortunately, this was the same time that President Obama made sweeping changes to the US healthcare system with his Obamacare project.
Making both sets of changes was an insurmountable challenge for Cover Oregon and the project failed to meet its targets. This led to a years-long legal battle between Cover Oregon and ERP vendor Oracle.
Careful consideration of their ERP transformation plan could have broken the project up into more-manageable phases, rather than trying to do everything at the same time. This, however, requires complete oversight, sophisticated planning, and most importantly, getting started as early as possible.
Enterprise resource planning (ERP) transformation had been a significant headache in the past for medical device manufacturer Invacare. With a 2005 transformation losing the company US $30 million.
October 2021 saw Invacare attempt another ERP transformation, but things didn't go much better. By Q1, 2022, with the company needing to pivot to remote working during the pandemic, the project had to be put on hold, even as they had to continue to pay contractors.
The delay was unpopular with Invacare's board and CEO Matt Monaghan soon left his position. With a better ERP transformation plan, the delay wouldn't have been necessary.
Sometimes enterprise resource planning (ERP) transformation isn't about modernization, but consolidation. In 2022, manufacturer J&J Snack Foods decided to move their entire organization onto their longstanding ERP platform: Oracle's JD Edwards.
The change over, however, was delayed from the end of J&J's financial year to February 2022. The manufacturer believed this normally quiet period would be an acceptable alternative.
However, several unplanned-for eventualities occurred during the transformation process, resulting in disruption. As a result J&J overall lost US $20 million in sales, despite their frozen beverages arm, which was already using JD Edwards, seeing 50% growth.
It's clear that having better oversight of J&J's ERP estate before the transformation would have made some of these eventualities not so unforeseen. Not to mention, it would have made the transformation easier to keep on schedule and avoid disaster.
UK-based National Grid implemented their enterprise resource planning (ERP) transformation at the worst-possible time. They launched their attempt to consolidate their US operations in 2012, just in time for the arrival of Hurricane Sandy.
Unfortunately, National Grid had only stress-tested their systems under ideal conditions. After the hurricane winds ravaged the network, the new system wasn't able to cope with the extra resource needed to make repairs.
Sorting out the mess left by the failed ERP transformation took National Grid two years and cost US $585 million. An earlier implementation could have been completed before the hurricane, or one under less pressure could have been delayed until after the hurricane's damage had been repaired.
Enterprise resource planning (ERP) transformation is an investment against risk. If you make the change too late, your ERP platform may not be resilient enough to support you through challenging times.
The five companies we've listed above were either forced to make their transformation at the worst-possible time, or rushed through it to hit a deadline. In either case, the companies faced huge financial setbacks, far worse than they would have faced if they had invested in ERP transformation sooner.
Yet, of course, you can't rush into an ERP transformation blind. You need clear and actionable intelligence on your ERP estate and that's exactly what LeanIX can provide.
To find out more about how LeanIX can support your ERP transformation, download our whitepaper: