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Sobeys gives SAP a second chance

Tuesday, April 24, 2007

Its last major project led to a $50-million writedown, but this time the Canadian grocer only has good things to say about its software implementation. The CIO offers lessons learned
From the archive: Sobeys fires SAP over ERP debacle
Double indemnity

Canadian grocery giant Sobeys Inc. shared lessons learned from its SAP implementation at the annual Sapphire user conference in Atlanta yesterday, but noticeably absent was any mention of the company's at times rocky history with the German software company.




The grocer abandoned an SAP retail implementation in December 2000 after the system crashed, leaving many store shelves bare in the crucial pre-Christmas period and forcing Sobeys to take a $50-million writedown on its earnings.

SAP was given a second chance though, and Sobeys successfully completed a regional SAP for Retail implementation in 2004. Sobeys was back at Sapphire this year as part of a panel on directions and challenges for food retailers, and rather than delve into past problems, Sobeys senior vice-president and CIO Clinton Keay said he'd rather “focus on the positives” in the company's SAP history.

The grocer has used SAP since 1996 for financials, later adding payroll, human resources and, of course, retail management. Keay said Sobeys' move to SAP was initially driven by Y2K compliance concerns; they had a lot of complex legacy systems that wouldn't talk to each other, and many of the people that knew how to run the legacy systems had left the company.

“The key focus was around integration, and a single source of the truth,” said Keay, describing the situation pre-SAP.  “There wasn't a meeting that would go by where everybody had different numbers, it was very frustrating.”

Herb Kleinberger, a partner in retail distribution at IBM Business Consulting Services, said these are challenging times for traditional grocers like Sobeys, who are increasingly losing market share to new entrants like Wal-Mart and big box retailers like Costco, as well as dollar stores and corner groceries.

“The notion of the weekly stock up for your family has evaporated,” said Kleinberger. “They're buying it more just in time, for family occasions.”

If the traditional grocers are going to compete Kleinberger said they're going to have to play to their strengths, such as knowledge of the local market and customer insight, things that has been overlooked in the recent drive toward operational efficiency. Grocers will increasingly have to tailor their stock to the local market and develop multi-channel supply chains. And if they're going to be successful at that, said  Kleinberger, technology will play a key role.
These were some of the drivers that led Brookshire Grocery Co., a private regional food chain in the Southern U.S., to SAP. Gary Butler, Brookshire's senior vice-president and CIO, said the company has been an SAP customer since 2003. They're currently running the financials, payroll/human resources, point of sale and retail management applications, with upgrades underway.

“We had lots of data in our older systems but we couldn't get the data out, we didn't have any reporting. You had to call a programmer,” said Butler. “Our competition was innovative, and we were being held back (by our infrastructure).”

As he looks back on their SAP implementation, Butler said Brookshire really didn't make a lot of mistakes. Key, he said, was selecting the best people in the organization to be a part of the project team and then dedicating them full time to the project.

“You can't expect your people to be working on a project part time, it's jut not going to work,” said Butler. “You've got to dedicate them to the project.”

One lesson learned was around change management. Butler said at the start they really didn't know what change management was, let alone its importance. As Brookshire completes the last phase of its implementation though there is now a dedicated change management team.
Another key, said Butler, is the integration partner. They need to be experienced, and they need to be willing to tell you when you're wrong and gently steer you down the right path, he said.

Looking back on his SAP implementation, Sobeys' Keay said among the lessons he learned was to get the right people on the project team, both internal staff and consultants. Also, change management is key; ensuring people know what is coming with the new system and how their jobs will be changing is crucial. He added it's important not to put in a new software platform without the infrastructure to support it.

“We can't forget technology is a really key enabler here,” said Keay. “You need to have a very strong infrastructure underneath to support the software.”

Right now Keay said Sobeys is very data rich, and the exercise is leveraging the data to make business decisions. As a CIO though, Keay said another challenge for him is around consolidation, walking the tightrope between a vanilla implementation and a highly customized implementation. The fear, said Keay, is falling back into a legacy world.

“As we introduce more flexibility I need to ensure the integration remains an SAP responsibility and upgrades don't become a lengthly challenge,” said Keay.

Sapphire continues on Wednesday.

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