An ERP replacement can put more than the project budget at risk. Disruption to production, inventory, deliveries, or financial information can weaken the operations that generate revenue and cash.
These six companies experienced ERP project problems before entering bankruptcy. In some cases, the company or its bankruptcy trustee explicitly identified those problems as contributing factors. In others, the records establish significant ERP difficulties and subsequent bankruptcy without establishing the extent of the connection.
The cases are ordered by bankruptcy date, newest first. The practical lessons are Wayferry’s interpretation of the reported events.
ERP failures and financial distress
Diebold Nixdorf: ERP replacement suspended after substantial investment
Reported impact: $38.4 million ERP impairment in 2022; Chapter 11 filing in June 2023
Sources: Diebold Nixdorf’s ERP impairment disclosure and bankruptcy and restructuring filing
Banking and retail technology company Diebold Nixdorf indefinitely suspended its North American cloud ERP replacement in 2022. It concluded that substantial additional investment would be needed before the replacement could function as well as its existing ERP. The company recorded a $38.4 million impairment of capitalized implementation costs.
Diebold Nixdorf subsequently filed for Chapter 11 in June 2023. The impairment documents a substantial unsuccessful investment, but the filings cited here do not establish how much the ERP project contributed to the later bankruptcy. The $38.4 million represents an accounting write-off, not the cost of the bankruptcy.
What buyers should verify: Establish which business capabilities the replacement must preserve and which outcomes it must improve. Require demonstrations of demanding requirements before selection, then use acceptance tests to verify delivery. At major milestones, reassess the remaining investment and whether the proposed solution can deliver the approved business case.
Invacare: ERP services dispute accompanies financial restructuring
Reported impact: Chapter 11 filing in January 2023, shortly after termination of an IT services agreement covering ERP implementation
Source: Invacare’s SEC filing on contract termination and bankruptcy
Medical-equipment manufacturer Invacare engaged Birlasoft in 2019 under an agreement covering IT services, modernization of legacy systems, a global ERP implementation, and an e-commerce platform.
Invacare terminated the agreement on January 27, 2023, alleging missed transformation milestones, failures to provide services, and other contractual breaches. Four days later, the company and certain subsidiaries filed for Chapter 11.
The filing establishes a serious technology-services dispute alongside financial distress. It does not quantify an ERP-specific loss or establish that ERP problems caused the bankruptcy. The allegations concern a broader agreement than ERP implementation alone.
What buyers should verify: Define measurable deliverables, acceptance criteria, and responsibilities for each stage of the project. Review missed milestones promptly and maintain a credible recovery plan. Ensure contracts provide for continued access to systems, data, documentation, and transition assistance if the supplier relationship ends.
Revlon: Manufacturing disruption precedes a later bankruptcy
Reported impact: Approximately $64 million in lower net sales and $53.6 million in incremental charges in 2018; Chapter 11 filing in June 2022
Sources: Revlon’s 2018 annual report, 2022 bankruptcy announcement, and Reuters report on its emergence from bankruptcy
Revlon’s February 2018 SAP ERP launch disrupted manufacturing and shipments at its Oxford, North Carolina facility. The company estimated approximately $64 million in lower net sales and $53.6 million in incremental charges, including costs incurred to restore customer service. These are different financial measures and should not be combined into a single loss figure.
Revlon filed for Chapter 11 four years later, citing liquidity pressures associated with debt obligations, supply-chain disruption, and inflation. Its restructuring transferred ownership to lenders and wiped out existing shareholders’ equity. The sources establish the earlier ERP damage and the later bankruptcy, but do not establish that the ERP failure caused the bankruptcy or shareholder losses.
What buyers should verify: Test production planning, material availability, manufacturing, and customer shipments as one operating process. Establish how the business will maintain deliveries during transition and how much disruption it can withstand. Require measurable readiness criteria before authorizing go-live.
