SAP Watch

Jul 16 2008   10:41AM GMT

Levis blames SAP for falling profitability

JackDanahy Jack Danahy Profile: JackDanahy

Levi Strauss, the iconic jeans company, has experienced a 19% drop-off in U.S. sales, and a 98% collapse in Q2 08 profitability. In an SEC filing and subsequent conference call, Levi Strauss placed much of the blame for the bad performance on SAP.

Levi Strauss, which began to roll out SAP globally in 2003, has certainly faced a challenging technology environment of late. From an IT perspective, the earlier part of this decade was dominated by trying to achieve compliance with Wal-Mart’s electronic trading mandates; afterwards, Levi Strauss installed SAP in its Asia-Pacific operations. The subsequent SAP project in the U.S. may have been rushed. Whatever the case, things came to a head in Q2 08 as Levi Strauss’ electronic systems simply shut down for a week. In addition to the platform problems, the company has also had to cope with falling demand for Dockers.

Levi Strauss hasn’t abandoned SAP, and is in fact hiring as many as 11 SAP consultants and experts to work in the company’s San Francisco headquarters. Nor has the company claimed that the SAP software is buggy; indeed, as most of Levi Strauss’ direct competitors successfully use SAP, that would be a hard claim to make.

CIO David Bergen, who was the SAP champion at Levi Strauss, is apparently no longer with the company, as his picture and biography on the Levi Strauss Web site were quietly dropped earlier this year (however, Bergen’s LinkedIn page still claims that he is CIO of Levi Strauss).

It’s worth noting that ex-CIO Bergen came from the IT application development world. He had only two years of experience as a CIO before joining Levi Strauss in 2000. From a risk management perspective, it was unjustifiable for Levi Strauss not to hire a senior CIO, well-versed in process-driven implementations and project management, to preside over the company’s IT strategy at such a critical time. Perhaps the company has paid the price for this decision.

In any case, SAP says that the software problem at Levi-Strauss is over: “We have a strong relationship with Levi Strauss and they successfully leverage SAP solutions to support many areas of their business,” stated SAP spokesperson Lindsey Held. “As part of this close partnership we work together to quickly resolve any challenges that arise. The software-specific challenge noted in their earnings was immediately addressed by the organizations involved and is largely solved at this point.”

Demir Barlas, Site Editor

10  Comments on this Post

 
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  • JackDanahy
    I'm under the impression that a majority of clothing manufacturers are using SAP. SAP as a solution is not the issue here and most likely the blame should fall on the project managers, business process owners and whoever was brought in to facilitate those teams. Do we know who was the implementation partner/s were?
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  • JackDanahy
    Hmm, so those companies that have SAP and do well should credit also be crediting SAP for their success? Blaming SAP is a ridiculous excuse on Levi's part. Thousands of companies use SAP successfully. Having used Levi's website to try and order jeans, I find this article amusing. You can't even order something in size 34x31. And they wonder why the are getting their a***s kicked in the marketplace? Give it a try yourself: http://us.levi.com/product/index.jsp?productId=2072838&cp=2068573.2075200.2075204&parentPage=family I contacted them about this several times and got zippo for an adequate response. A blind monkey could do better. I just took my business someplace else. If Levi's wants to know why their business is off, I would be happy to tell them. They have taken a great brand and ruined it with their lack of focus on the customer. This is their REAL problem, not SAP.
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  • JackDanahy
    In the information age its not only how but also what you do with the information and that makes or break the organization. Levi's cannot be an exception.
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  • JackDanahy
    It couldn't be that the business refused to change business processes and tried to get the implementation partner to modify SAP to match the way they did things on the mainframe, could it?
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  • JackDanahy
    The article says:"The subsequent SAP project in the U.S. may have been rushed." This is the key to failure:"Haste makes waste." Inadequate employee training is linked to the rush. Hershey's rushed its implementation (2.5 years instead of 5 years) and had a spectuclar failure too. Remember it's people who make or break the system not SAP.
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  • JackDanahy
    It's a well known fact on the market that Deloitte led the implementation at Levi. I have never seen a successful Deloitte implementation - or any other Big 4 (or 3?) for that matter. All the Big 3, bring an army of right-out-of-college (and some without college education) kids with zero experience, full of arogance, paying misery salaries and billing them to the customer anywhere from $200 to $500 per hour - I have seen invoices!! At one project I saw a Cap Gemini employee on his very first project as a "MANAGER", whose previous job 6 months earlier was a WAITER at PF Changs!!!! and another whose previous job was selling T-Shirts at Planet Hollywood. This is what customers are paying for!! Then they blame it on SAP. yeah right...
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  • JackDanahy
    Do not blame the consulting partners for that. I was involved in a good implementation by Deloitte in APD. It was a well-budgeted project. You pay peanuts you get monkeys! The consulting partners' act on getting the cheap staff are actually being pressurised from the price squeeze from the customers. Howevre, consulting firms should uphold their professionality.
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  • JackDanahy
    @SAPMAN B*S*ting doesn't help. So, don't blame the Deloittes or the Capgeminis or the Accentures of the world. Bet, you are one of those people who work for a SAP shop(Levi, et al), one with pre-conceived ideas about Big 4. Our job can be as good as the information provided to us(remember, the cliche "Garbage in Garbage out" - Yeah, that's how the consulting world works). I would be more interested to know what was Levi's key stakeholders'committment to the project like.
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  • Leviemployee
    This was not an SAP issue. As a current employee of Levi's, they had many successes with SAP in Asia. Do not blame the CIO or the IT function. We have serious business issues in that company that extend way behind this project. David Bergen quit Levi's and then all hell broke loose. The major issue was that the IT function (outsourced contractor) made a technical mistake after going live that brought the system down. To blame David Bergen is a mistake. We would have been much worse without a David Bergen. Deloitte was the integration partner and could have done a better job in ensuring these types of human mistakes do not happen. Our business continues not to want to change the processes and the business leadership is not forcing the change. How this becomes an IT issue is amazing. All that being said, the system is working fine and we are preparing to continue the project into the new countries.
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  • fgdfg
    SAP is about to be rolled out in Canadian food retailer Loblaw stores. Employees have become nervous of the system when hearing CAO, or PI employees were very limited to what they can do in terms of how items are set up in the automatic ordering system. If stores PI accuracy and Planograms are not perfect, many fear the overstock will flow in and the shelves will become bare because of too much back stock. Hope the company brass are aware of this potential problem.
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