Spar’s botched SAP project cost R1.4 billion and a top exec

Spar informed shareholders this morning that its move to a new software system has cost the company R1.4 billion over the past financial year but is now stable and performing consistently.

Spar started rolling out the new R1.8 billion SAP software system at its KwaZulu-Natal distribution centre earlier this year.

However, this transition resulted in “various go-live and integration challenges”, negatively impacting the company’s distribution operations in the region, the company said.

The move to the SAP software resulted in various integration and distribution issues that caused interruptions in stock deliveries to stores and lost sales.

In its interim results for the six months ended 31 March 2023, the company informed shareholders that these challenges cost Spar R786 million in lost first-half wholesale turnover.

In a trading update this morning, the company said this number had grown to an estimated loss of turnover of R1.4 billion, as it cost the company an additional R638 million in the five months to August 2023.

Earlier this month, Spar’s chief information technology executive, Mark Huxtable, also resigned from the company not long after the rocky implementation of SAP.

The company said Huxtable’s departure is for personal reasons, and he will leave the Durban-based company at the end of the month.

Spar told shareholders this morning that “SAP has remained a supportive partner throughout the project”. 

“After months of collaboration to resolve the issues and drive success, management is satisfied to report that the KZN distribution centre is once again servicing all stores in the region.” 

“The SAP solution is stable and performing consistently. Overall, service levels are approaching the levels at which they were prior to the SAP implementation.”

Spar’s operating profit fell 18% in the six months through March.

However, the company said this morning that its combined core grocery and liquor turnover grew by 7.0% in the 47 weeks to 25 August 2023. 

If adjusted for the estimated loss of turnover due to the impact of the SAP implementation, the combined turnover growth would have amounted to 9.0%