ERP in Tosco (B)
It was a warm February day in 2001. Sunshine provided some (badly) needed relief from the winter’s blues. Donna was sitting in her office observing the green lawn bathing in the warm sun. What a beautiful day. After four-and-a-half years of implementation and approximately $40 million (excluding costs of Tosco’s internal staff and ongoing maintenance costs of COMETS) over the initial approved budget, COMETS was a success. Unlike many IT projects that are scrapped after millions have been spent, COMETS worked and had allowed Tosco to grow through major acquisitions, even during the implementation process, without adding many more personnel. However, implementing COMETS was far from smooth or easy. The COMETS project was finished. Donna reflected on the whole experience.
Because of the unique business process Tosco maintained, the company decided on the customized approach. To write the software programs for COMETS, Tosco formed teams comprised of operational and accounting users, systems analysts and programmers, and consultants from Aspen Consulting. Most of the Tosco people assigned to the project were assigned part-time. People, when available, were pulled off their jobs from different functional areas and locations. The teams were made up of 70% Tosco and 30% Aspen Consulting in order to keep costs down, obtain buy-in from upper management, and retain knowledge within Tosco. Budget was tracked monthly within the COMETS project. In the first year of implementing the COMETS system, Tosco had another major acquisition, that of the Circle K convenience stores, headquartered in Phoenix, Arizona. The teams had to re-examine some requirements and get additional funding, although the convenience stores would largely continue to be run on their own system. The Circle K acquisition expanded Tosco’s core business, and adjustments had to be made to the COMETS system. In 1996, as Donna expected, the cost overruns on the COMETS project started to surface. Cost escalations began gradually and were mainly due to underestimating the difficulty of the project design phase. Time and again, Donna was approached with news that a particular process was taking longer than expected, sometimes dramatically longer, and often doubling the initial price tag of the task. Each time, Donna went back to Aspen Consulting and argued for them to absorb the costs. The change orders to date were growing and she often wondered if COMETS was ever going to materialize. She was growing weary of the heated discussions within their five-person management team (three from Tosco, two from Aspen Consulting). If requirements had not been clearly communicated by Tosco or if requirements were added, Tosco would have to pay. Fortunately, Donna had kept good records of Tosco’s stated requirements that enabled her to win at a 70-80% rate. Still, these change orders escalated the cost of the project from $10.5 million to $40 million, even after she cut out the fluff.
Copyright © 2002 Thunderbird, The American Graduate School of International Management. All rights reserved. This case was prepared by Professor Winter Nie and Renee Santo for the purpose of classroom discussion only, and not to indicate either effective or ineffective management. The author may have disguised certain names and other identifying information to maintain confidentiality.
In her monthly meetings with the COMETS Steering Committee, which was composed of heads of different departments such as operations, accounting, and marketing, everyone realized that the project was much more complicated than previously envisioned and that changes would need to be made to the system. After Donna gave her report on the progress of COMETS, the Committee’s discussions about which reports to add or subtract would often become quite complex and lengthy. Donna was also struggling with getting buy-in from certain key groups, primarily the Commercial...