Spar’s failed SAP enterprise resource planning (ERP) system cost the retail group R1.6 billion.
In a trading statement for the year ended 30 September, issued today, Spar says: “The unsuccessful launch of Spar’s new ERP IT system (SAP) at the KwaZulu-Natal (KZN) distribution centre impacted the KZN trading performance severely, causing a loss of group turnover estimated at R1.6 billion.”
According to the retailer, the operational impact amounted to an estimated R720 million in loss of profits for this region.
“As a result of the change in approach towards the SAP implementation rollout for the foreign regions, a write-off of R94 million in respect of the SAP ‘asset under construction’ has been recognised,” the group says.
According to Warehouse Automation, Spar Group encountered multiple obstacles during the rollout of the SAP software, particularly at its KZN distribution centre, which was the first to adopt the new system in February 2023.
It notes the transition resulted in various go-live and integration issues, significantly impacting distribution operations in the region. These challenges disrupted stock deliveries to retailers’ stores, leading to reduced service levels and a decline in retailer loyalty.
“Spar Group’s botched SAP implementation and subsequent financial losses serve as a cautionary tale for organisations embarking on digital transformation journeys,” Warehouse Automation adds.
“Despite facing obstacles, such as SAP integration challenges and load-shedding, Spar is actively working to resolve these issues and improve its operational performance. By incorporating the lessons learned from this experience, organisations can better navigate the complexities of implementing large-scale enterprise software and mitigate the risks associated with digital transformations.”
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