Failed ERP implementations are costly, but not all ERP projects have to end in disaster

ERP project failure is not uncommon. Hershey’s, United States Navy, Nike, MillerCoors and Lidl are just a small number of global brands that have experienced costly ERP project failure. One of the most notable, and costly, ERP project failures of the last 5 years comes from US cosmetics giant Revlon. After merging with Elizabeth Arden, Inc. in 2016, the business set out to implement a new ERP system. Both companies had different, well-established ERP solutions in place, however to fully integrate processes across both businesses, a new ERP system was chosen with rollout commencing just one year post-acquisition.

In what appeared to be a swift and hurried implementation, many challenges were created for Revlon’s manufacturing operations and the deployment of the new solution resulted in a financial and reputational disaster for Revlon. Revlon’s North Carolina manufacturing facility was unable to create quantities of finished goods, resulting in the loss of millions of dollars due to unfulfilled orders and expedited shipping fees. Revlon revealed in its 31 March 2019 financial filing that $64 million worth of products could not be shipped and that $53.6 million had to be spent to fix the lapse in customer service. The immediate impact of this astonishing revelation: Revlon’s stock price immediately fell by 6.4% in just 24 hours.

Dramatically, what followed was a series of class action lawsuits from Revlon’s shareholders seeking damages. The lawsuits claimed that Revlon failed to design, implement and consistently operate effective process-level controls to ensure it appropriately recorded and accounted for inventory, accounts receivable, net sales and cost of goods sold. It would be fair to suggest that short timelines, post-acquisition of Elizabeth Arden, and the impact this had on the planning and designing of Revlon’s ERP solution were at the root of Revlon’s failings.

Sadly, Revlon’s experience is not an isolated case. According to Gartner, between 55% and 75% of all ERP projects fail to meet their objectives, costing organisations time, money and potential future business.