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Thứ Ba, 17 tháng 12, 2013

Avon halt SAP upgrade rollout at a cost of $125m -

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It has been reported that Avon Products has pulled the breaks on the rollout of its global SAP implementation project.

According to a regulatory filing with the U.S Securities and Exchange Commission, the international manufacturer and distributor of beauty, household and personal care products described the initial pilot program in Canada as having caused “significant business disruption in the market, and did not show a clear return on investment.”

The Service Model Transformation (SMT) began in 2009, and was expected to improve Avon’s order management processes as well as interaction with representatives selling its products. In its filing, Avon said that the decision “to halt the further roll-out of SMT was made in light of the potential risk of further disruption.”

Although the cosmetics company still plans to continue using the SAP system in Canada, it will now take a pre-tax, noncash charge of $100m to $125m, “reflecting the write-down of capitalized software in the fourth quarter of 2013.”

According to SAP spokesman, Andy Kendzie, Avon and SAP’s relationship still remains strong, and that the system “is working as designed, despite any issues with the implementation.” But working for whom? While the system may have been installed and run as planned by SAP, the results that Avon had clearly expected are nowhere to be seen.

According to the Wall Street Journal (WSJ), the implementation was “so burdensome and disruptive to Avon representatives’ daily routine that they left in meaningful numbers.”

Furthermore, Kendzie’s comment on the SAP-Avon relationship, made to the Wall Street Journal, does not seem to fully resemble the sentiment of past statements made by the CEO of Avon, Sherilyn McCoy.

Upon looking back at Avon’s experience in Canada with SMT, McCoy had stated, “it’s clear to me that our business model has difficulty adjusting to these big-bang field initiatives. The nature of direct selling where our 6 million representatives are independent entrepreneurs is one of personal relationships and connections. It requires spacing change and thoughtfully and strategically not mandating abrupt changes.”

According to the regulatory filings, Avon will now opt to focus “on stabilizing and growing the business and improving operating capability, which includes updating IT infrastructure in a way that delivers clear return on investment.”

Avon, SAP, Service Model Transformation, ERP, SAP implementation, Andy Kenzie, Sherilyn McCoy

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