foxmeyer
Using the Foxmeyer case study (Scott) discuss how Foxmeyer’s failure might have been caused by ineffective conception and planning.
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.
Introduction
FoxMeyer Drugs was a $5 billion company and the
nation’s fourth largest distributor of pharmaceuticals
before the fiasco. With the goal of using technology to
increase efficiency, the Delta III project began in 1993.
FoxMeyer conducted market research and product
evaluation and purchased SAP R/3 in December of that
year. FoxMeyer also purchased warehouse-automation
from a vendor called Pinnacle, and chose Andersen
Consulting to integrate and implement the two systems.
Implementation of the Delta III project took place during
1994 and 1995.
According to Christopher Cole, chief operating officer
at Pinnacle, the FoxMeyer mess was “not a failure of
automation. It was not a failure of commercial software
per se. It was a management failure” (Jesitus, 1997).
Perhaps management had unrealistic expectations. Did
management expect technology to be a “magic bullet”
(Markus and Benjamin 1997a, 1997b). In reality, it was
the opposite. FoxMeyer was driven to bankruptcy in
1996, and the trustee of FoxMeyer announced in 1998
that he is suing SAP, the ERP vendor, as well as
Andersen Consulting, its SAP integrator, for $500 million
each (Caldwell 1998, Stein 1998).
Project Risks
The Delta III project at FoxMeyer Drugs was at risk
for several reasons. Using a framework developed for
identifying software project risks (Keil, Cule, Lyytinen
and Schmidt 1998), this study classifies the project risks
at FoxMeyer into (1) customer mandate, (2) scope and
requirements, (3) execution and (4) environment.
First, the customer mandate relies on commitment
from both top management and users. At FoxMeyer,
although senior management commitment was high,
reports reveal that some users were not as committed. In
fact, there was a definite morale problem among the
warehouse employees. This was not surprising, since the
project’s Pinnacle warehouse automation integrated with
SAP R/3 threatened their jobs. With the closing of three
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