Shane Co.: Project overruns and inventory problems add to financial pressure
Reported impact: Chapter 11 bankruptcy in January 2009, with ERP problems cited as a contributing factor
Source: Computerworld, “SAP project costs cited in jeweler’s bankruptcy filing”
Jewelry retailer Shane Co. contracted for an SAP point-of-sale and inventory management system in 2005. According to reporting on its bankruptcy filing, the project was expected to cost $8 million to $10 million and take one year. It ultimately cost $36 million and took 32 months.
The company reported inaccurate inventory information, excessive stock, and the wrong merchandise mix. These problems tied up capital and affected sales. Some contracted functionality remained undelivered even after the system became stable toward the end of 2008.
Shane Co. identified implementation problems as contributing to its financial distress. Its filing nevertheless identified the recession-driven decline in retail sales as the largest reason for bankruptcy. The $36 million was project spending, not a measured ERP-related loss.
What buyers should verify: Demonstrate inventory accuracy, replenishment, and reporting using realistic business scenarios. Establish measurable acceptance criteria and review the cost to complete at each major milestone. Assess whether the company could withstand implementation overruns, excess inventory, and weaker sales occurring together.
American LaFrance: A troubled ERP transition disrupts production
Reported impact: Chapter 11 bankruptcy in January 2008, with ERP transition problems cited as a contributing factor
Source: CIO, “Citing Botched ERP System, Fire Truck Maker Says IBM Contributed to Bankruptcy”
Emergency-vehicle manufacturer American LaFrance needed to take over functions previously managed by its former owner, Freightliner. Those functions included inventory, payroll, and manufacturing processes. The company introduced a replacement ERP environment with IBM’s assistance.
According to reporting on its bankruptcy filings and company statements, the transition resulted in missing financial information, unreliable inventory records, and difficulty locating parts needed for production. Production slowed, unfulfilled orders accumulated, and the company lacked sufficient funds to continue operating.
American LaFrance attributed its difficulties to ERP disruption and previously undisclosed obsolete inventory. The reporting does not establish that IBM or the ERP software alone caused the bankruptcy.
What buyers should verify: Reconcile migrated inventory and financial information before accepting the new system. Test whether employees can locate materials, release work, complete production, and fulfill orders. When separating from a parent company’s systems, confirm the replacement can perform every essential function before ending access to the old environment.
FoxMeyer Drugs: ERP and warehouse problems precede the distributor’s collapse
Reported impact: Bankruptcy in 1996; the trustee subsequently alleged that the ERP project contributed to the collapse
Sources: Judy E. Scott, “The FoxMeyer Drugs’ Bankruptcy: Was it a Failure of ERP?” and The Register, “SAP software ‘hastened’ company’s demise”
FoxMeyer Drugs, a pharmaceutical distributor with approximately $5 billion in annual revenue, undertook a project to replace its mainframe environment with SAP R/3 integrated with warehouse automation.
The project encountered transaction-processing limitations, warehouse disruption, inventory losses, and escalating costs. A major new customer contract increased the transaction volumes the system needed to support. The case study describes how project difficulties and rising expenditure weakened an already low-margin business.
FoxMeyer entered bankruptcy in 1996. Its trustee subsequently brought claims against SAP and implementation partner Andersen Consulting, alleging that their work contributed to the collapse. Those claims should not be treated as findings that the software or either supplier alone caused the bankruptcy.
What buyers should verify: Prove that the ERP and connected warehouse systems can support current and anticipated transaction volumes. Repeat that assessment when major contracts or growth plans change demand. Test the complete order-to-delivery process and establish when leadership will pause, reduce scope, or change course if the transition is not ready.
Protect the business before committing to replacement
ERP project problems can consume cash and disrupt essential operations when a business can least afford it. Keeping an aging system can also carry significant risks. The decision needs a business case grounded in your company’s goals and circumstances.
Start by establishing which strategic objectives and business goals your current ERP constrains, whether improvements could address those constraints, and whether the potential five-year value justifies replacement.
Wayferry’s standalone, fixed-fee ERP Replacement Decision Assessment gives your executive team a documented recommendation: keep the current ERP, replace later, prepare before replacing, or proceed now.