The following entry is a record in the “Catalogue of Catastrophe” – a list of failed or troubled projects from around the world.
Organization: Lidl Stiftung & Co. KG – Germany
Project name : eLWIS (apparently pronounced “Elvis” in German)
Project type : Merchandise management system – Grocery stores
Date : Aug 2018
Cost : €500m
Synopsis :
When it comes to selling the basic commodities of life you have to be lean and efficient. The grocery industry runs on thin margins and relies on giving the customer the right product, at the right time with as little waste as possible. When you’re dealing with perishable products you have to be nimble, organized and leverage your business data to its maximum effect.
Lidl groceries
Source wikicommons (Santeri Viinamäki)
The battle in the retail space is in large part fought using IT systems as a tool. The better your systems, the lower you can push your pricing and the more market share you can grab. In Europe low cost grocery chains have reshaped the grocery business and at the forefront of that transformation has been Germany’s Lidl Stiftung & Co (Lidl).
To maintain their lead, Lidl decided to replace their aging legacy systems with a new SAP based state of the art merchandise management system. Unfortunately reports indicate an apples to oranges difference between the basic software design and Lidl’s business model. As such the system had to undergo significant redesign, customization and adjustment to meet the requirements. Reporting from Consultancy.uk indicate that -“Lidl based its inventory management system on purchase prices. The standard SAP for retail software uses retail prices, and fearing the group could lose a competitive edge by compromising, Lidl declined to change, so the software was instead adapted.”
Customize package software to fit your needs may be easy or it may be hard. The degree of difficulty, depends on the so called ‘requirements gap’ (i.e. the difference between what the existing package is capable of and what you want it to do). The smaller the gap the easier the project, the bigger the gap the more challenging the project becomes. A requirements gap can be addressed in a number of different ways;
- You change your business processes to match what the software can do
- You customize the software to match your business processes
- You can meet in the middle (i.e. do a bit of both – change the software and change the business processes).
All have their challenges, but by deciding to keep their processes as is, Lidl took on the challenge of making a system do something it was not originally designed to do. Despite going live in 2015, Lidl has now found the it wasn’t a ‘requirements gap’ they had in front of them, instead it was a ‘requirements chasm’. Despite having spent €500m, Lidl has apparently come to the conclusion that their business objectives can’t be met. ComputerWeekly magazine reports that “a memo sent by the head of Lidl, Jesper Hoyer, to staff stated that the strategic goals as originally defined by the project could not be achieved without the retailer having to spend more than it wanted”. Lidl will apparently be returning to their old legacy systems for now.
€500m is one heck of a lesson to learn, but good for Lidl’s management team for eventually recognizing that their plan was not going to achieve what they wanted to achieve. I know of many management teams that wouldn’t have the nerve to step up and admit that.
Related stories:
- HealthSMART – Victoria – Again a package software project with a large requirements gap
- London Stock Exchange – Taurus – A blast from the past to illustrate that this issue is nothing new.
Contributing factors as reported in the press:
Forcing a square peg into a round hole (system capabilities and business processes poorly aligned). Inappropriate product choice. Underestimation of complexity.
Reference links: