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Project

Cosmetic giant implemented the ERP system of SAP and regretted

Customers: Revlon

Trade

Contractors: SAP SE
Product: SAP ERP
На базе: SAP NetWeaver

Project date: 2018/02

Content

2019: Claims from investors

In May, 2019 investors of Revlon continued to file a lawsuit against the cosmetic giant for failure of deliveries of products because of problems with the software of SAP.

The Zhang Investor Law law company took to court the class action on behalf of shareholders of Revlon. Those say that the company could not create necessary measures for planning and control of implementation of the ERP system of SAP.

Revlon did not manage to be developed, implemented and to consistently apply effective remedies of control at the level of processes to provide proper registration and stock accounting of products, receivables, net sales and cost value of the sold goods, according to the lawsuit.

The cosmetic giant Revlon implemented the ERP system of SAP and regretted

Similar group complaints also took Bragar Eagel & Squire, Wolf Haldenstein Adler Freeman & Herz and Rosen Law Firm law firms to court. Data from the reporting of Revlon for 2018 are the basis for charges. In the document it is said that the company could not deliver products under agreements therefore it did not get $64 million net proceeds. Besides, the American producer of cosmetic products incurred additional expenses in the amount of $53.6 million which were directed to elimination of effects of the broken contracts with customers.

In documents which provided to Revlon Securities and Exchange Commission, it is said that the failure in customer service which occurred at manufacturing enterprise in Oxford, the State of North Carolina, the USA had a negative impact on sales to the company in the first quarter of 2018. At this factory a new ERP system of SAP was started.

According to claimants, in each quarterly statements of Revlon told the market about the strategy in digital technologies and e-commerce. However the SAP company began to speak about a system only after faced interruptions in production because of new software. The company made the false or misleading statements and did not disclose the scale of the problems from implementation of technology of SAP, it is specified in the class action.

Itself Revlon calls charges from investors groundless and is going to protect actively the correctness in the legal framework.

In March, 2019 the chief financial officer of Revlon Victoria Dolan said that the plant in Oxford works in the normal mode, and a SAP system does not prevent the company to turn out products in the necessary quantity. Almost all partner channel is loaded by products of Revlon completely, she claimed.

Problems at implementation of ERP systems meet rather often, however seldom reaches claims from investors, Jim Johnson, the founder of consulting company Standish Group International which specializes in studying of ERP projects says. According to him, most often there are disputes between clients to whom set software, and integrators which implements it. 

Despite the failure SAP project of Revlon she does not intend to set other ERP system

The director of expert services in court of Panorama Consulting Solutions Bill Baumann agrees that shareholders infrequently file a lawsuit against the company after the failure ERP project. In the majority of such not numerous cases claimants accuse the company of failure to follow promises to provide integration of the systems with third-party service. 

Problems in ERP projects arise partly due to the lack of the plan for control of organizational changes: employees do not participate in change of ERP and do not study a new system, Baumann noted. 

Besides, the management can not support such initiatives. Subordinates know about it therefore they do not find time for implementation and use of a new system, preferring to be engaged in the normal work, the expert added.

2018: Failure implementation of the ERP system of SAP

Revlon completed the project on implementation of the ERP system of SAP at the plant in Northern Carolina in February, 2018. It had to integrate planning processes of deliveries, search of suppliers, productions and distributions and also financial transactions.

Right after start numerous errors in work of software were found. Then the company was recognized that it insufficiently carefully controlled development processes and implementations of software.

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We expected that this system deployment will provide big transparency of information on transactions in real time that will allow to make better and quicker decisions, to increase efficiency of customer service and to improve rational use of current assets. However in transition time on SAP we faced problems because of which the plant began to increase capacities more slowly, than it was expected — the operating officer of Revlon Christopher Peterson reported in February, 2018.
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According to him, because of problems with the software of SAP could not make finished goods in the necessary quantity and execute orders from large retailers in the USA. In January-March, 2018 the company did not get $20 million net proceeds.

Unsuccessful implementation of the ERP system led to heavy losses of cosmetic giant Revlon

Then it was necessary to spend off-schedule $10 million which Revlon carried to overheads of the enterprise which turned out to be consequence low in comparison normal production volumes and one-time costs of compensation at the Oxford factory.

By February, 2018 Revlon implemented a SAP software on the objects in 22 countries. The competitor of Revlon — Elizabeth Arden — preferred to refrain from cooperation with SAP and implemented the ERP system of JD Edwards company.

Christopher Peterson said that by February, 2018 the company is not going to replace the system of SAP.[1]

Notes