Cosmetics giant Avon has halted a multi-year service model transformation (SMT) programme based on SAP due to poor return on investment.
The company stated it will incur a charge of $125m as a result of the software charges associated with the deployment.
The decision, announced as part of a trading update, will result in job loses related to the SMT programme.
The company’s SAP based service model transformation (SMT) project was a multi-year global initiative, to improve the way Avon representatives interacted with the company. The IT project included an update to Avon's order management system.
In the statement Avon said: "Earlier in 2013, SMT was piloted in Canada, causing significant business disruption in that market, and did not show a clear return on investment. The decision was made in light of the potential risk of further disruption. The company’s focus is on stabilising and growing the business and improving operating capability, which includes updating IT infrastructure in a way that delivers clear return on investment."
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In the company’s Q3 earnings call, CEO Sheri McCoy, stated: “While the SMT pilot technology platform worked well, the degree of impact of change in the daily processes to the representative was significant.”
At the time, McCoy admitted that a big bang approach to the rollout did not suite the nature of the Avon business. “When I look at our experience in Canada with SMT it's clear to me that our business model has difficulty adjusting to these big-bang field initiatives. The nature of direct selling where our 6 million representatives are independent entrepreneurs is one of personal relationships and connections. It's about influencing and incenting behaviour. It requires spacing change and thoughtfully and strategically not mandating abrupt changes.”
The system was meant to underpin the largest transformation the organisation has undertaken over the last 50 years covering campaign management, order capture, order fulfillment, field management and finance to improve efficiency, greater flexibility for Avon representatives.
Although the company is halting SMT rollout, Avon said it remained committed to updating IT infrastructure and improving systems for its Representatives.
Avon appears to have been recruiting heavily for the programme. The vacancies suggest SMT was based on SAP ECC 6.0 and CRM 7.0 including the Customer Interaction Center. ECC powered the order to cash process for Avon's Global Core Service Model, along with Vistex for Pricing and Promotions. IBM's WebSphere was used to build the user interface that would be used by 6 million representatives globally.
13 Dec 2013