Foxmeyer Case – Erp System
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FoxMeyer was the 5th largest pharmaceutical wholesales in the United States back in 1995. Since the pharmaceutical industry was extremely important to the economy, competition was high. FoxMeyer had to compete with companies like McKesson and Bergens who had created an additional way to distribute such retail and wholesale on the web. FoxMeyer believed that by implementing a new ERP system, they would soar as a distributor and remain in the top but improperly managed change, an undefined and uncontrolled scope, and having no clear end-user training program drug the company down into failure.
Improperly managed change was one cause of FoxMeyers ERP failure. Managements unrealistic idea of completing the Delta III project in 18 months caused the implementation of the new ERP system to be phased in too quickly. There was not enough time allotted for employees to adjust their business processes to the system and the system did not go through adequate testing. Another problem with a fast ERP implementation of SAP R/3 and the warehouse-automation was that Andersens inexperienced consultants would not have enough time to learn the ins and outs of the system. “There was no contingency planning to deal with changes in the business operations” (FoxMeyer Case, n.d). Without clear phases in a project, the ERP system implementation is likely to fail. Management at FoxMeyer should have used a more phased approach when implementing the new ERP system. By doing so, they could see the difference between the old and new systems and not transition from old to new too quickly. They would then be able to see if any problems would occur before completely relying on the new system. It is managements responsibility to examine FoxMeyers competitive position in relation to their desired position before deciding to apply a particular ERP system in place of their old one (Chen).
FoxMeyer also did not have a defined and controlled scope of the Delta project. On top of the SAP R/3 and warehouse-automation with completely different vendors such as Pinnacle and Andersen Consulting, they also signed another contract with University HealthSystem Consoritum. FoxMeyer had too many contracts involved in the Delta project and it only made things worse. They expected a lot from Andersen Consulting because they “assumed” they knew what they were doing and would have no problem using the ERP system and warehouse-automation. The reality was that the consultants used for the project were inexperienced and this created many setbacks (Chen). FoxMeyer sued SAP and Andersen for those setbacks and losing large amounts of money that essentially damaged their company. “Andersen Consulting did not match that companys upfront attitude, according to the FoxMeyer lawsuit. Even so, some say, the consultant should not necessarily shoulder the entire blame” (Buxbaum). FoxMeyer should have had a more thorough contract written up that stated specific expectations of SAP