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Supply chain failure dents ICI profits

The failure of a new supply chain management system has been blamed in part for a 38% fall in profits at the Quest food business...

The failure of a new supply chain management system has been blamed in part for a 38% fall in profits at the Quest food business at chemicals giant ICI.

ICI chairman Lord Trotman said Quest had a disappointing second quarter for 2002 as a result of production problems after systems were changed.

While production volumes have now been restored, he said there would be a trading profit impact in the second half, which is estimated at around £10m. The failure has, so far, cost the business £4m.

ICI chief executive officer Brandan O'Neill said the problems involved a company-wide project known as Q-star, based on SAP. The project's aim was to optimise Quest's supply chain, in order to achieve savings of £20m a year by 2004.

However, at the end of May, when the system went live across four locations in the Netherlands, Quest experienced problems with Q-star, that led to "an inability to locate raw materials accurately", O'Neill explained. The result was a massive backlog in the company's order book.

O'Neill said Quest has spent the past eight weeks rectifying the glitch, which involved a combination of seven-day working in at the plant in Naarden, and relocation of manufacturing to other Quest sites to reduce the production backlog.

O'Neill insisted he was undeterred by the failure at Naarden and planned to continue rolling out the Q-star project and SAP.

"We have implemented SAP successfully across ICI and within the Q-star programme," O'Neill said. "The problems we experienced were unique to this location."

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