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22 October 2004 Supermarket chain Sainsbury's has reported its first ever loss after a failed IT project left its shelves bare; the retailer is now abandoning automated systems in favour of manual ones.

Sainsbury's is to write down £140 million in IT assets and a further £120 million in automated distribution after its botched overhaul of the group's distribution and IT systems that had made availability of stock "worse than ever".

As part of the plan to get the supermarket chain back on track, Sainsbury's is to axe 750 head office jobs, while taking on 3,000 staff to stock shelves. Four newly automated depots will also be closed.

"The IT systems that were built to back up that [supply chain system] have not yet delivered," King said. "The IT cost is a greater proportion of sales than they were three years ago."

Sainsbury's outsourced part of its IT to consultancy firm Accenture in November 2000. The £1.8 billion seven-year contract - labelled as the "Business Transformation Programme by then chief executive Sir Peter Davies - was designed to help achieve advantage over its competitors as efficiently and cost effectively as possible.

In a statement released by Sainsbury's the company said it will concentrate on rebuilding its IT team in-house and renegotiate its contract with Accenture. Attempts have been made to simplify relations between Sainsbury's and Accenture. In February 2004 Sainsbury's bought back Swan Infrastructure - the intermediary company set up with Accenture to run the transformation programme - for £553 million. King said at the time "the balance of responsibility lies far too heavily on Accenture."

Accenture has distanced itself from the supply chain problems and stressed that its contract did not cover the problem areas.