Chemical industry giant ICI has demonstrated in spectacular fashion the consequences of a botched software implementation.
A recent profits warning from the company, which resulted in a 39% drop in its share price, blamed major problems with the implementation of an SAP supply chain management package at its Netherlands-based flavours and fragrances business unit.
The supply chain project, known as Q-Star, went live at four sites in the Netherlands in May 2002, but encountered major problems from the outset. Most seriously, staff using the system had difficulty locating raw materials and thus struggled to fulfil orders, leading to a huge backlog. As a result, some of the unit’s largest customers have since defected to competitors.
Last month, ICI said it wrote off £20 million over 2002 as a result of the problems, and before the profits warning it had made pro-vision for a further £5 million to be written off this year.
Earlier, the company also said that it had deferred the implementation of a restructuring and cost-saving programme following problems with deployment of the supply chain system.
The departure of the unit’s CEO, Paul Dreschler, shows where ICI thinks responsibility lies for such systems implementation failures.