Failure of an MIS

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Failure of an MIS

In the year1994, FoxMeyer was the fourth largest drug wholesaler in the United States with an annual sales of approximately $5.1 billion. The company filled orders from thousands of pharmaceutical companies with shipments of up to 500,000 items per day. However, in the same year, due to rapid growth and consolidation of the pharmaceutical industry, FoxMeyer’s management was concerned about competition from the larger competitors. The threat imposed required drastic measures. The whole industry competed on low profit margins. Therefore, FoxMeyer decided to stay ahead of the competition by implementing a new information system.

Previously, the Information Technology department consisted of the Unisys mainframe, which was able to track inventory accounts. In addition, the company’s warehouse had out-dated packaging and shipping technology. FoxMeyer believed that by improving information technology, warehousing and customer service, that the competitors could be outpaced by a wide margin. FoxMeyer decided to automate their inventory and delivery process in an attempt to provide better service at a lower price than their competition.

The bulk of the project was changing the warehouse from manual to automated. They implemented bar code readers and bar coded all their products for faster tracking capabilities. Further efficiency was added with the installation of automated conveyor belts. The belts lifted the products and delivered them to docks were they were placed in the appropriate trucks for shipment.

Also, the new information system tremendously supported FoxMeyer by making the business process of tracking sales and inventory easier and faster. First, it automated the order taking process by allowing hospitals to enter their orders directly into FoxMeyer's inventory computer system. Secondly, the system allowed robots to automatically gather the orders and send them off to the shipping docks for rapid delivery. This was thought to have the most strategic impact to fill the most orders.

The direct computer order entry system facilitated control over their inventory. The information system was designed to pick up eighty percent of all items automatically, as compared with an industry average of thirty-three percent (Bulkeley, 1996) definitely, giving FoxMeyer an advantage of superior service over the compet...

... middle of paper ...

... cash. Interestingly, it is obvious that the Delta Information System’s technology was capable of functioning as designed, since McKesson Corp made the technology work, including the automation of the warehouse.

In the competitive world of business, changes must be made to stay on top. Often, information technology is the change a company needs to ascend them ahead of the rest. In the case of FoxMeyer’s Delta Information System, the technology was ready and capable; however, the management was defective. FoxMeyer bet its company on the new system and lost.

Resources

1. Bulkeley, W. (1996, November) “When Things Go Wrong” The Wall Street Journal.

2. Caldwell, Bruce. (1998, July) “FoxMeyer Sues Andersen Consulting Over Flawed SAP R/s

Implementation” InformationWeek Online.

3. Madden, John. (1998, November) "SAP Dismisses as ‘Unfounded’ a $500 Million Lawsuit

Filed by the Trustee of a Bankrupt Drug Company" Philadelphia Business Journal.

4. Neumann and Sabher (1996) “How Information Can Help You Compete” Harvard Business

Review.

5. Porter, M. (1985) “Competitive Advantage” New York: Free Press.

6. The SAP Home Page http://www.sapinfo.net/

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