Under Armour’s SAP implementation issues contribute to disappointing quarter
US sportswear company Under Armour has admitted issues with implementing SAP’s S/4 HANA ERP system has “negatively impacted” third quarter results due to change management issues and supply chain disruption.
The planned rollout, which was initially announced in October, encompassed warehouse management, inventory control, POS, merchandising and product allocation systems across North America and Europe, and had been designed to help Under Armour operate more efficiently.
However, president and COO Patrik Frisk explained on a conference call with ZDNet that they had “encountered a number of change management issues impacting our workforce and manufacturing partners as they adapt to the new platform and processes”, resulting in delayed shipments and productivity loss.
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He said “During this system migration, we have encountered a number of change management issues impacting our workforce and manufacturing partners as they adapt to the new platform and processes.”
Training and cooperation with external users seems to have been a particular stumbling block, according to CFO David Bergman. He explained that Under Armour ran into problems “working with our inventory partners, our vendors, trying to get them up and trained on the system as well and just getting all the things in place.”
Consequently inventory rose 22% to $1.2 billion. Meanwhile, Under Armour earned $54 million on revenue of $1.4 billion in the third quarter, down 5% from a year ago.
The announcement comes after a period of struggle for Under Armour, who have been trying to compete with faster, more digitally savvy rivals whilst dealing with distributor bankruptcy and shifting consumer tastes and laying off staff over the past year.
Nevertheless, Bergman says that S/4 HANA is now “operating well” and “stable”. Whilst Under Armour is still working through some of the problems that aren’t “completely gone yet”, the company predicts that change management and supply chain problems won’t affect fourth quarter earnings as much.
Since running into trouble implementing S/4 HANA, Under Armour has adjusted its outlook for 2017 earnings and revenue to 18 to 20 cents a share, compared to the 37 cents a share expected by Wall Street Analysts.
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