The Elyria, Ohio-based company, which manufactures and distributes home and long-term care medical products, implemented Oracle’s ERP software in October but said it is only now approaching pre-implementation performance levels. The company said it was hit by a temporary disruption of order processing capability and inefficiencies resulting from the implementation of a new $20m enterprise resource planning system for the its North American home care businesses.
Invacare said: [Knock-on effects include] lost revenues due to difficulties in processing orders and the inability to ship products to customers within required lead times. The implementation is also resulting in additional overtime in manufacturing, distribution centers, and customer service, along with added costs to expedite product to customers and is resulting in processing a higher than normal level of returns. The company continues to work through the ERP implementation issues and expects these start-up issues to be generally resolved by December 31; however, these issues are expected to result in an anticipated revenue shortfall of approximately $30m for the fourth quarter.
Invacare has a substantial Oracle investment, having used the database since the early 90s and the applications suite since the late 90s. In an interview in CIO Today magazine in April, Invacare’s CIO Russ Lenahan said the company was planning to increase the proportion of IT spend used for ERP software and support over the coming 12 months. ERP and ERP support are areas that will grow, he said. We’ve had a lot of activity in that area in the last three years, and as those systems stabilize we’ll want further development. Our ability to upgrade modules and functionality and enhance the environment will be critical for our success in bringing further business value to the company.
There are multiple points of potential failure during an implementation, including the software itself, the objective, implementation methodology, timescale and scope, and skill set availability. Invacare did not comment on exactly what went wrong but its experience illustrates the business risk involved in upgrading or implementing a core business system, even for existing customers using established technology. Oracle was not available for comment.
Invacare’s experience is particularly pertinent given the moves by all the vendors towards the delivery of first-generation service oriented architectures and version 1.x process-based applications, which also require substantial changes and new practices.
