Is your organization considering an ERP system? Do you believe it to be the best option for more efficient and streamlined operations?
Unfortunately, these projects have a dark secret: a shockingly high failure rate. Don’t let your investment turn into a financial bleed or operational chaos.
I looked at 10 research studies and cases about ERP failures and success factors — including the Hershey’s ERP disaster and lessons from companies worldwide. Here’s the story they all tell about why ERP projects crash and how you can avoid the pitfalls.
Why ERP projects crash
1. Inadequate Project Planning and Unrealistic Timelines
ERP projects often suffer from overly ambitious schedules. The Hershey Foods case highlights a rushed implementation just before peak sales season, which left insufficient time for testing and debugging . Mandal & Gunasekaran (2002) also stress the importance of phased implementation plans rather than “all-at-once” rollouts, citing risk management and change absorption as key to success.
2. Poor Change Management and User Resistance
Change management is frequently underestimated. Kuruppuarachchi et al. (2002) emphasize the critical role of change agents and strategic communication in easing transitions. Poonam Garg’s empirical study (2010) further notes that training and education are essential to reduce user resistance and ensure smooth adoption, which, if neglected, can doom ERP efforts.
3. Lack of Top Management Commitment
Strong and visible executive sponsorship is a recurring success factor. Mandal & Gunasekaran (2002), Garg (2010), and Wagle (1998) all identify top management involvement and resource allocation as vital. Without this, projects lack authority, direction, and funding, leading to stalled progress and unresolved conflicts.
4. Inadequate Team Composition and Cross-Functional Cooperation
ERP implementations demand collaboration between IT and business units. Bailey (1998) and Garg (2010) stress forming multidisciplinary teams with a “can-do” attitude. Failures often occur when teams lack sufficient business knowledge or technical expertise, or when organizational silos prevent effective cooperation.
5. Technical Integration and Data Accuracy Problems
The Hershey case and Mandal & Gunasekaran’s Water Corporation study reveal data integration issues and legacy system mismatches as major blocks. Missing or inaccurate data in ERP databases led to order fulfillment failures and inventory mismatches (Hershey Foods Case). Early and thorough data cleansing, along with proper legacy system integration, is critical (Bancroft et al., 1998).
6. Insufficient Testing and Troubleshooting
Hershey’s failure to adequately test all modules prior to the big launch was catastrophic (Hershey Foods Case). Mandal & Gunasekaran (2002) also argue for iterative testing and evolutionary implementation methods (Bailey, 1998), which allow early identification of issues and minimize disruption.
7. Scope Creep and Poor Project Management
Scope expansion beyond initial plans creates delays and budget overruns. Poonam Garg (2010) notes disciplined scope management as a key project management success factor, as mentioned by Mandal & Gunasekaran emphasis on controlled change requests and clear goals. Lack of realistic expectations leads to resource strain and project fatigue.
Lessons Learned and Recommendations
- Adopt a phased implementation strategy to control risks and facilitate change management.
- Ensure strong and ongoing executive sponsorship to secure resources, set priorities, and motivate teams.
- Invest heavily in user training and change management programs before, during, and after implementation.
- Assemble cross-functional teams with the right blend of technical, business, and leadership skills.
- Perform rigorous, iterative testing and data cleansing to ensure system readiness.
- Manage scope tightly and align expectations with business objectives.
- Maintain clear communication with all stakeholders and vendors throughout the project lifecycle.
- Minimizing customization to align with ERP best practices to reduce errors and eases upgrades
ERP implementation failures are rarely due to technology alone; they are mostly rooted in organizational, managerial, and strategic shortcomings. Drawing on insights from ten key research papers and landmark case studies, it is clear that success depends on holistic planning, leadership commitment, change management, and disciplined project execution. By learning from past failures, companies can better navigate the complex journey of ERP implementation and reap its promised benefits.
References & Case Studies Behind This Article
- ERP Implementation Failures in China: Case Studies with Implications for ERP Vendors.
- ERP Failure: A Systematic Mapping of the Literature bstract
- Identification and classification of ERP critical failure factors in Iranian industries.
- Major concerns about Enterprise Resource Planning (ERP) systems: A systematic review of a decade of research (2011-2021)
- Overcoming the Challenges of Enterprise Resource Planning (ERP): A Systematic Review Approach.
- Critical Failure Factors in ERP Implementation: A Systematic Literature Review
- Overcoming the Challenges of Enterprise Resource Planning (ERP): A Systematic Review Approach.
- Issues in implementing ERP: A case study
- ERP implementation Failure at Hershey Foods Corporation Case study
- Critical Success factors for Enterprise Resource Planning implementation in Indian Retail Industry: An Exploratory Study
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