Critical.
Authoritative.
Strategic.
Subscribe to CIO Magazine »

ERP woes blamed for lumber company's bad quarter

Workers' trouble learning the SAP system drove down productivity and potential sales

Lumber Liquidators is attributing a weak third quarter to a complex SAP implementation, saying the project imposed a significant drain on worker productivity. But the problems appear to be largely related to employees having trouble acclimating to the new system, versus malfunctions in the software itself.

The discount flooring chain "implemented the most significant phase" of its SAP project during the quarter in late August, it reported Wednesday. Its components include a new point-of-sale system along with warehouse management and inventory modules.

While business continued without interruption during the project, and net sales rose $US6.7 million to $147.2 million, lower productivity led to an estimated $12 million and $14 million in unrealized net sales, according to the company. Net income fell nearly 45 per cent to $4.3 million.

But Lumber Liquidators expects the SAP system to have significant benefits for the company over time, CEO Jeffrey Griffiths said during a conference call Thursday. It will help the company grow internationally, as well as take advantage of a broad ecosystem of complementary applications, he added.

He attributed the problems in the quarter to employees having difficulty adjusting to the SAP software, which he nonetheless praised.

"One features of our previous system is that it was very flexible and easy to manipulate. SAP is much more structured, you follow steps, but it's much more stable because of that was a change for us," he said. "There were a few things that didn't work quite right, a few things that were unique to our business that we didn't see as well ahead of time," he added.

Prior to SAP, Lumber Liquidators also employed many manual processes, running some operations off spreadsheets, he said. With SAP, "we're confident that we're going to see significant improvements and benefits."

As of now, Lumber Liquidators' staff is "probably at 85, 90 per cent productivity and we get better every week," Griffiths said

The situation differs from other troubled SAP projects, such as one conducted by Waste Management that led to a bitter lawsuit. That matter was ultimately settled.

"Lumber Liquidators is a valued SAP customer and we remain strong and positive partners," SAP spokesman Andy Kendzie said in a statement. "SAP is actively engaged with the company in completing their implementation and we believe this is solidly on track. When complete, we are confident Lumber Liquidators will reap significant benefits from the system and it will continue to be a critical element in the company's growth strategy."

Overall, ERP projects can go badly for multiple reasons, such as "changing internal requirements by the company that slow down system integrator implementation, lack of resources for training and system design, and complexity in the software," said Altimeter Group analyst Ray Wang.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is Chris_Kanaracus@idg.com

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

More about: IDG, SAP, Wang, Waste Management
References show all

Comments

Post new comment

The content of this field is kept private and will not be shown publicly.
Users posting comments agree to the CIO comments policy.
Login or register to link comments to your user profile, or you may also post a comment without being logged in.
Related Coverage
Related Whitepapers
Latest Stories
Community Comments
Tags: applications, business issues, enterprise resource planning, ERP, financial results, sap, services, software
Latest Blog Posts
Whitepapers
  • So Long, Silos: Why Multi-Domain MDM Is Better For Your Business
    Say “so long” to silos. This white paper explains why a multi-domain MDM solution is far better than single-domain, single-focused point solutions. You’ll learn what to look for in a multi-domain solution so you don’t outgrow it or are forced to purchase multiple products down the road. You’ll also get tips on how to select a multi-domain solution that can lead to multiple benefits over many years. The age of multi-domain MDM is here. See why you should say “hello” to it!
    Learn more »
  • Why Encrypt? Securing Email without compromising communications.
    Encryption is a vital component of any DLP strategy. It allows businesses to exchange sensitive information without compromising on security; even if data is intercepted, encryption makes it unreadable and renders it tamper-proof. Read on.
    Learn more »
  • HP ePrint Enterprise mobile printing solution
    The merger of mobile devices and cloud services has become one of the most significant enablers of business productivity and innovation in the past decade. We now hold the power of communicating and computing in the palms of our hands, nearly anywhere business or life takes us. However, one key business process has eluded the mobility movement: printing. Even the most technically enabled business travelers find themselves hunting down print services while on the road and interrupting IT managers when visiting a branch office simply to print a document. But finally, a truly mobile print experience is available—helping enterprises to drive business productivity further. Read more.
    Learn more »
All whitepapers
rhs_login_lockGet exclusive access to Invitation only events CIO, reports & analysis.
Recent comments