The Snap-On project involved the conversion of the company’s order entry system to the ERP system. The company obtained the system from Baan Co. The system took three years of design and deployment. However, the new system for making order entry turned to be a disaster for the company. It resulted in “$50 million in lost sales for the first half of 1998” (Stein, 1998). It also created delays in the delivery of orders and wrong number of inventories.
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Snap-On experienced a surge in operating costs by 40 percent. This cost resulted from the need to “cover costs of extra freight and temporary workers” (Stein, 1998). The deployed system also affected dealers because most of them could not operate the new software, and they went to rival companies. During the fiscal year of 1998, the company recorded a decline in profit by 22 percent as compared to the previous year.
The ERP system has a crucial role in most important aspects of an organization, both internal and external. Therefore, effective implementation of the project and its subsequent usages are significant to performance and continuity of any firm.
In the past decades, Enterprises Resource Planning (ERP) systems have taken center stage in the development of information technology among many firms. The adoption of ERP systems in an organization involves complex processes, many stakeholders, and deployment of other resources in order to achieve the desired outcome under pressure and time constraints amidst unforeseen challenges.
Therefore, for an organization to remain competitive in an evolving marketplace, it must deploy the ERP system to for efficiency and effective services to its customers. Although the system can provide numerous benefits, there are high rates of failure during the deployment process as was the case of the Snap-On conversion project. It resulted in massive losses, increase in costs, loss of customers, wrong deliveries, and miscounted inventories.
In most circumstances, firms do not adhere to the most important warnings that may indicate the possibility of a project failure. Therefore, it is necessary for a firm to identify issues that could lead to success or failure of a noble project (Kuang, Lau and Nah, 2001).
The jumbled initiation of the Baan enterprise software contributed to massive financial difficulties for Snap-On Inc. The company recognized that challenges with the implementation of the system would result in 40 percent losses in the second quarter. Challenges occurred due to the learning curve for the new system and system failures and delays. These factors contributed to poor standard of services at Snap-On. For instance, there were unwanted impacts on sales, customer service, expenses, and productivity.
Snap-On Project Simplify was among the top ten failures of the time
Snap-On had acquired the Baan’s software for manufacturing, distribution, and financial in 1994. The company referred to the initiative as the Project Simplify. Implementation of the system formed the part of a broad Project Simplify, which originally aimed at changing the entire business processes and facilitating delivery of products and services to Snap-On independent dealers.
However, serious issues during the implementation resulted in a massive loss of $50 million in sales. This was according to the published report on the project. However, both Snap-On and Baan did not comment on the exact nature of the problem.
Baan noted that they would assist Snap-On to rollout its system. However, during the implementation, Baan did not take active role in the process because Snap-On introduced another consulting company (Booz, Allen & Hamilton) to implement the system.
Baan noted that challenges resulted from a large scope of the project in terms of several years of plan, million-dollar costs, and it observed that during the purchase of the system, Snap-On engaged in 17 new acquisitions and introduced hundreds of products within those years.
Observers noted that Snap-On was undertaking a critical reengineering and implementation of the ERP system. The system aimed to streamline its operations and enhance communication, coordination, and relationships with independent dealers. Thus, this was a magnitude project, which was also a part of the issue.
Although the implementation process could not avoid short-term issues, Snap-On tried to replace its old method of doing business with a single ERP solution in a single phase. This was the most important source of a long-term failure to the company. Thus, the failure forced the company to restructure, close some business operation, and integrate and consolidate the significant units with a new system.
There are critical success factors for implementation of a project (Davenport, 2000). From the failure, it is obvious that Snap-On did not identify factors, which could have resulted in successful implementation of the project.
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The Snap-On case shows that various factors can lead to a project failure or successful rollout. Clearly, the project lacked a good project management approach. Consequently, it did not integrate various units of the business. Details regarding the level of participation in the implementation of the project among the top management of Snap-On have remained scarce.
However, studies have demonstrated that effective implementation of a project requires optimal support from the company’s senior executives. This is necessary because implementation of a project affects the most important operations of an existing organization. In addition, the project also involves a huge amount of resources. Therefore, senior executives should provide their supports to the project in terms of decision-making.
