ERP Implementation Troubles Hit Levi Strauss
By: Jeff Myhre, Chief Editor (8/7/2008)
This is a cautionary tale about the need to get an implementation right the first time.
In its latest quarterly report to the SEC, clothing maker
Levi Strauss reported a 98% decline in its net income, $1 million in second
quarter 2008, down from $46 million in second quarter 2007.
What was to blame? The company
said, “Net revenues in the
It turns out that after the system went live, Levi Strauss “encountered issues with the U.S. ERP system which caused us to further revise our internal control process and procedures in order to correct and supplement our processing capabilities within the new system.”
Nor is the company convinced it’s out of the woods yet, “Key challenges and risks for us during the remainder of the year include . . . our ability to mitigate the impact of any further ERP-related issues during stabilization, which we expect to continue through the remainder of the year.”
The company seems had no illusions that things could go wrong. “In anticipation of that implementation, we provided advance shipments to wholesale customers in the first quarter of 2008 that would normally have been shipped in the second quarter. Our ability to fulfill customer orders in the second quarter was subsequently impacted by issues encountered during stabilization of the ERP system.”
Now, the $45 million drop in net income wasn’t just because of the ERP difficulties, but if management felt it important enough to mention, the loss must have been big. Levi Strauss isn’t talking much about what went wrong, but there’s a lesson for everyone here – getting an implementation right can boost your business, but getting it wrong can wreck it.
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