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Ulta Beauty has become the latest firm to face snags caused by the rollout of a new ERP (enterprise resource planning) system.
On its second-quarter analyst call, Ulta officials said updating key store systems starting in March across its more than 1,400 stores forced teams to manage dual systems, adding complexities within purchasing, store allocation, as well as planning processes and systems.
“We are pleased to have successfully completed this important phase, but we have experienced some unexpected operational challenges as our teams have adjusted to new capabilities, new processes, and new ways of working associated with the new systems,” CEO Dave Kimbell told analysts.
Some related store inventory allocation disruption was part of the reason for Ulta’s sales shortfall in the second quarter. Kimbell added, “With all of our stores and DCs now operating on the same core systems, we are shifting from implementation to system optimization and are working quickly to help our teams navigate these new ways of working in order to balance inventories across the network and deliver an optimized guest experience.”
To minimize future disruption, Ulta identified key legacy processes that are creating friction and implemented proactive monitoring. Kimbell concluded, “I am confident that our new capabilities will support better, more agile decision-making in the future.”
Panorama Consulting Group, which regularly surveys businesses on the outcomes of their ERP projects, showed in its 2023 ERP Report that 83% of projects met ROI expectations a year or more after going live.
However, the internet is full of advice on executing ERP implementations, with many of the benefits arriving later than expected or causing minor to major complications. Consumer-related firms cited in case studies around failed ERP implementation projects include Target, Hershey, Lidl, Revlon, J&J Snack Foods, Avon, and Nike.
According to cloud-based ERP system provider Velosio, six common ERP challenges are:
- Lack of vision
- Resistance to change
- Integrating systems and processes
- Skills shortages
- Data migration
- Poor project planning and management
Gartner estimates that by 2027, over 70% of recently launched ERP initiatives will fail to fully achieve their initial business case objectives, with as many as a quarter of these expected to “fail catastrophically.”
Gartner pointed to recent research showing that 75% of ERP strategies “are not strongly aligned with overall business strategy, leading to confusion and lackluster results. This scenario makes it even more important to create a clear ERP strategy and set of principles to assess the fitness of new technologies to the projected business strategy outcomes — and answers the key question from business stakeholders of ‘what’s in it for us?’”
Paul Saunders, SAP chief evangelist for Cloud ERP, wrote in a Forbes column on digital transformations, “Meeting the expectations of a wide group of stakeholders and transforming how a company meets the needs of its customers, partners, and employees now and in the future cannot be accomplished with technology alone. It requires the formation of a common culture and mindset that inspires everyone within the organization to work to meet its goals. It also necessitates identifying what truly differentiates the organization to its customers and then building and delivering differentiated capabilities on top of standardized processes.”