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- 1. The FoxMeyer Drugs' Bankruptcy Was it a Failure of ERP? Presented by:- AshishRaj Makkar Jaspreet Singh AanchalGhai Chandan Gupta
- 2. Flow of presentation Introduction Role in Supply Chain Competition FoxMeyer Process New Business Strategy New System Project Risks Project Escalation Steps taken The two perspectives Recipe for Failure What could have been done? Sold to Words of wisdom
- 3. Introduction Fox-Vliet Drug Company, a drug distributor based in Wichita, Kansas, that had first opened its doors in 1903. With purchasing of Meyer Brothers Drug Company based at Missouri, St. Louis, the company completed a major acquisition in July 1981 FoxMeyer Drugs
- 4. It conducted business mainly through two operating units: FoxMeyer Corp. Ben Franklin Retail Stores Incorporated
- 5. Role in Supply Chain
- 6. Competition WHOLESALER MANUFACTURER DIRECT MAIL AND INTERNET ORDERS SELF-WAREHOUSING
- 7. Due to the intense competition, FoxMeyer was in a great need of a solution that would have helped it to make a complex supply chain decisions and meet the increased cost pressure.
- 10. Need of hour Needed new distribution processes & IS to capitalize on growth Wanted to be able to undercut competitors Replacing aging IS key
- 11. Project Risks Internal Customer Mandate Scope of Project Execution of Project Environment
- 12. Given the high level of risk, why did FoxMeyer initiate the project? Furthermore, why was the project allowed to escalate to the extent of contributing to FoxMeyer's bankruptcy?
- 13. Project Escalation Various factors: Project factors Psychological factors Social factors Organizational factors
- 15. (estimated cost $65 million)
- 18. Project Escalation Various factors: Social factors De-escalating the project was not considered since abandonment would not be good publicity.
- 19. Project Escalation Various factors: Organizational factors FoxMeyer's CEO and CIO were strong advocates of the project
- 21. Hired Pinnacle Automation for warehouse automation system
- 23. The failure of the ERP can be viewed from two perspectives: Planning Poor selection of the Software No consideration of other consultants’ advice(Woltz) Lack of contingency planning No end user involvement(Top down approach)
- 24. The failure of the ERP can be viewed from two perspectives: Implementation No restructuring of the business process was done Insufficient testing Over-ambitious project scope Dominance of IT specialists’ personal interest Lack of end-user cooperation(Threatened & damaged warehouse)
- 25. Recipe for failure Not having proper change management policies and procedures, is a recipe for failure Going for consultants without prior experience or ERP solutions in which you are the only company within your industry, could be a recipe for failure Not having a clear end-user training program to transfer skills to employees, is a recipe for failure Having the management over- committed (excessively ambitious, prompting unrealistic deadlines), is recipe for failure Internal resistance to changing the 'old' processes, is a recipe for failure The client does not properly address and plan for the expenses involved, is a recipe for failure The management is not controlling the scope of the project especially when you expect the consultant to provide a magic bullet, is a recipe for failure
- 26. What could have been done?
- 27. Planning (1) Software selection They should compare different softwares, evaluate their pros and cons and identify the one which best fit the business needs. It may be advisable to seek the advice one or more consultants. (2) Contingency plan Develop contingency plan of how to survive in case of system failures. (3) Stakeholders’ involvement An ERP project should get the involvement of all stakeholders, including end users and customers of the company.
- 28. Implementation Inclusion of the necessary business process reengineering ERP is not magic bullet improved supply chain planning systems, enterprise optimization systems, customer relations management, transportation and logistics management and warehouse management. (2) Thorough testing It should be done in Phased manner (3) Realistic project scope Project scope should be clearly identified with realistic time targets. Critical milestones should be set. If necessary, implementation can be piloted in a certain section or rolled out in phases. (4) Close monitoring of project status – Not to be totally relied on the Anderson (5) Seek end user support All employees should be well-trained in the new software. Address to the concerns create a high morale to meet the new challenges. (6) Post implementation— Technology transfer to the internal talent in case of troubleshooting.
- 29. Sold to McKesson McKesson paid approximately $ 1.3 Billion $23 million in cash to the debtor, Paid off about $500 million in secured debt and Additional $75 million in other liabilities Inventories & Assets of approximately $650 million
- 30. Who is Arthur Anderson Consulting now