Problems during the installation of an enterprise
resource planning system at an Australia-based company have led to
an estimated cost overrun of $21m (£11.3m) - and a claim against
the software supplier, PeopleSoft.
The ERP implementation problems and cost overruns emerged last
week during a webcast for investors by Crane Group, a metal and
plastic pipeline manufacturer and plumbing and electrical supplies
distributor.
The costs were incurred during the past several years amid a
multimillion-dollar implementation of JD Edwards applications.
PeopleSoft bought out JD Edwards last year, and the software is now
known as PeopleSoft EnterpriseOne.
The company's IT budget for the project is expected to rise to
$33m in the 2004-05 fiscal year, up from $22m in the previous
fiscal year, according to Greg Sedgwick, Crane's general
manager.
Currently, all 42 of Crane's manufacturing and warehouse sites
are live with PeopleSoft EnterpriseOne, along with 207 of the
company's 230 trade outlets. The rest are due to go live this
month. The applications support planning, forecasting, procurement,
sales, financials and other operations in the company.
Without providing specifics, Sedgwick acknowledged that the
nearly completed system had run "significantly over time and over
budget". The software is expected to allow Crane Group to improve
its business processes and offer customers new electronic data
interchange, forecasting and e-business capabilities.
According to the company, Crane has taken a number of steps to
rectify the problems. They include consolidating the company's IT
management structure from four CIO positions to one and a plan to
downsize the IT department by 30 people after the ERP rollout is
finished. That is expected to lead to significant savings the
company said.
Hardest hit by the ERP rollout was the company's Tradelink
plumbing distribution business, according to Sedgwick. Financial
problems facing Tradelink were exacerbated by the ERP rollout
problems, and as a result Crane will close 13 of its nonperforming
stores and lay off 200 people.
PeopleSoft declined to discuss the software rollout at Crane
Group except to say that it is largely complete.
"We continue to have a close working relationship with Crane in
the ongoing rollout of their IT system," said PeopleSoft spokesman
Steve Swasey. "The Crane Group implementation is now substantially
complete."
Marc L Songini writes for
Computerworld