FoxMeyer Bankruptcy

The FoxMeyer's Drugs' Bankruptcy: Was it a failure of ERP?

Abstract

The research paper discusses the possible causes of failure of US's fourth largest pharmaceutical distributor FoxMeyer. In 1993, the company decided to implement an ERP system in order to handle their growing business through software. The paper discussed the description of the ERP software along with its purpose in the company. It also analyses the reasons for the project's complete failure. Mismanagement in the implementation of ERP project in the company led to its complete failure.Contents

Abstracti

Introduction1

Overview of the organisation/tool/system1

Description3

Analysis5

Impact on Customers8

Factors for Failure of SAP R/38

Inappropriateness of SAP R/8

Moral problem among employees9

Mismanagement of implementation process9

Conclusion10

Recommendation10

References12

The FoxMeyer's Drugs' Bankruptcy: Was it a failure of ERP?

Introduction

FoxMeyer Drugs was among the large scale distributors of pharmaceuticals worldwide. The company had a worth of $5 billion. In the year 1993, it recognized the need of implementation of new software for handling the issues related to its inventory system and other areas (Motivalla & Thompson, 2009, p. 232). In the same year, it started the implementation of a package of ERP software by SAP, called R/3. Within a period of four years, the company got bankrupted. Few organizations get crippled by problems of technology as FoxMeyer got. The officials of the company were of the viewpoint that technology played the major role in failing their company and that its failure was the responsibility of SAP. In this report, an in-depth analysis on the reasons behind failure of FoxMeyer Company is carried out.

Overview of the organisation/tool/system

The company of Fox Meyer's Drugs was a company worth $5 Billion. It was the 4th largest distributor of pharmaceuticals in United States before it collapsed. Its annual sales were about US $5 billion. Its daily shipments included more than 500,000 items (Holland & Light, n.d., p.n.d.). The business of the company was mainly in services related to health care. FoxMeyer distributed a wide range health and beauty aids along with pharmaceutical products to independent drug stores, chain stores, hospitals, clinics and other healthcare facilities. In other words, customers of FoxMeyer were dispensers and retailers. It offered information-based services and managed care to pharmacies, physicians, and health care facilties. It conducted business in operating and franchising of crafts stores, and products' wholesale distribution to those crafts store (Anonymous, n.d., p. w138)

Fox Meyer faced intense competition from its rivals. Due to that, it required a solution for helping it in making complex decision for supply chain and meeting head on the increased cost pressure. In early 1990s, the management of FoxMeyer decided to lay emphasis on a business strategy of transforming the company into a distributor that was low cost in order to increase the competitive advantage. It decided that at the same time it would offer differentiated services to targeted customers of a diversified nature. Based on an analysis of supply chain, it was decided that a system of ERP would provide the best solution for the company to offer real time information and integrate and automate inventory systems (Anonymous, ...