Spar estimates SAP rollout problems cost R1.6 billion in lost turnover
The Spar Group says the launch of its new SAP software system at its distribution centre in KwaZulu-Natal has resulted in an estimated turnover loss of R1.6 billion.
Moreover, its implementation led to an estimated loss of R720 million in profits. However, Spar says it has learnt a lot and will delay the rollout of SAP’s system in other Southern African regions until management is satisfied with its optimisation.
“The impact of the SAP implementation at KZN amounted to an estimated loss of turnover of R1.6 billion and an estimated R720.0 million loss of profits for the period ended 30 September 2023,” said Spar.
“Furthermore, as a result of the change in approach towards the SAP implementation rollout for the foreign regions, a write-off of R94.1 million in respect of the SAP’ asset under construction’ has been recognised.”
The SAP rollout at Spar’s KwaZulu-Natal distribution centre began in February 2023. Spar says 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’ stores in the province from its Eastern Cape, South Rand, and North Rand distribution centres.
“The KZN DC resumed servicing all stores in the region as of August 2023,” the company said.
Spar said its management now believes it has identified key issues that led to the shortcomings experienced during the rollout in KwaZulu-Natal.
“They now have the right team and resources in place to appropriately plan for future implementations in Southern African regions,” said Spar.
Shoprite also had teething problems with its SAP rollout, with the retailer partially blaming the upgrades for its biggest drop in share price since 1999.
In January 2019, Shoprite shares slumped after the company’s first-half earnings for the year dropped by between 16% and 26% to as low as R3.89.
However, despite its challenges with the SAP rollout, it now credits its massive success in recent years to it.
“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 told MyBroadband.
The retailer started using SAP’s human resource and finance systems in the late 1990s and successfully rolled out SAP Retail at all its stores and distribution centres in 2018.
The project saw the highest number of stores of any SAP customer in Europe, the Middle East, and Africa go live with the system within a year.
“1,819 stores, 30,355 users and nine distribution centres moved onto SAP within 12 months,” Shoprite said.
The retailer says it has seen various benefits to implementing the software at its stores and distribution centres.
“It supports many aspects of our business — from supply chain to store,” Shoprite said.
“[It also] enables legislative governance and compliance across borders, as well as enabling our online and e-commerce offerings.”
Shoprite said SAP ERP is core to its business processes, including listing, pricing, ordering, and ensuring its inventory is well managed.
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