Spar’s major SAP problem

The Spar Group has said that parts of its business operations will transition away from SAP’s software following the implementation difficulties it had in 2023.

Spar Group CEO Angelo Swart revealed their plans to drop SAP for parts of the business in a recent interview on 702’s The Money Show with Bruce Whitfield.

Swart said that the business will not wholly transition away from SAP architecture but will move to a new platform for its warehouse management.

“We have made the decision to move the warehouse management system away from the core SAP architecture; however, we will keep our core enterprise resource planning (ERP) system on the SAP backbone, and that accounts for 80% of the system on any event,” Swart told 702.

The group’s recent interim results ending 31 March noted that two issues relating to the integration remain: inefficiencies of the warehouse management system and the impact of the lack of visibility of prices and subsidies on the gross profit margin.

Spar says that to mitigate the latter, “further developments and designs are being implemented to improve the pricing screens and will be productionised in September 2024.”

However, the company has decided to implement a “more cost-effective warehouse management system” better suited to its business.

Spar said in September 2023 that the implementation at its KwaZulu-Natal distribution centre resulted in an estimated loss in turnover of R1.6 billion and a loss in profits of R720 million.

The SAP rollout at Spar’s KwaZulu-Natal distribution centre began in February 2023. Spar said it faced various go-live and integration issues that negatively impacted its operations in the province.

To mitigate the impact, Spar began supplying its retailers in the province from its Eastern Cape, South Rand, and North Rand distribution centres.

The KZN distribution centre eventually resumed regular servicing in August of that year.

Spar Group’s chief technology officer, Mark Huxtable, resigned soon after the SAP debacle, although this was said to be for personal reasons.

Shoprite, one of Spar’s competitors, also had teething problems with its SAP rollout, with the retailer partially blaming the upgrades for its most significant drop in share price since 1999.

However, despite its challenges with the SAP rollout, it now credits it with its massive success in recent years.

“Our considerable base of 2,791 corporate-owned and managed stores, combined with our enterprise-wide IT system (SAP ERP), provides us with a proximity and platform advantage when it comes to executing our daily operations and delivering on strategic plans,” Shoprite recently told MyBroadband.

Shoprite also explained how one of its major successes over the past few years — its on-demand delivery service Checkers Sixty60 — benefitted from SAP ERP.

“SAP Retail is the source of the stock ledger and real-time sales, which are essential for accurate fulfilment of customer orders,” Shoprite stated.

“The ERP also provides promotional information, prices and article data to Sixty60, which ensures that the prices on Sixty60 are the same as the prices in-store.”