ERP FAILURE

W W GRAINGER

INTRODUCTION

In its basic definition, ERP (Enterprise Resource Planning) is an enterprise-wide information system that integrates and controls all the business processes in the entire organization. According to Nah and Lau ERP is “a packaged business software system that enables a company to manage the efficient and effective use of resources (materials, human resources, finance, etc.) by providing a total, integrated solution for the organization’s information-processing needs.

W. W. Grainger Incorporation

W.W. Grainger, Inc. is a Fortune 500 industrial supply company founded in 1927 in Chicago, Illinois. Grainger's catalog includes such offerings as motors, lighting, material handling, fasteners, plumbing, tools, and safety supplies. Revenue is generally from business to business sales rather than consumer sales.

History

The company was founded by William W. Grainger in 1927 in Chicago. He established the company to provide an efficient solution for customers to access a consistent supply of electric motors. The business was incorporated as W. W. Grainger, Inc. in 1928.

Current business

The company is currently in the midst of a massive expansion, which includes the remodeling of existing locations as well as the company's entry into the Chinese market. Grainger is also expanding their product offering, in 2008 their new catalog featured over 183,000 products, and customers could purchase over 350,000 products on Grainger.com. This is partly primarily due to feedback from customers that Grainger should carry an even broader supply of products.

W. W. Grainger Inc. PROJECT: SAP ERP system

WHAT HAPPENED? Grainger spent at least $9 million on SAP

software and services in 1997-1998, but the ERP system,Over-counted warehouse inventory and had routine crashes. During the worst six months, Grainger lost $19 million in sales and $23million in profits. Grainger patiently worked with SAP on fixes.

Grainger, a $4.3 billion company that sells manufacturing supplies and spare parts, it said its profits for the fourth quarter of last year could be as much as 45% below Wall Street's average expectation of about $50 million. The big culprit continues to be the SAP AG-based enterprise resource planning (ERP) system Grainger switched on to . Problems with the R/3 system already cost Grainger $19 million in lost sales and $23 million in reduced earnings during the second and third quarters of 1999. At the end of the fourth quarter, Grainger officials said, a physical count of inventory showed that the ERP software was counting more products than were actually on hand in the company's warehouses.

The "inventory shrinkage," which was blamed on transaction-processing failures during the rollout of the new system, required a downward adjustment in the inventory figures.

salary and employee benefit costs were also higher than expected due to costs associated with installing the ERP system and doing the inventory count.

Installing an ERP system can be an especially thorny task for a distribution-oriented company such as Grainger. "There's such an enormous number of things they sell, and they have an extremely complicated business model and lots of [facilities],”. "It's the sort of thing that puts a lot of pressure on anybody's ERP system, not just SAP's."