The FoxMeyer Drugs' Bankruptcy: Was it a Failure of ERP?
Judy E. Scott, The University of Texas at Austin, Judy.Scott@bus.utexas.edu Abstract
This interpretive case study of FoxMeyer Drugs' ERP implementation is based on empirical frameworks and models of software project risks and project escalation. Implications of the study offer suggestions on how to avoid ERP failure. warehouses, the transition to the first automated warehouse was a disaster. Disgruntled workers damaged inventory, and orders were not filled, and mistakes occurred as the new system struggled with the volume of transactions. $34 million worth of inventory were lost (Jesitus 1997). Second, the scope of the project was risky. FoxMeyer was an early adopter of SAP R/3. After the project began, FoxMeyer signed a large contract to supply University HealthSystem Consortium (UHC). This event exacerbated the need for an unprecedented volume of R/3 transactions. Although, prior to the contract, testing seemed to indicate that R/3 on HP9000 servers would be able to cope with the volume of transactions, in 1994 R/3 could process only 10,000 customer orders per night, compared with 420,000 under FoxMeyer's original mainframe system (Jesitus 1997). Third, the execution of the project was an issue due to the shortage of skilled and knowledgeable personnel. FoxMeyer did not have the necessary skills in-house and was relying on Andersen Consulting to implement R/3 and integrate the ERP with an automated warehouse system from Pinnacle. Although at the height of the project there were over 50 consultants at FoxMeyer, many of them were inexperienced and turnover was high (Computergram International 1998). Finally, the environment quadrant of the risk framework includes issues over which project management has little or no control (Keil, Cule, Lyytinen and Schmidt 1998). Although FoxMeyer must have realized the