Lidl SAP ERP Implementation Failure, What Can You Learn?

 

My colleague recently wrote a blog about a having digitalisation strategy for the future, and now more than ever this is becoming one of the most important subjects for every company, from the big to the small.

Unfortunately, this is a lesson that is often learnt the hard way, especially in Lidl’s case.

For those of you unfamiliar with Lidl, Lidl is a global discount super market chain with 10,000 stores across Europe and America.

Lidl’s main offices and HQ are based out of Neckarsulm, Germany. In 2011 it was announced that Lidl’s old, outdated, merchandise management system was being replaced.

SAP, also a Germany company, was selected as the ERP vendor of choice, using SAP for retail which is powered by SAP HANA, a brand-new merchandising management system was to be implemented.

This new merchandising management system would allow Lidl key information and insights into their systems including near real time inventory data and reports.

In 2017 SAP even awarded Lidl an award as one of their best customers.

Where the problem started.

Shortly into 2017, it was discovered that the SAP ERP inventory management system is based on retail price whereas Lidl has always based its inventory management on purchase price.

Lidl wasn’t willing to change, so the software had to adapted.

After hundreds of hours and staff working to implement and then change the new system, costing an estimated 500 million, and with the price increasing and the efficiency decreasing, Lidl decided to scrap SAP altogether.

Lidl’s head of IT, Alexander Sonnemoser, left the business in May 2017 and by July 2018 it was decided to revert back to their old inventory system.

What could have been the problem?

After Lidl found that the SAP software wasn’t up to requirements, they had two options; adapt to the new system or change the system to suit them.

They went with the latter, one of the rumours being that Lidl’s mentality is “that’s how we have always done it”.

Lidl would have to change all the process within the company to suit the new SAP solution and that wasn’t something they were prepared to do.

This is all speculation, but some IT experts believe the more advanced changes to the code was the problem. The new rules and adaptions made it fair more complex than the standard solution making the software unstable.

With many companies having such old systems, most likely out-dated, in place and with these systems having been built over time, this often makes it even harder to implement and integrate a relatively standardised system or solution.

Whose fault was it?

There are 3 possible entities to point a finger at.

Lidl, SAP or KPS.

So, to introduce KPS; KPS are a German IT consultancy who were brought in for the management and guiding of Lidl through its transformation to SAP for retail.

Some People believe that KPS is at fault, namely for being too slow to implement needed changes within Lidl in preparation for a project of this magnitude.

A senior manager at KPS, Matthias Nollenberger, who was responsible for overseeing the project, reported the shorter than usual deadlines were actually the problem.

Many people, however, are pointing their fingers at SAP as they believe that the solution they offer is quite simply not up to standard.

SAP on the other hand are very quick to highlight all of their (and there are a lot) successful implementations, including with organisations such as Aldi Nord.

Most people believe that Lidl is a fault, with their inability to adapt to change and requirement for customisation causing long development times.

Jean-Claude Flurry the chairman of a worldwide SAP user group says that Lidl is to blame. Lidl should have done more research on what they were buying and more clearly documented their processes and needs.

What are they going to do now?

After 7 years, and €500 million spent, Lidl have decided to revert back to their old legacy system.

This may cause them a hassle to maintain the system and staff, as the system gets older it’s going to need a lot more attention and maintenance.

IT experts may be a hassle to recruit, train and maintain, especially as new generations of coders and IT experts will not want to be maintaining 30-year-old code.

So what are the lessons we can learn from this?

To start, evaluate your processes and understand how your business works.

Since this is the first step of creating a digitalisation strategy, it should also be something your business carries out periodically, as changes in people, process, legislation, and technology, may ignite the fuse to transform your processes giving you huge benefits – such as cost savings.

Getting a proper understanding about how your business operates gives you an understanding of what works well and what doesn’t. This allows you to pinpoint improvements in key areas, one at a time.

Finally, know where your business could be falling down, or behind, and understanding how and why gives you a better understanding of what you need when looking to digitise and improve your processes.

A key area where Lidl failed to evaluate its processes, was with its inventory management system as mentioned above. If Lidl had a better understanding of the process they already had, they may have entered the market with a better eye on a solution that would work for them without so much customisation needed.

Evaluate Your Options.

Knowing how your business and your systems operate gives you a better understand on what your business needs.

Once you set your strategy in place, and have set out needed requirements, that is the time to approach the market for solutions.

Exploring what is on offer, who offers what you need, who offers what you want and what solution fits best between those two categories will give you a shortlist of possible solutions and partners to then work with.

Evaluate Your People.

Make sure that everyone who will be involved in the project and have use of the solution after it’s installed, has a clear understanding of all the changes that are being proposed and will, hopefully, be made.

If the people are not willing to change their mind set of “this is how it’s always been done” then it’s going to be an uphill battle form the start.

The best thing to do is educate people, keep them in the loop and inform them of all changes, building trust in you will be building trust in the new solution

Conclusion?

Lidl isn’t the first company and won’t be the last company to have a massive system installation favour, Large company’s generally have multiply old legacy systems intertwined and patched together from multiple decades and now it’s more important than ever to keep updated.

Perhaps, more importantly, this is about changing your mindset, the “that’s how we have always done it“ response no longer works with the organisations and technologies of today.

So used to technology changing, constant updates from apps employees and the public expect companies to be ready to move with the times and not be bogged down in old technology.

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Post by James Donaldson

James has been with ITESOFT since late 2016. Quickly establishing himself as a genuine automation enthusiast, he is a reliable source for the latest information on Financial Process Automation technologies.

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