FoxMeyer was a large drug wholesaler that implemented an enterprise resource planning (ERP) system in 1994 to integrate its business functions and gain efficiencies. However, the implementation faced major issues including an overambitious project scope, lack of business process reengineering, insufficient testing, and lack of end user involvement. This led to failures in inventory and billing systems that caused major financial losses and the bankruptcy of FoxMeyer in 1996. Better planning, testing, stakeholder involvement, and change management could have prevented this ERP implementation failure.

1. BY
FARHANAAZ.C
FOXMEYER’S – CASE
STUDY

2. INTRODUCTION
 Enterprise resource planning (ERP) systems integrate internal and
external management of information across an entire
organization— embracing finance/accounting, manufacturing,
sales and service, customer relationship management, etc. ERP
systems automate this activity with an integrated software
application. Enterprise systems are complex software packages
that offer the potential of integrating data and processes across
functions in an enterprise.

3. WHY ERP IS NEEDED?
• ERP system grew to replace the islands of information by
integrating the traditional business functions.
• Successful implementation of an ERP system will have following
advantages
Business integration and Improved Data Accuracy
 Planning and MIS
 Improved Efficiency and Productivity
Establishment of Standardized Procedures
Flexibility and technology

4. HISTORY OF THE COMPANY:
• Fox- Vliet drug company, a drug distributor based in Wichita,
Kansas, 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
1981.
•FoxMeyer was the fifth largest drug wholesaler in the United States
(1995) with annual sales of about 5 billion US$ and daily shipments of
over 500,000 items.

5. DISTRIBUTION:
The company had 25 distribution centres located
throughout USA.
It conducted business mainly through two operating
units:
 FoxMeyer Corp.
 Ben Franklin Retail Stores, Inc.

6. BUSINESS STRATEGY:
• Cost efficiency operations
• Effective inventory
management
• Effective information
system management
COST LEADERSHIP
• Provide innovative services
• Focus on quality
• Strengthen sales and
marketing efforts
DIFFERENTIATION

7. COMPETITION
• WHOLESALES
McKesson- $20.8 Billion
Bergen’s- $11.6 Billion
Cardinal- $11.5 Billion
Amerisouce- $7.8 Billion
FoxMeyer- $5.5 Billion
• MANUFACTURER DIRECT
• MAIL AND INTERNET ORDERS
• SELF-WAREHOUSING
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.

8. CUSTOMERS OF FOXMEYER
• INDEPENDENT PHARMACIES
• INSTITUTIONS
• RETAIL CHAINS

9. FOXMEYER ADOPTING ERP:
• GOAL: Increase efficiency
• BEGINNING: 1993 , Implementation: 1994
• PROJECT: DELTA III
• SOFTWARE : SAP R/3, Pinnacle warehouse-automation
• CONSULTANTS : Andersen Consulting

10. TIMELINE:
1993 – Software
acquisition
1994 - Implementation
1995- Implementation
1996- Thomas Anderson, president & CEO
resign & BANKRUPTCY
1998
Trustee of FoxMeyer suing SAP & Anderson Consulting
for $500 million each

11. PROJECT RISKS:
•Internal customer mandate
•Scope of project
•Environment
•Execution of project

12. PROJECT ESCALATION:
VARIOUS FACTORS
 PROJECT FACTOR:
They hoped to save $40 million annually ,ERP installation (estimated cost
$65 million)
Warehouse Automation System (another $18 million)
 PSYCHOLOGICAL FACTORS:
Andersen and SAP were the then market leader in their respective
businesses .Upper management was in full drive to implement.
 SOCIAL FACTOR:
De-escalating the project was not considered since abandonment would
not be good publicity.
 ORGANIZATIONAL FACTOR:
A change in management is often needed for de-escalation. But it was too
late for FoxMeyer .Reports seem to indicate that FoxMeyer had loose
management controls, shown by the fact that management did not control
the scope of the Delta project.

13. FAILURE:
PLANNING:
• Poor selection of the Software
• No consideration of other consultants’ advice.
• Lack of contingency planning
• No end user involvement(Top down approach)

14. IMPLEMENTATION:
• No restructuring of the business process
• Insufficient testing
• Over-ambitious project scope
• Dominance of IT specialists’ personal interest
• Poor Management support
• Lack of end-user cooperation

15. WHAT COULD HAVE BEEN DONE?
PLANNING:
 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.
 Contingency plan:
Develop contingency plan of how to survive in case of system
failures.
 Stakeholders’ involvement :
An ERP project should get the involvement of all stakeholders,
including end users and customers of the company.

16. • 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.
 Thorough testing It should be done in Phased manner.
 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.

17.  Close monitoring of project status – Not to be totally relied on the
Anderson.
 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.
 Post implementation
Technology transfer to the internal talent in case of troubleshooting.