FoxMeyer Company
FoxMeyer was recognized as among the best five largest drug wholesalers with an annual sale of close to 5 billion US$ and a daily shipment of more than half a million items in the United States. The company mainly focused on health care services such as distributing a line of pharmaceuticals and health products including beauty related products to chain stores, hospitals, healthcare facilities and also the independent drug stores. The company also dealt with providing managed care and the information based care services to the healthcare centers, physicians, and pharmacies (Scott & Iris, p75).
Finally, the company dealt with conducting businesses such as franchising variety stores, the operation of the stores, and distribution in wholesale to the stores. In the United States, the company had at least 25 distribution centers located all around the country (Mertic, p1). The business was operated in mainly using two operational units such as the Ben Franklin Retail stores and FoxMeyer Corporation. Both of these companies had the obligation of franchising and wholesaling to the stores including offering information-based services and managed care services.
The business strategy for this company was having a mix of differentiation and cost leadership strategies. Differentiation strategy included providing services such as the computer services, focus on quality, maintaining the national and local responsive coverage and complementing the distribution activities with the current market programs (Scott & Iris, p75). Cost leadership strategies included automating the warehouse, manning the information management systems and managing the inventory through cost-cutting. Pharmaceuticals is basically one of the most influential and dynamic type of an industry in the United States which contributes to the economy in a huge way. This is due to the reason that the United States has become a medically advanced country, therefore, the prescribed drugs bring in a huge profit for the country. Over the last twenty years, the industry has continued to grow to greater levels through mergers and acquisition in the industry (Conteh & Jalil, p122). FoxMeyer was one of the best companies which had distribution center all across the United States, therefore, taking in a huge profit. However, FoxMeyer faced fierce competition from other players in the industry of manufacturers and distributors as well as from the mail order and other self-warehousing chains.
With the main goal of having technology in order to have the efficiency improved, the company began a Delta III project in the year 1993. FoxMeyer did a research and made an SAP R/3 purchase in December of 1993. The company also made a purchase of the warehouse automation called pinnacle from a vendor and gave a consulting firm by the name Andersen to integrate both of these systems. The implementation process took a period of two years. The failure according to the chief officers was not as a result of automation but was a management issue. A trustee from FoxMeyer sued SAP who was the ERP vendor for at least $500 million including the consulting firms due to not honoring their deal of implementing the projects successfully (Samara, p123). There are many reasons as to why enterprise resource planning (ERP) at FoxMeyer failed to range from the management issue to the high level of expectations of the company.
Project risks included scope and requirements, customer mandate, environment and the execution process. Customer specifications usually rely on the dedication from both the executive and the user of the program (Alami, p7). The administration at FoxMeyer was on point but the users were not dedicated to the program since it presented itself as a way of rendering them jobless. The scope of the project was also a challenge since the integrated system could process at least over 420 000 transactions compared to the newly implemented system in the university health center where only 10 000 transactions could take place. The execution process was also a challenge since it required the trained personnel’s to deal with the program which was scarce at FoxMeyer. FoxMeyer did not have the capacity to handle the project and so contracting another company was the solution which was very expensive (Samara, p101). The integration of the ERP and automated services offered by pinnacle was very challenging and could only be done by at least 50 other consultants at FoxMeyer which also added to the cost while generating no returns. Project management at FoxMeyer was very little and at times it was reduced to zero making the environment very challenging for the system integration.
FoxMeyer had initially thought of the project being in big trouble but due to the consulting firms and the vendor’s lack of transparency, the control of the project went into unexpected difficult situations preventing it from being a success (Conteh & Jalil, p120). The main players for the project to fail in this case are the users and the implementation team which never gave clear directions with regards to the success of the system. For the case of users, each project undertaken by the company for the benefit of increasing the market capacity and reducing delays sent a wrong message to the users. Each user who felt the need to make the project a success could have done it but feared for their job position being overtaken by the system.
