spar group said on Wednesday that system-related business interruptions experienced in KwaZulu-Natal as a result of the SAP project failure had had a widespread impact on its profitability over the past 12 months, but did not provide an updated amount of the impact. There wasn't.
Spar Southern Africa's 5.6% rise in total wholesale sales was impacted by a weaker-than-expected performance in its grocery business, the group said in its trading update for the 20 weeks to February 16, 2024. . However, the company's trading performance was “resilient” with sales increasing by 9.3%.
Although the system is working as designed, the company's ability to predict demand and manage availability is still not optimal, he said.
It added that the use of the system in the region was sub-optimal, profit margins were still being affected and costs were being exaggerated.
Over the past six months, the group has carried out a “thorough reassessment” of the SAP project, including stabilizing the KZN implementation. Re-evaluate your warehouse management system and whether it is fit for purpose. Then consider how you can continue to deploy your systems with significantly reduced risk levels.
“This includes separating the ERP from the warehouse system and implementing it independently.”
Spahr said in September that Germany-based enterprise software giant SAP “remained a collaborative partner throughout the project.”
The failure of an IT project that went live at its KZN distribution center in October 2022 has seriously impacted the Pinetown-based retailer's full-year profit to the end of September 2023. SAP-related losses totaled R1.8 billion in the same period.
Impact on profits
“Profit after tax for the 2023 financial year was R400 million, a significant 80% year-on-year decline,” Spar said in its annual report. “This result was severely impacted by the failure of the SAP implementation at the KZN distribution centre.”
The KZN logistics hub has been crippled, forcing retailers to use distribution centers further afield to fill the gap. Group CEO Angelo Swartz said distribution centers in the Eastern Cape, Northland and Southland were being used to keep KZN stores supplied.
Read: Learn more about why large SAP projects go pear-shaped
Complex logistics led to a 12.8% increase in fuel and logistics costs, with an even bigger impact due to issues that particularly affect the retail sector as a whole, namely ongoing food price inflation due to rising interest rates, fuel and energy costs. It affected me. — (c)2024 NewsCentral Media