The system developers (Baan) did not take active role in the implementation of the system. Instead, Snap-On introduced an external consultant to implement the project. One can also attribute the failure of the project to the use of the external consultant (Booz, Allen & Hamilton).
Studies have also noted that the use of external consultants have contributed to failures of some projects (Wong and Tein, n.d). Implementation of an ERP system in an organization needs expertise and sound knowledge of specific business operations in order to implement the system to fit all units and external stakeholders. It is critical to note that finding good consultants for technical ERP solutions is difficult.
Expertise and competence of the project team can also have significant impacts on the overall implementation of the ERP system. A skilled team spends the minimum amount of resources to ensure that the project is successful with minimum issues. An experienced project team also has effective methods of risk management during the implementation phase.
The Project Simplify covered the entire company, including independent dealers of Snap-On. Therefore, it was necessary for Snap-On to develop clear objectives, focus, and scope of the project before its implementation. A lack of a clear strategic plan in implementation of a project usually leads to failure. This was vital for Snap-On because it wanted to change and overhaul the old method of its business operations.
Other factors, which could have contributed to the failure of the ERP solution, were likely to be change management challenges, a lack of effective training prior to deployment of the system, and culture of the organization. Thus, effective project management is a key to successful implementation of the project.
This also ensures that the project achieved the desired outcomes with allocated resources. A firm’s culture in which employees have common values and objectives and willing to accept changes is likely to thrive in the implementation of the project. Change agents in an organization are important facilitators of change through communication. Moreover, they have the ability to leverage the firm’s culture as a way of facilitating change in the organization.
Firms should include user training in their programs. The lack of training among others users of the Snap-On’s ERP system led to its failure. There were cases of wrong inventories, counts, and orders. Such challenges led to delays in delivery and eventually the loss of dealers, who turned to competitors.
Snap-On used the opportunity as a form of reengineering its business operations. However, there were challenges with the integration of the ongoing business practices and the new ERP system. On this note, organizations should realize that the ERP systems would not solve all challenges in the organization, at least during the implementation stage. Snap-On attempted to transfer all its operations and business units to the system in a single phase. This was disastrous.
The failure to train users on the new system could have resulted from a lack of interdepartmental coordination and communication. During the implementation process, it is necessary for different departments to test and provide their feedback concerning system challenges. This provides an opportunity to understand technical challenges with the system and methods of addressing the said issues.
Researchers have noted that most organizations seem to ignore the idea of risk management in the implementation of ERP solutions (Wong and Tein, n.d). Snap-on failed to provide a plan for risk management during the implementation of the Project Simplify. The company should have a clear plan of managing any potential risks during implementation of a project to avoid its total failure.
In short, failure to understand factors that ensure successful implementation of an ERP system led to the failure of Project Simplify at Snap-On. Effective understanding of these factors can aid senior executives to make critical decisions in order to avert failures by providing the necessary support in various areas and during various stages in the implementation process (Chen, 2001).
The implementation of a new system in a firm is a multifaceted initiative that requires careful planning. The case of Snap-On shows that the project is a high-risk undertaking that requires careful planning and execution because it affects all operations of the business units, including external partners.
ERP solutions are expensive. Therefore, they require management to make complex decisions during their implementation. The impact of the system on the entire business requires that a project team should have the right expertise and knowledge to implement the project successfully.
Effective implementation of the ERP solution in an organization requires the right team, resources, and careful planning. The organization must take initiatives to train its people and dealers on suitability and effective uses of the system before deployment. It is also important to align the business needs and strategic objectives with the ERP system. Overall, the organization must also identify all success factors and possible risks in order to ensure successful implementation.
Chen, I. (2001). lanning for ERP system: Analysis and Future Trend. Business Process Management Journal, 7(5), 347-386.
Davenport, T. (2000). Mission Critical: Realizing the Promise of Enterprise Systems. Boston: Harvard Business School Press.
Kuang, J., Lau, S., and Nah, H. (2001). Critical factors for successful implementation of enterprise systems. Business Process Management Journal, 7(3), 285-296.
Stein, T. (1998). Snap-on Retools Amid IT Problems . Web.
Wong, B., and Tein, D. (n.d). Critical Success Factors for ERP Projects. Web.