1. Large drug distributor Wanted to implement ERP
FoxMeyer Drug
Large drug distributor
Wanted to implement ERP
This PPT describes implementation of an ERP by FoxMeyer Drug. It is a student project done by Jason Donalson, June Seibold, Matthew Welch, and Sok Woo Yoon in the INFO Department, Texas A&M University, Spring 1999.

2. FoxMeyer Corp Holding company in health care services
wholesale distribution of drugs & beauty aids
served drug stores, chains, hospitals, care facilities
US: 23 distribution centers
Sought market niches, such as home health care

3. FoxMeyer Long-term strategies:
Due to aging population & growth in health care, expected high growth
Market had extreme price competition, threatening margins
Long-term strategies:
efficiently manage inventory
lower operating expenses
strengthen sales & marketing
expand services

4. Prior FoxMeyer IS 3 data processing centers, linked
included electronic order entry, invoice preparation, inventory tracking
1992 began migration of core systems
Benefits not realized until system fully integrated

5. FoxMeyer Process Customer fills out electronic order
Order sent to 1 of the 3 data processing centers
Orders sent to the appropriate distribution center (within 24 hours)
Orders filled manually and packaged
Had just completed national distribution center with multiple carousels & automated picking
Could track inventory to secondary locations

6. New System
Needed new distribution processes & IS to capitalize on growth
Wanted to be able to undercut competitors
Replacing aging IS key
PROJECT: hoped to save $40 million annually (estimated cost $65 million)
complete ERP installation & warehouse automation system (another $18 million)

7. FoxMeyer Project Select ERP hundreds of thousands of transactions
meet DEA & FDA regulations
benchmarked & tested for months
picked SAP R/3
hired Andersen Consulting to integrate
hired Pinnacle Automation for warehouse automation system

8. Operations
FoxMeyer expected the new systems to improve operational efficiency
Signed several giant contracts
counted on savings, underbid competitors
Counted on being up and running in 18 months

9. Problems SAP & warehouse automation system integration
two sources, two installers - coordination problems
New contracts forced change in system requirements after testing & development underway
Late, Over budget
SAP successfully implemented

10. Outcomes Warehouse system consistently failed
Lost key customer - 15% of sales
To recoup, signed new customer, expected $40 million benefit from ERP immediately - pushed ERP project deadline ahead 90 days, no time to reengineer
Warehouse system consistently failed
late orders, incorrect shipment, lost shipments
losses of over $15 million
August 1996 filed for Chapter 11
McKesson bought

11. McKesson Followup Mid-1990s started implementation of SAP R/3
Cancelled project in 1996 after spending $15 million
1997 acquired FoxMeyer
Carefully designed new R/3 implementation
Dropped a number of modules
Implemented modules one at a time
Cautious rollout schedule, rigorously followed
Separate testing group formed
At last report $50 million system on time, in budget

12. McKesson Massive changes in 3,000 end user jobs
Careful analysis of changes
Surveys
Focus groups
Demonstrations
Computer-based training

13. Lesson Implementing ERP a major undertaking
Can easily bankrupt a company
However, it can also be done
Opportunity for great benefits