Canadian supermarket chain abandons SAP's retail software

Canada's second-largest supermarket chain has abandoned its implementation of SAP's business applications for retailers after a five-day database and systems shutdown affected the company's business operations for nearly a month.

          Canada's second-largest supermarket chain has abandoned an $US89.1 million implementation of SAP's business applications for retailers after a five-day database and systems shutdown during December affected the company's business operations for nearly a month.

          Bill McEwan, president and CEO of Stellarton, Nova Scotia-based Sobeys, says that "growing pains" expected by the 1400-store retail chain on the two-year-old project became "in fact systemic problems of a much more serious nature." McEwan, who inherited the SAP implementation when he joined Sobeys in November, adds that it would have taken another two years to finish the software rollout.

          The decision to write off the SAP system resulted from the complexities of the project, combined with the technology problems that occurred in early December, says McEwan. The system shutdown resulted in "unprecedented" out-of-stock issues with products at many of Sobeys' corporate-owned stores in eastern Canada, he says.

          The SAP Retail software couldn't effectively deal with the "extreme, high number of transactions in our retail operating environment," McEwan says, adding that the disruption also forced Sobeys to implement a series of workaround procedures for its accounting department.

          Business operations were affected for four to five weeks while the problems were reconciled, McEwan says. He also announced that the company is hiring a new CIO "on the heels of our SAP decision," although he didn't name the incoming IT executive.

          Bill Wohl, a spokesman at SAP's US-based subsidiary in Newtown Square, Pennsylvania, says the German software vendor was taken by surprise by Sobeys' decision to jettison the project. "This is not a problem with the SAP software itself," Wohl insists, while adding that Sobeys does plan to continue using SAP's human resources and financial applications.

          Wohl says there are unique data processing challenges facing retailers "above and beyond" any implementation difficulties that may be posed by applications such as those made by SAP. "Those challenges are not unique to SAP, but to [Sobeys and other retailers]," he says. "We feel confident about the [SAP Retail] solution."

          Sobeys executives didn't return phone calls seeking additional comment on the decision to scrap the project. McEwan says SAP Retail will be phased out of the supermarket chain's Atlantic Division and 30 corporate-owned stores in Ontario, with the decision costing the company an after-tax writeoff of $US49.9 million.

          Sobeys plans to replace the SAP applications with an alternate software package that can be installed more quickly and that "will fully meet all the business requirements" at the company, McEwan says. He didn't identify the vendor of the replacement software.

          Big enterprise resource planning (ERP) installations such as the one at Sobeys are highly complex, says Kevin Restivo, an analyst who works in Canada for Framingham, Massachusetts-based market research firm IDC. Sobeys is a "particularly unhappy" user, Restivo adds, but he says the problems that companies can run into on ERP projects "aren't usually as black and white as people make them out to be."

          SAP, in particular, has been dogged by problems at a number of high-profile users. Retailers have been especially prone to difficulties: For example, pet-supply retailer Petsmart and Jo-Ann Stores, which operates a chain of fabric and craft stores, both said last year that their financial results were being affected by lingering problems related to rollouts of the SAP Retail applications.

          Sobeys also is at least the second big food distributor to back away from an SAP Retail installation. Two years ago, Minneapolis-based food wholesaler and supermarket operator Nash Finch shelved most of a $US76 million SAP project after development delays made it impossible to install the software in time to fix its year 2000 problems.

          The perception that SAP's software is thorny to implement is one that executives at the vendor "are trying to shake," Restivo says. "No matter whose fault it is, they'd like to get past that image and be seen as a [developer of software] that won't have to be ripped out."

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