Question

ERP FAILURE: Company: Waste Management, Estimated Sunk Cost: $100 million

Waste Management, the biggest company of its kind in North America, decided to partner with one of the largest global vendors to implement a new ERP without having to extensively customize the product. The two companies agreed upon an 18-month implementation cycle, which involved costs estimated at more than $100 million, with the expectation that Waste Management would realize more than $350 million in cost benefits. When the project snowballed into a failed ERP, the lawsuits began to fly. Waste Management believed that the software giant didn’t deliver the solution as promised. The vendor responded by stating that Waste Management had ducked its responsibility through an inability to define its business requirements, including receiving input from “sufficient, knowledgeable, decision-empowered users and managers” to collaborate on the project.

After years of pre-trial litigation, the two sides eventually agreed to a settlement to the plaintiff (Waste Management) for an undisclosed amount. If Waste Management had deployed a team dedicated to change management for ERP implementation, the project may have succeeded in the long run. Instead, a lack of dedicated change management was used against the company in a court of law. Waste Management’s failure to clearly define specific requirements during the early stages of their ERP project placed the company in a poor position to implement a competent change management plan. After years of pre-trial litigation, the two sides eventually agreed to a settlement to the plaintiff (Waste Management) for an undisclosed amount.

Question:

What was the main cause of this ERP failure and what could have been done to avoid this failure?       

Answer 1

ERP stands for Enterprise Resource Planning, it refers to software and systems used to plan and manage all the core supply chain, manufacturing services, financial and other processes of an organization. The main purpose of ERP is to increase the organisational efficiency by managing and improving how the company's resources are utilized.

In the given instance the main cause of ERP failure are:

• Insuffiecient planning, the organisation haven't done enough planning before implementing t he ERP. It should have performed an internal audit of all processes and policies in each department so they can make more efficient with the new system. This process should have been done by an experienced ERP Consultant who would ensure all of the process goals be met and the solution will fit all the requirements.
• Underestimating the required resource, the organisation should have deployed an internal unit so they can provide insight into what success would look like in their department. Without a team the ERP implementation takes long time
• Choosing the right partner, not every solution is best fit for your unique business process therefore the organisation should have a meeting with the vendors and make sure it fits for their organisation
• Inappropriate customizations, ERP doesn't offer a wide range of product functionality, so it is critical to communicate which systems you want to replace and which solutions you want to integrate.

It is clear from the given points that the Waste Management Company should have informed and discussed its business requirements with the Vendor and should have hired an ERP Consultant to collaborate on the project.