I was a little flummoxed to read that Levi Strauss, the venerable Jeans maker, reported a 98% drop in quarterly net profit last week. Well I wasn’t flummoxed about the drop in profit – these are difficult times after all. No, what really surprised me was the major reason given by Levis, after the economic downturn for this drop in profits: a new ERP system.
Yes you guessed it – ERP that, according to a Wikipedia definition should;
combine the data of formerly separate applications, simplify keeping data in synchronization across the enterprise, simplify the computer infrastructure within a large organization, and it standardize and reduce the number of software specialties required within larger organizations
In commenting on the ERP debacle, Levi Strauss said that;
Issues with the ERP system led to delayed orders and cancellations by retailers and amounted to a “substantial portion” of Levi Strauss’ revenue decline in the quarter
Now is it only me or is the tail wagging the dog here? Isn’t software meant to help business, and shouldn’t a new ERP system improve the results obtained with the former. Sure there is always a bit of stop/start when deploying a new solution but really, a 98% drop in profits, approximately half of which is attributed to the cost of software deployment?
don’t forget – Levi’s used to be the poster child example for just in time production, mass customization and other such Tofflerisms (http://en.wikipedia.org/wiki/Alvin_Toffler).
I guess its easier to write a book about the wave of the future than to make it actually happen in a massive business. If they had succeeded everybody would be talking about the wave of the future and them having the guts to ‘commit their whole business to the new model’ etc. Of course it didn’t so they took a big risk and it didn’t pay off, I guess.
Now don’t get me wrong as soon as the word “E” (for enterprise) starts showing up at the front of any type of massive software deployment I think one is right to be skeptical, and I for one will be likely to run far away in the opposite direction.
as one of those who work on that ERP-thing I have to defend both LS and the ERP system, or rather: LS was sold on a cheap solution and got exactly what it paid for. Cheap solution. (We went there to fix it – expect the good news next quarter).
ERP is not supposed to be cheap to implement but it is supposed to pay off over time. All of those costs you should reflect against the cost of “not doing it” to get the real picture. This is an investment in the life of the enterprise, having it done right is crucial, bad times or not. Thinking of ERP is a culprit itself is wrong. The way it was deployed would have had to be done better. Like, when you have your car built/fixed: it needs the engine to be all right. You may envy those V12 S600-s or M5-s but understanding what drives that car really…. and those Model T-s may be collector items but you sure would no longer be able to get from A to be with them.
You get a tool. If you use it well it will do the job.