Failure in ERP system Implementation at General Motors Locomotive GroupBig Business units are still quite capable of failing badly when it'comes toimplementing new ERP systems. With all .the bad publicity about spe.ctacular ERPimplementation failures by big US companies over the past 10 years, one wouldthink that today's IT departments and business units could develop and manageERP implementation projects. So failure would not be an option. Many probablydo. 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'slargest builder of diesel-electric locomotives.GM-LGED encountered severe problems during a roll out of SAPAG's R/3 ERPapplications in 2001 that its spare parts business virtually grounded to a halt,forcing GM to launch an emergency turnaround efforts 6 months after the softwarewent live. Officials at GM-LGED said order backlogs and fulfillment cycle timesstill aren't at levels that fully meet customer demands, although businessoperations started to improve shortly after ths rescue effort begdn in July 2001.

I The SAP softwzre had to be reconfigured, flashed and repopulated with cleanI data, said Director of after market sales and development at Illinois Electro mot0cycle system. The $ 2 billion G M subsidiary hired a second consulting firm toI help fix the ERP and supply chain management (SCM) systems after its firstsystems integrator completed the initial rollout. The GM unit, which makeslocomotive, diesel engines and armoured vehicles such as tanks, also had theretrain and users and rema? all the business processes that were being. built intothe new system.The LGED launched a SAP based ERP aild SCM system during 2001 in order toimprove its financial reporting and its ability to forecast spare parts needs. Theproblems started when the LG went live with R/3 in Jil~iuary2 001. The plan wasto make after market operations more efficient by replacing legacy mainframesystems with ERP system modules powered by Rl3 that could handle partsdistribution, order entry procurement and financial reporting said to executivedirector of LG. As per him, the software was not contigured well enough to matchinternal business r\:ocesses and legacy mainframe data were not properly formattedfor the new system.Executive Director said that there were rio problems with the R/3 software, butthe 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", rit 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 toget 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, norwould 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 financialimpact of the system problems.A spokesman at SAP America Inc, Pennsylvania declined to comment specificallyon 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 heERP system were specially troublesome. The way they yere configures did'ntreflect the conlplexity of the distribution processes that the I,(; uses to supplyparts to customers in the U.S and other countries, he said. In addition some legacydata were not adequately reformatted to workwith the SAP applications.The LG brought in Chicago-based technology solutions Co. to help recoilfigurethe ERP systems. Executive director said that although most after marketoperations have returned to normal, GM is looking for continued improvemmtsfrom both IT and business process stand points. The LG is also outsourcing SAPrelated application-.report, end user training and follow on softwareimplementation for the new ERP system to technology solutions. And despite themajor start-up problems with their current ER system, GM still plans to installSAP'S EKP software in the LG's manufactuiing operations and other departmentsin the next few years.Questions:1) G.M locomotive says the problem was not with the ERP software. Then whatdid cause the major failure of their ERP system ? Explain.2. What major shortcaTriings in system implementation, conversion or projectmanagement practices do you recognise in this case ?3) What would you advise C:d-LG to do differently to avoid similar problems intheir incoming ERP implementation ? Explain the reasons for your proposals.

Q.8 Case Study (compulsory) 20