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Case Scenario: Failed Wholesale Distribution ERP System

By: Brooks Hilliard, CMC, CCP
Tel: (602) 264-9263
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Represented The Plaintiff, A Wholesale Distributor

Case Synopsis:

A regional wholesale distributor of construction products was sold a manufacturing ERP system that the software developer and implementer claimed was capable of meeting its distribution needs. After an extended implementation effort, the software performed little more than the accounting and suffered severe reliability and performance problems. In particular, it failed to perform crucial distribution functions including multi-warehouse inventory management, over-the-counter sales, etc. The distributor paid well over one million dollars for the software license and implementation services and faced a counter-suit to collect additional unpaid fees.

The expert was hired by counsel for the wholesale distribution company in suit naming both the software developer and the software implementation company. The software developer settled (favorably to distributor) after expert depositions and the suit continued in Federal Court against the software implantation firm.

Expert Analysis:

After the expert reviewed thousands of documents (proposals, specifications, e-mails, progress reports, deposition transcripts, etc.) it was apparent that the system had numerous critical problems and was unable to perform numerous functions critical to the distributor's operations.
  • The system was unable to operate continuously for any significant number of hours without failing. Such failures ranged from the display or printing of erroneous information, to temporary interruptions affecting individual users, to complete system failures that shut down the entire system for extended periods of time.
  • In between failures, the system's operation was so slow that, among other detriments, it was unusable for taking orders directly (i.e., over the counter) or via the telephone because the customer would get frustrated and either walk away or hang up before an employee could complete the transaction
  • Numerous capabilities that the software company had committed to deliver were never delivered or, if delivered, were non-functional, including but not necessarily limited to: the ability to enter orders, maintain accurate inventory counts, keep accurate inventory costs, analyze inventory replenishment needs, handle special orders of non-stocked items, handle Internet-initiated transactions, handle order entry and purchasing of superseded product and their successors, etc.
  • The consulting and implementation services, and customer support provided by the implementation company to implement the software were seriously negligent and significantly below minimum industry standards.
  • In its attempts to implement the software, the implementation company failed to follow its own published standards.
  • The software developer had attempted to "port" its ERP software from UNIX to Windows only a short time before the attempted implementation. Discovery showed that this effort had never had significant testing, directly contradicting what the software developer and implementation company had told the distributor prior the distributor signing the contract to acquire the system.

Result:

The expert concluded that the software developer and the implementation company had misrepresented the system's reliability and functionality, and - once the attempted implementation had begun - both had performed at levels substantially below the level that was normal and customary in the business software industry. The software developer settled favorably to the distributor after the expert's deposition. The software implementation company went to trial and the jury found in favor of the distributor.


Brooks Hilliard, CMC, CCP has been a consulting and/or testifying expert in more than 50 cases involving computer systems alleged to have software defects, faulty operation, and/or defective performance (engaged by counsel for both users and vendors). These assignments have involved some of the industry's largest software developers. Issues have covered software and/or system deficiencies, unreliable software and defective functionality, including matters involving installation, implementation, customization and development services provided by software firms and independent contractors.

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