German confectionery company Haribo suffered from operational upheaval during their digital transformation, leading to missed shipments and lowered sales.
German confectionery maker and gummy bear creator Haribo faced production constraints and missed deliveries to supermarkets due to a turbulent migration to SAP S/4HANA, according to a report in Handelsblatt.
The unhappy IT department of Haribo began transitioning to S/4HANA in October 2018, converting 16 candy factories spread across 10 countries away from the heterogenous enterprise resource planning systems used in each region-some of which dated back to the 1980s.
The move away from this decades-old technology requires a great deal of manual effort to convert the business processes and workflows that fit those systems. Continuing to operate on dated technology is not a viable strategy, likewise, attempting to modernize old, bespoke designs is likely to be rife with problems regardless of the software you migrate to.
SEE: Digital transformation: A guide for CXOs (Tech Pro Research)
The troubled shift led to a 25% decline in sales of Haribo's trademark Gold Bear gummy candy in 2018, partially due to delayed shipments to supermarkets caused by operational disruptions from the S/4HANA migration. Similarly, Wirtschafts Woche claims supermarkets are out of stock of individual Haribo products for days at a time.
Part of the blame certainly lies with Haribo for these shortages, as the company acknowledged to Handelsblatt that it became too focused on producing niche products, though a spokesperson said the worst is over, claiming in a translated statement that "we see our delivery capabilities continue to improve day by day and week by week."
Digital transformation challenges
Haribo is not alone in suffering difficulties from SAP migrations, with discount German grocer Lidl spending €500 million ($573 million USD) over seven years in a failed SAP migration. Eric Kimberling, CEO of Third Stage Consulting, points out that companies need to be willing to change as part of their digital transformation, noting in the Lidl case that "even the smallest details can disrupt a project." Kimberling told TechRepublic that the first companies migrating to S/4HANA are still in transition, and that transformations at larger organizations are more complex.
Digital transformations hinge on people, process, and technology-and on the latter point, planning for digital transformation can be myopic, Kimberling said.
Push-outs—people who quit their jobs as a result of digital transformation—are the minority, according to Kimbering, but this does happen on occasion, particularly in cases where employees' skills sets or interest in adopting new software are lacking, or when they are feeling threatened by the prospect of automation.
Organizations looking to avoid turbulence should be mindful of all three facets during their digital transformation. Earlier this month, Altimeter released their annual State of Digital Transformation report, which provides guidelines for digital transformation success.
The big takeaways for tech leaders:
- Haribo began transitioning 16 candy factories in 10 countries to S/4HANA in October 2018. Problems resulting from migration troubles led to a 25% decline in sales in 2018.
- German grocer Lidl spending €500 million ($573 million USD) over seven years in a failed SAP migration.
- Digital transformation: A cheat sheet (TechRepublic)
- Digital transformation: An IT pro's guide (TechRepublic download)
- Digital transformation: A guide for CXOs (Tech Pro Research)
- What is digital transformation? Everything you need to know about how technology is reshaping business (ZDNet)
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