Gm Locomotive 73625f

REAL WORLD CASE GM LOCOMOTIVE GROUP : FAILURE IN ERP SYSTEM IMPLEMENTATION The more things change, the more they remain the same. Or so it seems. Big companies or their big business units are still quite capable of failing badly when it comes to implementing new enterprise resources planning (ERP) systems. With all the bad publicity about spectacular ERP implementation failures by big U.S. companies over the past ten years, one would think that today’s IT departments and business units could develop and manage ERP implementation projects so failure would not be an option. Many probably do. But others continue to take major hits. Take General Motors for instance. Or more specifically, the Locomotive Group of GM’s Electromotive Division (wwwgmemd.com), the world’s largest builder of diesel-electric locomotives. General Motors Corp.’s locomotive unit encountered such severe problems during a rollout of SAP AG’s R/3 enterprise resource planning applications in 2001 that its spare parts business virtually ground to a halt, forcing GM to launch an emergency turnaround effort six months after the software went live. Officials at GM’s Locomotive Group said order backlogs and fulfillment cycle times still aren’t levels that fully meet customer demands, although business operations started to improve shortly after the rescue effort began in July 2001. The SAP software had to be reconfigured, flushed, and repopulated with clean data, said Mike Duncan, director of worldwide aftermarket sales and development at the L-Grange, Illinois-based Electromotive Division. The $2 billion GM subsidiary hired a second consulting firm to help fix the enterprise resource planning and supply chain management systems after its first systems integrator completed the initial rollout. The GM unit, which makes locomotive, diesel engines and armored vehicles such as tanks, also had to retrain end s and remap all the business processes that were being built into the new system. The locomotive unit launched a SAP-based ERP and supply chain system during 2001 in order to improve its financial reporting and its ability to forecast spare parts needs. The problems started when the Locomotive Group went live with R/3 in January 2001. The plan was to make after market operations more efficient by replacing legacy main frame systems with ERP system modules powered by R/3 that could handle parts distribution, order entry procurement, and financial reporting, said David Scott, the locomotive unit’s executive director. He said the software wasn’t configured well enough to match internal business processes, and legacy mainframe data weren’t properly formatted for the new system. Scott said there were no problems with the R/3 software itself, but the applications weren’t properly configured to meet GM’s needs. As a result, the aftermarket department couldn’t accurately forecast demand or ensure that it had the right mix of parts inventories on hand. “Our business processes were largely arrested by what happened,” Scott said, “We spent a lot of money and expected to get something for it, and got

something else instead. It was very disappointing.” Scott and Duncan declined to identify the first consulting firm that worked on the project, nor would they discuss the process they used to originally configure and operate the system. They also declined to disclose the cost of the project or the financial impact of the system problems. A spokesman at SAP America Inc. in Newtown Square, Pennsylvania, declined to comment specifically on the situation at GM, “They continue to be a productive customer at this point, and we continue to work with them,” he said. Duncan said the materials supply and forecasting modules in the ERP system were especially troublesome. The way they were configured didn’t reflect the complexity of the distribution processes that the Locomotive Group uses to supply parts to customers in the United States and other countries, he said. In addition, some legacy data weren’t adequately reformatted to work within the SAP applications. The Locomotive Group brought in Chicago-based Technology Solutions Co. to help reconfigure the ERP systems. Scott said that although most aftermarket operations have returned to normal, GM is still looking for continued improvements from both IT and business process standpoints. The Locomotive Group is also outsourcing SAP related application , end- training, and follow-on software implementation for the new ERP system to Technology Solutions. And despite the major start-up problems with their current ERP system, GM still plans to install SAP’s enterprise resource planning software in the locomotive unit’s manufacturing operations and other departments in the next few years. Case Study Questions: 1. GM Locomotive says the problem wasn’t with the ERP software. Then what did cause the major failure of their ERP system? Explain 2. What major shortcomings in systems implementation, conversion, or project management practices do you recognise in this case? 3. What would you advise GM Locomotive to do differently to avoid similar problems in their ERP implementations? Explain the reasons for your proposals. Source : Adapted from March Songini, “GM Locomotive Unit Puts ERP Rollout Back on Track,” Computerworld, February 11, 2002, p.12 Source: Management Information Systems by James Obrien , Tata Mcgraw Hill Ltd , Sixth Edition