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How Nike’s ERP Implementation Failure Cost the Company 7 Years of Work and $500 Million
ERP implementation failures are unfortunately all too common in the industry, and one of the most known examples of a failed ERP implementation is that of retail sports and shoe magnate Nike.
The company notoriously lost nearly 7 years of work and $500 million because of its failed ERP implementation. This article will explain what went wrong and how you can prevent it from happening to you.
Nike’s Failed ERP Implementation: What Happened?
In 2001, Nike aimed to implement an ERP system to improve supply chain management and their financial accounting as well as strengthen their global business operations.
The company wanted to reduce inefficiencies, make better forecasts of demand, and optimize inventory management to better match their supply and customer demand. Little did they know, it would result in the exact opposite.
Instead of accomplishing their business goals, the failed ERP implementation led to massive supply chain disruptions for the company, which caused a variety of problems.
Where Did The Investment Go?
Nike Chairman, President, and CEO said during an earnings call::
“This is what you get for $400 million, huh?” – Phil Knight
He did so to highlight the astonishing $400 million wasted in resources by failing to properly implement their ERP—but that’s not where the losses ended for Nike.
Due to the software’s inability to handle complex data, deployment was delayed. Suppliers received inconsistent orders, and customer dissatisfaction peaked.
For example, due to their disconnected systems, they ended up with an excess inventory of products that were not popular and shortages of products that were in high demand like Air Jordans.
In the end, this resulted in over $100 million in revenue losses for the company. To make matters even worse, the news caused the company stock to drop a whopping 20% in value—-ouch!
After the damage was done, it took the company nearly seven years to recover from the impact of the failed ERP implementation. The recovery required major system changes and additional investments.
The Problem: A Rushed and Mismanaged Implementation
It was a complex domino effect of issues that led to Nike’s failed ERP implementation. These issues included a lack of training, inefficient planning, and a rushed implementation.
This is a breakdown of what went wrong:
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Too Fast, Too Big
Nike attempted to deploy a complex ERP system in just 6 months when typically projects like these take years to implement.
In doing so, the company skipped key phases of the rollout, taking a “big bang” approach to a launch and deploying the system all at once. This, understandably, created chaos across all departments.
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Incompatible Systems
To make matters worse, the software the company tried to implement was not fully compatible with Nike’s existing legacy systems.
This was the driving force behind the supply chain issues the company experienced as the systems did not communicate well with each other.
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Lack of Testing & User Training
Nike had a shortage of skilled employees which they failed to properly train. This was partly due to their quick launch approach. This added fuel to the fire since the system was not properly tested, and employees were not properly trained.
Who Bore Responsibility
There is not one individual party who was entirely responsible for the failed ERP implementation. However, since the issue was primarily due to planning and technicalities it is fair to say that the IT, project management, and implementation teams bore the bulk of the responsibility.
Their decision to skip phases in the process, their lack of testing, and poor integration practices, despite having a large budget, were the driving factors behind the failed ERP Implementation.
How to Avoid a Failed ERP Implementation With Xledger
The best way to ensure your ERP implementation works as planned is by onboarding a trusted ERP partner with a solid implementation track record like Xledger.
At Xledger we boast a 99% success rate, a rarity in an industry where the norm is to fail three-quarters of the time.
We achieve this impeccable track record by employing a proprietary implementation methodology we call XIM. The Xledger Implementation Methodology (XIM) is a smart implementation process that deploys the system quickly and with minimal disruption to your business.
The six phases of XIM include planning and setting clear goals, analyzing and designing business processes, implementing a tailored configuration that is right for your business, testing and verifying that the system is fully operational, and training and going live together.
Nike’s implementation failed due to a poor planning methodology. By leveraging Xledger’s XIM you can rest assured that our team will go through the entire phase cycle to ensure a successful implementation of your ERP and avoid any financial losses.
Xledger’s comprehensive end-to-end testing ensures technical bugs and errors like the one that caused the inventory imbalance are identified and fixed prior to the software rollout.
Our team also provides comprehensive training to end-users ensuring your team knows exactly how to operate the system prior to launch.
Since Xledger is cloud-based, the system can also easily integrate with other software applications to suit your unique requirements. Our API is open, so we can integrate it with any other platform.
Book a free demo and discover why Xledger is the leader in implementation in the ERP industry.
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