Back in August we took a light-hearted look at project forensics. Today we’ll look at three notorious project disasters, and what lessons can be learned from them.
Timing is Everything
It wasn’t a very sweet Halloween for the Hershey Company in 1999. The chocolate maker had invested $112 million to roll out an order-taking and distribution system, a combination of ERP software from SAP, CRM software from Siebel and supply chain software from Manugstics.
The Hershey Company reported a significant 19% drop Q3 earnings that November, laying some of the blame on its new software. The problems it generated left Hershey unable to deliver $100 million worth of Hershey’s Kisses and Jolly Ranchers in time for Halloween.
At the time, questions about the viability of its new system abounded. But compared to similar enterprise software implementations, the issues that the Hershey Company experienced were actually typical. The disaster wasn’t the software, it was the timing of its launch – just as orders for Halloween began pouring in.
Lesson Learned: A project that affects business critical systems should not be launched near or during times of peak operations. A good way to manage this is to ensure that the sponsor and all possible stakeholders have the opportunity to review the project plan, its goals, costs and schedule, to raise any possible red flags.
Stay On Top of Projects
"This is what you get for $400 million, huh?"
Phil Knight, Nike CEO
Nike hired a software development company to develop a supply chain management system, which launched In June 2000. The new system cost them more than $100 million in lost sales through excess inventory and order delays (which were compounded by a slowdown in U.S. footwear sales). This disaster led to a stock depression, and even several lawsuits.
Nike cited several problems with the release: speed issues, poor integration with their existing systems, and inadequate training for Nike’s planners before it went live.
Fortunately, these problems were quickly corrected these problems by fall of that year, and Nike reported that its business was unaffected after that quarter.
Lesson Learned: Staying on top of the status of projects, their progress and issues, can eliminate many ugly surprises during closure and launch.
Problems Don’t Fix Themselves
In 2003, one of Britain’s largest and oldest retailers, Sainsbury’s, deployed an automated fulfillment system at its distribution center that served most of London and southeast England, with the intent of increasing efficiencies and streamlining operations.
The system utilized barcodes, or rather, it was intended to. “Horrendous” barcode-reading errors lead to severe disruptions in service. Nevertheless, Sainsbury insisted in 2005 that its system was operating as intended. However, by 2007 their tune had changed. The system was shuttered, leaving the supermarket giant to write of £150 million in IT costs (in 2007, this amounted to approximately $300 million).
Lesson Learned: A review phase is essential to any project schedule. The product should be thoroughly tested before release, and having a means to identify problems, assign them for work, and track their status is essential. A support phase following the rollout, to manage issues that pop up in a live environment, is just as important.