Israel Faces National Drug Shortage After ERP Migration Failure

For over two weeks, Israel has been struggling with a nationwide drug shortage after a failed ERP migration by Novolog, one of the country’s exclusive pharmaceutical distributor. The transition to a new inventory management system was meant to streamline operations but instead paralyzed supply chains, leaving pharmacies unable to stock essential medications, including chemotherapy treatments, hypertension drugs, and psychiatric prescriptions.

The Cost of ERP Failures in Healthcare

ERP system failures have long posed a significant risk to the healthcare and pharmaceutical industries. Two major cases illustrate how these failures can disrupt critical supply chains.

In 1993, FoxMeyer Drug, one of the largest pharmaceutical distributors in the United States, attempted to modernize its operations with SAP’s R/3 ERP system. However, the system struggled to handle the company's transaction volume, causing order processing rates to collapse. The resulting inefficiencies led to widespread drug shortages and, ultimately, the company’s bankruptcy. The failure stemmed in part from the system’s inability to scale effectively, as it was originally designed for manufacturing rather than high-volume pharmaceutical distribution.

A more recent example is Zimmer Biomet, a leading global medical device company, which faced major disruptions in 2024 after migrating to a new ERP system. The transition led to severe production and shipment delays, affecting the availability of critical medical products. Customers were left without essential supplies for weeks as the company worked to stabilize the system. The shift to a cloud-based ERP introduced unforeseen integration issues with existing manufacturing processes, resulting in significant downtime.

How Novolog’s ERP Failure Led to a National Crisis

Earlier this month Novolog’s ERP migration failure has left Israel’s pharmacies struggling to replenish stocks, forcing desperate patients to travel long distances in search of vital medications. Despite the company’s claim that operations had resumed by January 6, supply issues persist, with industry experts warning that the situation exposes a deeper systemic problem: the high failure rate of enterprise software migrations.

According to Pini Usha, CEO of Buffers.ai, Novolog’s failure was entirely predictable. “For over a decade, I’ve seen these projects collapse under their own weight. Companies expect a new system to solve all their problems overnight, but they underestimate the complexity of implementation,” he explains. Usha highlights three key reasons why ERP migrations frequently fail:

1. Unrealistic expectations – "Many companies assume that implementing a big-name software solution will immediately improve efficiency, ignoring the complexity of adoption."

2. Rigid enterprise software – "Large providers like SAP and Oracle build solutions for global industries but often require major process changes that businesses cannot handle."

3. Lack of adaptability to company needs – "Big ERP solutions don’t easily conform to a company’s unique workflows, leading to inefficiencies rather than improvements."

Novolog’s system migration, intended to modernize pharmaceutical logistics, instead resulted in data synchronization failures between legacy and new inventory databases, disrupting real-time stock tracking. To prevent similar disasters, Usha argues that companies must take a smarter approach to inventory management. Instead of completely overhauling systems, businesses can use AI-driven inventory optimization solutions that integrate with existing ERPs.

Buffers.ai, which develops ERP plug-ins for inventory optimization, works with global giants like H&M, Toshiba, and Procter & Gamble. Their technology leverages AI and Big Data to optimize replenishment and procurement processes, reducing inefficiencies and minimizing supply chain disruptions. "The mistake Novolog made—and many others before them—is assuming that a one-size-fits-all solution will work," Usha concludes. "Companies need to find the right balance between customization and scalability to ensure smooth transitions without disrupting operations."

Lessons for the Industry

Novolog’s failure serves as a warning for businesses undergoing digital transformation. Large-scale software migrations require careful planning, extensive testing, and a realistic assessment of an organization’s readiness. Without these steps, companies risk operational collapse, financial loss, and reputational damage—challenges Novolog is now struggling to manage. As Israel deals with the fallout from this crisis, it becomes clear that learning from these mistakes will be crucial in preventing similar disasters in the future.