Failure in ERP system Implementation at General Motors Locomotive Group Big Business units are still quite capable of failing badly when it'comes to implementing new ERP systems. With all .the bad publicity about spe.ctacular ERP implementation failures by big US companies over the past 10 years, one would think that today's IT departments and business units could develop and manage ERP implementation projects. So failure would not be an option. Many probably do. But others continue to take major hits. Take General Motors (GM) as example The Locomotive Group of GM's electron~otived ivision (GM-LGED) the World's largest builder of diesel-electric locomotives. GM-LGED encountered severe problems during a roll out of SAPAG's R/3 ERP applications in 2001 that its spare parts business virtually grounded to a halt, forcing GM to launch an emergency turnaround efforts 6 months after the software went live. Officials at GM-LGED said order backlogs and fulfillment cycle times still aren't at levels that fully meet customer demands, although business operations started to improve shortly after ths rescue effort begdn in July 2001.
I The SAP softwzre had to be reconfigured, flashed and repopulated with clean I data, said Director of after market sales and development at Illinois Electro mot0 cycle system. The $ 2 billion G M subsidiary hired a second consulting firm to
fix the ERP and supply chain management (SCM) systems after its first systems integrator completed the initial rollout. The GM unit, which makes I help
locomotive, diesel engines and armoured vehicles such as tanks, also had the retrain and users and rema? all the business processes that were being. built into the new system. The LGED launched a SAP based ERP aild SCM system during 2001 in order to improve its financial reporting and its ability to forecast spare parts needs. The problems started when the LG went live with R/3 in Jil~iuary2 001. The plan was to make after market operations more efficient by replacing legacy mainframe systems with ERP system modules powered by Rl3 that could handle parts distribution, order entry procurement and financial reporting said to executive director of LG. As per him, the software was not contigured well enough to match internal business r\:ocesses and legacy mainframe data were not properly formatted for the new system. Executive Director said that there were rio problems with the R/3 software, but the applicaticli;~\ vex not properly configured to meet G.M.s needs. As a result, the after markei de:,al-tknent could not accurately forecast demand or ensure that
If, I", r it had to right mix,of parts inventories on hand. He also said "our business process
were largely arrested by what happened. We spent a lot of money and expected to get something for it, and got something else instead. It was very disappointing". He declined to identify the first consulting firm that worked on the project, nor would discuss the process they used to originally configure and operate the system. The director and ED both decIined to disclose the cost of the project or the financial impact of the system problems. A spokesman at SAP America Inc, Pennsylvania declined to comment specifically on the situation at GM. 'They continue to be a productive customer at this point' and we continue to work with them' he said. The Director at Illinois said the materials supply and forecasting modules in he ERP system were specially troublesome. The way they yere configures did'nt reflect the conlplexity of the distribution processes that the I,(; uses to supply parts to customers in the U.S and other countries, he said. In addition some legacy data were not adequately reformatted to workwith the SAP applications. The LG brought in Chicago-based technology solutions Co. to help recoilfigure the ERP systems. Executive director said that although most after market operations have returned to normal, GM is looking for continued improvemmts from both IT and business process stand points. The LG is also outsourcing SAP related application-.report, end user training and follow on software implementation for the new ERP system to technology solutions. And despite the major start-up problems with their current ER system, GM still plans to install SAP'S EKP software in the LG's manufactuiing operations and other departments in the next few years. Questions: 1) G.M locomotive says the problem was not with the ERP software. Then what did cause the major failure of their ERP system ? Explain. 2. What major shortcaTriings in system implementation, conversion or project management practices do you recognise in this case ? 3) What would you advise C:d-LG to do differently to avoid similar problems in their incoming ERP implementation ? Explain the reasons for your proposals.
Q.8 Case Study (compulsory)
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