We recently had a brief discussion about the SAP failures. Every case, including Hershey ERP failure and Lidl ERP failure, had its points to learn lessons and ensure that your company is not about to make the same mistake. Today, we will talk about Revlon, so you can see if you are also preparing to join the same path or not. You can check out the SAP failure rate as many companies fail to learn from previous failures.
Revlon revealed a couple of weeks ago that it was terrible to enforce its SAP. It was due to the inability to enforce the SAP that delayed financial reporting.
Within 24 hours of publishing the story, its stock decreased 6.9%, triggering an investor’s lawsuit. Not good for a well-established consumer product business, especially for publicly traded companies.
What have we learned from Revlon’s SAP failure?
Design and Controls are the keys to success
Revlon reported a lack of design as one of the problems behind the failure of ERP. As a result of its internal controls, the company suffered “material weaknesses.”
It is important to look closely at the business processes to minimize the risk of material operational disruption.
You should ensure that the development team knows this when determining your future state and training your staff to configure and evaluate the program correctly.
Negative ROI is a big red flag
Revlon also announced that: In addition to a breakdown in its North Carolina Plant’s operational controls and production problems:
- Sales lost by SAP failure could not be recovered.
- Disruption in customer service.
- The demands for their management and employees were growing, with an emphasis on other business goals cannibalized.
- It produced substantial capital and operating costs.
- The handling of sellers’ payments was challenging.
- It couldn’t meet the timely or reliable federal, state, and local reporting and filing standards.
- It had higher shipping costs than anticipated – due to the SAP failure of the customer burning.
- It was ‘incapable of correctly or promptly filling customer orders, or at all’ (emphasis added).
We are sure that this wasn’t the expectation of Revlon.
- Implementation risks should be well understood
Revlon did not seem to recognize the risks associated with its ERP implementation, as were many organizations adopting SAP S/4HANA and other ERP solutions. Worse still, efficient methods for reducing such risks should not be quantified or enforced.
Revlon endured delays in shipment and missed sales in North Carolina due to the production interruptions – the site of the first phase of its SAP live service.
If Revlon had known, quantified, and mitigated the risks associated with ERP introduction, steps would have been taken to ensure that its go-live did not significantly impact its operations.
Risk Identification must be calculated
In Revlon’s case, problems became apparent right after the device was implemented in Oxford, NC. The roll-out created service level disturbances that affected production and shipping capabilities directly.
Revlon clarified that they could impact their competitive position if such disruptions continue. Their client relationships, prospects, financial conditions, and cash flow may also influence them.
The company should have prepared for these setbacks with a comprehensive risk evaluation. The risks to implementing an ERP are inherent, and it is not reasonable to expect to go live without problems.
DFSM ERP Failure Rescue Service
If you can find out the ERP implementation failure statistics increasing (from Gartner), you must not take a chance and hire professionals for consultation.
We support some big companies on their ERP implementation rescue plan to be glad to exchange notes and share some lessons from failures to successful projects.
Contact us to discuss any time – we’re pleased to be your digital transformation partner.