What Can Target Canada’s ERP Failure Teach Us?

Posted on: March 31, 2016

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Topics: General

ERP Implementation Failure Case Study

When an ERP system is working well, it can be a major boon for a business. Data is clean and up-to-date, communication between departments or locations is clear, and leadership can make smarter, more informed decisions.

But in some cases, ERP implementation failure does happen. It’s important to look at these ERP failure examples to understand how to avoid such situations, like Target’s ill-fated venture into Canada. The major retailer announced in January that it would pull out of the Canadian market after losing millions at its 133 Canadian stores, all of which were opened between 2013 and 2015.

There are myriad reasons why Target Canada wasn’t able to sustain a profit – you can read about all of them in this excellent article, “The Last Days of Target Canada,” in Canadian Business magazine – but one major one had to do with the company’s choice of technology.

Target Canada’s ERP

A retailer of Target’s size requires a great deal from its software systems. It needs to keep track of inventory, shipping details, cost, product information, and more for the thousands of individual products found in their stores. That’s not to mention the fact that all of the systems need to talk to each other and integrate data as needed.

In the U.S., Target uses a custom-designed software system that has been in place for years. Employees know how it works, and the company has a store of knowledge about the system that teams and individuals can draw on. In addition, because it’s a custom system, it’s been tailored to fit the retailer’s specific needs.

When company leadership made the decision to move into Canada, they had to decide whether to use this same system, or go with something completely new. In the end, they decided to go with something new: specifically, SAP, systems designed by the German company of the same name.

This was essentially an out-of-the-box system that would store the massive amounts of data related to each and every product Target Canada would sell. It’s a popular system with large companies around the globe, but it’s also notoriously difficult to implement and maintain. Usability issues, problems with customization, and various other problems dog SAP (just Google “issues with SAP” to see how true this is). Plus, Target planned to set up SAP and have it running smoothly in two years, which was a bold – some have said impossible – plan.

That choice, then, was one part of why Target failed in Canada.

Doomed by data: how shoddy data entry set Target Canada back

One of the many critical failure factors in ERP implementation with Target Canada was that the data going into the system was riddled with errors. Employees tasked with entering the massive amounts of data that the store required had made all kinds of mistakes, from simple typos to using incorrect currency.

This was partly due to the incredibly aggressive timeline that these employees were on, and partly because the information they received from vendors was often unreliable (a well-known issue in the retail industry). The result was that Target Canada’s supply chain was plunged into chaos. Dealing with this catastrophe was yet another setback that the retailer had to fix; not surprisingly, it ate up a huge amount of time and money.

What can be learned from Target Canada’s ERP failure?

There’s a difference between simply getting a complex computer system up and running, and having it actually help you meet your business objectives.

In Target Canada’s case, they had the first part – SAP was operational – but the business leaders didn’t understand that the system would most likely need tweaking and some customization in order to have it fit Target Canada’s requirements.

Perhaps a larger issue was that the timeline the retailer was set on was unrealistic. Especially for a company of Target’s size, getting a system like SAP to the point where it not only functions, but has a positive effect on the business’s operations, is no small task.

At the same time, Target Canada doesn’t seem to have taken into account the importance of getting employees comfortable on the system. Training is vital to a business’s success with a new software system. User errors are inevitable, but they can be easily managed when a business allows itself to roll out a new system gradually.

The takeaways? Businesses need to ensure that the systems they adopt are moving them toward their business objectives. Just as importantly, they must be ready to invest the time and resources necessary for making the implementation a successful one. That means allowing time for tweaks and changes, as well as for adequate employee training.

Want to read more about how to make your new software system a success? Read about TGO’s systems consulting services, from custom development to system implementation, support, and training, here.