The issue at FoxMeyer could have been de-escalated by having the objectives and goals very clear before undertaking on the implementation process. However, the goals at FoxMeyer were clear but lacked the back up from a knowledgeable source on how to deal with the upcoming issues. Before the commencement of the projects, FoxMeyer should have also anticipated the challenges such as user illiteracy and how well will the project be accepted by the users (Mähring et al., p462). A prior employee training could have made the project very successful since it would have eliminated lack of trust and rejection after costing billions of dollars for purchase and implementation. Also, FoxMeyer could have avoided going bankrupt after the project being unsuccessful for the many times. There were a number of unsuccessful processes which lead to the company hiring more than 50 consulting firms who only brought in extra costs rather than offer a solution to the menace.
The Chief Executive officer could have avoided the company from going down at such a high level through handling the project with caution and testing it for errors such as the failure during the implementation stage. Every person including the users of the system was part of the program that could have brought a success to FoxMeyer but the CEO did not put that idea into consideration. Stakeholders in an implementation process include the end users and it was important for the management to consider such while undertaking on the project (Scott & Iris, p78). For a big company such as FoxMeyer to run a project which was not even tested and which was to cost such huge amounts of money was a reckless move that could have been avoided.
In relation to the week 1 and 2 discussions, project management is very crucial for any organization that wants to the role in a process. In many cases, project managers are supposed to offer technical support for the success of the project. Considering the case of FoxMeyer, it is evident to indicate that the project lacked the management and therefore making it be a total failure within a period of fewer than two years. With relevance from the discussion, project managers should always look out for ways in which any project will be successful without increasing the cost of service (New York University, p15). There are various contributing factors to the success of a project which include but not limited to scope optimization, skilled resources, focusing on execution and having the tools and infrastructure ready for use. Requirement traceability is very important for an Information technology related project. The specific requirements for initiation and planning must be present to make the project a success. Updating of the requirements at each stage is vital since it lays the foundation on which the project will be executed successfully.
Updates such as cost and the risks involved need to be determined and also the key stakeholders of the project must also be identified (New York University, p9). Work breakdown in every stage is also important to ensure that all processes are done with the required energy and right specifications. This breakdown must happen at every stage of project plan development in an organization. The development of every project starts from the initiation stage until the close or final stage of completion. Planning, execution, controlling and monitoring are vital processes which FoxMeyer lacked. The company ignored all the processes and trusted the consulting firms with the task of managing its business which leads to the bankruptcy of FoxMeyer.
Works cited
Alami, Adam. "Why do Projects Fail?." PM World Journal 5 (2016): 1-9.
Conteh, Nabie Y., and M. Jalil Akhtar. "Implementation challenges of an enterprise system and its advantages over legacy systems." International Journal on Computer Science and Engineering 7.11 (2015): 120.
Ganesh, L., and Arpita Mehta. "Understanding Cloud Based ERP Implementation in Light of Conventional ERP Implementation at Indian SMEs: A Case Study." (2016).
Mähring, Magnus, et al. "Making IT project de-escalation happen: An exploration into key roles." Journal of the Association for Information Systems 9.8 (2008): 462.
Mertic, John. On FoxMeyer, and why forcing a “big bang solution” can kill your business. (2013). Retrieved from: https://www.sugarcrm.com/blog/2013/03/28/on-foxmeyer-and-why-forcing-a-big-bang-solution-can-kill-your-business/
New York University, Applying Project Management Principles in IT. (2017). Week 1 and 2.
Samara, Tarek. ERP and Information Systems: Integration Or Disintegration. John Wiley & Sons, 2015.
Scott, J. E. The FoxMeyer Drugs’ Bankruptcy: Was it a Failure of ERP?. (2009). Retrieved from: https://www.slideshare.net/jmramireza/the-foxmeyer-drugs-bankruptcy-was-it-a-failure-of-erp-2332065
Scott, Judy E., and Iris Vessey. "Managing risks in enterprise systems implementations." Communications of the ACM 45.4 (2002): 74-81.
