- “Post go-live stabilisation challenges” with implementation of an Oracle ERP system resulted in disruption for Mr Price Group.
- In addition, loadshedding negatively impacted the group’s ability to keep stores open.
- This led to an estimate loss of 318 000 trading hours following an increase in loadshedding from September 2022.
Earlier this month Spar Group bemoaned the launch of a new ERP system which was, to put it plainly, botched. The failed implementation of a new SAP platform “resulted in lost sales and increased IT costs” for Spar and now ERP software has struck another firm, Mr Price Group.
In its financial results for the 2023 financial year, published this morning, Mr Price Group said that a failed launch of an Oracle ERP system in April 2022 had a major impacts on its results.
“The implementation of a new Oracle Merchandise Enterprise Resource Planning system in April 2022 was a significant milestone for the group, de-risking its legacy, home-grown IT environment and building a firm platform for its growth ambitions. As noted in prior SENS announcements, post go-live stabilisation challenges were encountered, which are typical in such large company-wide installations and resulted in disruption and significant distraction to merchant activities. An internal diagnostic performed by management revealed that the system cut over impacted the group’s competitive advantage of in-season trade and the execution of key sales, stock and margin management planning activities over the year,” the group told shareholders.
This illustrates just how complex something as simple as a system change can be. Just this week we saw how it took Old Mutual nearly four years to migrate from an on-prem solution to the cloud.
Hopefully the incident with Spar and this latest problem with Mr Price are a signal to decision makers to exercise more caution moving forward.
A billion lost to loadshedding
As with so many businesses that have released results from the past year, loadshedding has severely impacted Mr Price Group’s retail business.
The group says that when power cuts worsened in September 2022, only 37 percent of its core business had backup power. The firm has improved this through an investment to the tune of R220 million and it anticipates that 100 percent of its stores will have back-up solutions by the end of June. These solutions include inverters and battery backups and can handle up to Stage 8 loadshedding while keeping 70 percent of the lights in a store on.
“The cumulative quantum of loadshedding from September 2022 to March 2023 was greater than the previous 15 years combined, resulting in an estimated annual loss of 318 000 trading hours, equivalent to approximately R1bn in revenue. The indirect impact of loadshedding on changing customer shopping behaviour and lower levels of consumer confidence, coupled with the need to markdown higher levels of unsold stock, additionally weighed on the group’s H2 performance,” shareholders were told.
Ultimately this and other factors saw gross profit margin for the group decline despite revenue increase 17 percent to R32.9 billion.