Woolworths Australia, dubbed “Woolies” by locals, is the largest supermarket chain in Australia. Operating nearly 1,000 locations across the country, it staffs around 115,000 employees.
With various stores, support offices and distribution centers, the company needed a system capable of organizing and streamlining its operations. It rolled out a promising $200-million SAP implementation in 2009, but by 2015, it was clear that the project was derailing.
What began as an inspiring overhaul of Woolies’ decades-old legacy systems eventually cost the company more than $766 million in related losses.
Today, we’re taking a closer look at the Woolworths Australia ERP failure and discussing how your company can avoid similar mistakes.
We are called upon to investigate the feasibility of litigation, provide software expert witness testimony and build background reporting for some of the industry’s highest-profile ERP lawsuits.
Behind the Woolworths Australia ERP Failure
The idea to upgrade Woolies’ existing, in-house controls started innocently enough. Built 30 years ago by both internal employees and outside contractors, the old system was called CASS. This acronym stood for corporate application support system.
Divided into four separate platforms, the setup was outdated and in dire need of modernization. Enter a new end-to-end SAP human capital management (HCM) system and some catchy project branding: Project Galaxy.
The HCM implementation took place slowly, over the course of six years. However, when it finally went live, the results were a far cry from the sweeping success that everyone anticipated.
Software Errors Impact Sales
End-users quickly began noticing glitches in the software. The most critical issue was an inability to send orders to suppliers.
On their end, suppliers were equally frustrated, as they were unable to receive and sell products to customers. Such inefficiencies ultimately cost the company millions in lost sales.
Decreased Accounting Oversight
Before the SAP system was rolled out, supermarket managers at Woolworths were used to receiving timely profit-and-loss statements every week. Not only did these statements help them keep an eye on their bottom line, but they served as important performance benchmarks between stores.
Once the new system went live, however, those updates became impossible to provide. The issue was that the new data collection processes weren’t comparable to those used in the old system. As a result, managers were left in the dark about their store’s profitability and production.
3 Lessons Learned from this HCM Failure
There were several issues at play in the Woolworths ERP implementation failure. All of them combined resulted in massive losses, frustrated employees and a brand image setback that took years to recover.
Let’s take a look at a few of the issues and lessons learned.
1. Process Documentation is Key
From the very beginning, ERP projects require careful and thorough process documentation.
In the case of the Woolworths failure, there was little attention given to documenting the current or future business processes. Instead, this intellectual property remained stored in the minds of Woolies employees.
The issue with relying on tribal knowledge arises when staff members leave and take the intel with them. This can be a challenge at any time, but it’s especially frustrating when you’re implementing software and ex-employees are the only ones who understand certain workflows.
Relying on tribal knowledge can also be a problem when it comes to the C-suite. Throughout the six-year project, Woolworths saw many changes in its executive management. As senior leaders left the company, their roles were filled by people who weren’t privy to the same knowledge as their predecessors. This made a smooth ERP rollout nearly impossible.
2. Executive Buy-In Keeps Projects on Track
For an ERP project to be successful, it must support company business objectives.
- Performance objectives
- Talent and success
- Payroll and self-service
The goal was to create simple processes that would allow individual store managers to exercise control over their own HR tasks. Once in place, the system would help them develop their workforce, while they managed their own careers as leaders in the Woolies enterprise.
While these were decent goals, they weren’t sufficient on their own. What Woolies should have done was define additional project goals – more specifically, ones that directly tied to overarching business objectives.
It’s reported that the senior leaders at the time didn’t view technology as a business enabler, and as a result, they didn’t see value in setting such goals.
This attitude is typically a sign of low executive buy-in and involvement. It’s clear that Woolworths struggled to engage its executives as evidenced by the fact that their CIO at the time stepped down.
The lesson here is that unless executive buy-in is firmly in place and maintained throughout the life of a project, the initiative can lose steam, funding and attention.
3. Extended Timelines can Derail Focus
Understandably, any ERP project won’t happen overnight. This is especially the case when you’re overhauling a system as old as Woolies’ system. However, six years is a significantly long duration.
As Project Galaxy chugged along toward the finish line, it became difficult for anyone involved in the project to stay focused on its success.
Then, when it was finally time to go live, the sudden shift came as a shock to many employees as they had grown familiar with talk of the project but weren’t prepared for its implementation.
Shortening the timeline could have kept employees focused on preparing for go-live, but what was really missing was a dedicated focus on organizational change management.
This is important because employees are the ones who ultimately help you realize ERP business benefits. Preparing employees for a major change and communicating key updates at every touchpoint ensures they’re equipped and empowered to make optimal use of the new system.
The Recipe for ERP Success
Despite the challenges that led to the Woolworths Australia ERP failure, the brand remains committed to ERP implementation success. Recently, it announced plans to shift its current ECC 6.0 SAP environment to a Microsoft Azure platform, though details remain unclear.
It’s likely that this will be a much more thorough, thought-out project, given the lessons learned thus far.