Failure of an MIS
analytical Essay
1573 words
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/
In this essay, the author
- Explains that foxmeyer was the fourth largest drug wholesaler in the us with an annual sales of approximately $5.1 billion. however, due to rapid growth and consolidation of the pharmaceutical industry, the threat imposed required drastic measures.
- Explains how foxmeyer decided to automate their inventory and delivery process to provide better service at a lower price than their competition.
- Explains that the bulk of the project was changing the warehouse from manual to automated. they implemented barcode readers and bar coded all their products for faster tracking capabilities.
- Explains that foxmeyer was the fourth largest drug wholesaler in the us with an annual sales of approximately $5.1 billion. however, due to rapid growth and consolidation of the pharmaceutical industry, the threat imposed required drastic measures.
- Explains how foxmeyer decided to automate their inventory and delivery process to provide better service at a lower price than their competition.
- Explains that the bulk of the project was changing the warehouse from manual to automated. they implemented barcode readers and bar coded all their products for faster tracking capabilities.
- Explains how the new information system greatly supported foxmeyer by making the business process of tracking sales and inventory easier and faster.
- Explains that the direct computer order entry system facilitated control over their inventory. the information system picked up eighty percent of all items automatically, giving foxmeyer an advantage of superior service over the competition.
- Explains that foxmeyer's information system planned to conduct business with its customers on a daily basis. however, the implementation was inconsistent with the changing business environment.
- Explains that foxmeyer's management committed $56 million to develop and install the delta information system. however, to build its new 340,000-square-foot warehouse, the company hired anderson consulting, a leading international information systems consulting firm.
- Explains that foxmeyer purchased r/3, an inventory management software system from sap ag, a giant german software company. the vendor for the warehouse system was pinnacle.
- Explains that the software had a reliable reputation and was designed to run on client/server hardware and enabled its users to replace their old mainframes.
- Analyzes how management adopted an out-of-mind attitude towards sap implementation problems. even management personnel involved in the implementation were discouraged from criticizing the system.
- Explains that management failed to understand the complexity and risks involved in the implementation process and fast tracked the project by three months prior to having the system fully tested.
- Explains that the system at the new warehouse repeatedly failed during the busiest working hours, leading to many errors.
- Explains that many orders were shipped with items missing, but with an invoice for a complete order. customers saw service quality deteriorate, as they did not receive invoiced items when the original shipment arrived.
- Analyzes how the company was forced to announce a $34 million charge to cover the non-collectible losses from customer orders.
- Analyzes how foxmeyer's management of the project entailed a top-down approach, whereby management, andersen consulting and few technical people planned and implemented it right from the outset. the communication gap between users and system personnel was predictable.
- Explains that the lack of all departments' involvement in the project left workers threatened by the implementation of the system, particularly at the warehouse level.
- Explains that the delta information system failed because foxmeyer's management neglected to understand the complexity of the project. they also did not recognize the risks, timelines, resources and testing in the implementation process.
- Explains that foxmeyer's stock suffered heavily from the automation problems and filed for bankruptcy protection under chapter 11 of the federal bankruptcy law.
- Analyzes how the mckesson corporation purchased foxmeyer drug company for $80 million in cash. the delta information system's technology was capable of functioning as designed.
- Explains that in the competitive world of business, changes must be made to stay on top. in the case of foxmeyer's delta information system, the technology was ready and capable, but the management was defective.
- Cites bulkeley, caldwell, andersen consulting, madden, john, neumann, and sabher.
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