Some SAP retail software users still hitting bumps

SAP AG’s business applications for retailers continue to be stung by a series of high-profile installation problems that analysts said illustrate the complexity of trying to fit an integrated suite of enterprise resource planning (ERP) software into a retail operation.

Retailers as a group have been slow to leave behind their homegrown mainframe applications in order to make the jump to packages such as SAP Retail, according to analysts. And retailers’ high transaction volumes and specialized processing requirements complicate the process of installing an ERP system and getting it to run smoothly.

The latest example came late last month, when Canadian supermarket chain Sobeys Inc. abandoned an US$89.1 million SAP Retail implementation after deciding that the software had “insufficient core functionality” to effectively handle its transaction load. But Stellarton, Nova Scotia-based Sobeys isn’t the only retailer that has hit bumps on an SAP project.

Jo-Ann Stores Inc., a $1.4 billion chain of fabric and craft stores, was the sixth U.S. user to go live with SAP Retail when it turned on a $30 million system last March, about seven months later than planned. But the Hudson, Ohio-based company said last fall that its financial results were being affected by lingering problems associated with the rollout, and the situation still hasn’t been fully resolved.

Brian Carney, Jo-Ann’s chief financial officer, said the retailer continues to work through difficulties in processing product restocking orders from its stores. “I would say the issues we still have are [the] inventory replenishment and forecasting capabilities in the software,” Carney said, although he added that Jo-Ann is satisfied with SAP Retail on an overall basis.

Pet-supply retailer Petsmart Inc. also said last fall that implementation delays and other problems on an SAP Retail project were hurting its financial performance. And in late 1998, Minneapolis-based food wholesaler and supermarket operator Nash Finch Co. shelved most of a $76 million SAP project after development delays made it impossible to install the software in time to fix its year 2000 problems.

SAP officials have consistently defended the functionality of SAP Retail. Last week, in response to the ending of the project at Sobeys, SAP spokesman William Wohl said the difficulties encountered by the supermarket chain were “not a problem with the SAP software itself.” He added that SAP executives “feel confident” about the technology.

Geraldine McBride, general manager of the consumer sector business unit at SAP America Inc. in Newtown Square, Pa., said this week that the German vendor has signed up more than 260 retailers worldwide as customers. Just under half of those companies have gone live with SAP’s software, she added.

But Greg Girard, an analyst at AMR Research Inc. in Boston, said most of the retailers are running SAP’s financial and human resources applications at this point, not SAP Retail itself. One SAP Retail user told Girard that there “are 23 or so different variables that need to be set right so you can replenish a store’s stocks,” he said. “The implication is that it’s a very complex system.”

Kevin Restivo, an analyst who works in Canada for Framingham, Mass.-based market research firm IDC, said SAP’s retail software is a good product. But technology is never a “silver bullet, [just] part of a larger puzzle” that begins with making sure internal business processes are in tune with the software’s capabilities, Restivo added. That’s especially true given the processing complexities faced by retailers, he said.

Reebok International Ltd. in late 1998 was the first U.S. company to go live with SAP Retail, which now supports 115 outlet stores run by the Stoughton, Mass.-based footwear maker. Peter Burrows, Reebok’s chief technology officer, said the SAP system is producing “a very high level of stock accuracy” in the stores.

But the yearlong installation process wasn’t easy and required Reebok to make some adjustments as it went along, Burrows added. “You have to have a strong [implementation] methodology,” he said.