The recent story reported in Computer Weekly about Revlon’s SAP woes, illustrates the importance of tech due diligence. Its CTO, Chau Banks, who previously worked as CIO at New York & Company, is responsible for the company’s global technology strategy. But she joined the company in January 2018, just a month before the new SAP project started going wrong.
During a quarterly earnings call in March 2019, Revlon’s CFO, Victoria Dolan told financial analysts that a supply chain issue the company experienced in February 2018, after the implementation of a new SAP system, was now full resolved. But that did not stop its share price from sliding.
Shareholders blame Revlon
A number of US law firms have now announced class action lawsuits on behalf of shareholders, alleging that Revlon failed to prepare properly for the disruption caused when it deployed the SAP ERP system at its Oxford facility in North Carolina in February 2018. For its Q1 2018 earnings, posted in May 2018, the company reported revenue of $560.7m, missing its target by $31.9m.
According to the transcript of the earning call posted on Seeking Alpha, the company’s chief operating officer, Christopher Peterson, admitted sales and gross margins were directly impacted by the SAP disruption.
When has an ERP project ever been flawless?
When asked about the timing of the disruption. Peterson said: “Honestly, it’s just we did not expect to have the issues on the facility that we did. So in hindsight, the phasing looks a little off, but the reality is we were expecting to execute flawlessly on the SAP situation at Oxford.”
According to the transcript on Seeking Alpha, he had previously told analysts during the Q4 2017 earnings call that implementation of the new SAP ERP system, which was designed to support new customer technologies and processes and improve performance, was “on schedule”.
When Computer Weekly looked at the company’s Security and Exchange Commission (SEC) quarterly filings, it is interesting to see that SAP was only mentioned after the disruption. While implementing ERP systems is not a core business activity for the cosmetics giant, the unfolding story illustrates just how much of a business impact, a problematic ERP implementation can have. Which significant IT project has ever been executed flawlessly?