An IT project that cost Hudson’s Bay Co. millions in lost revenue was a year past its original deadline and caused delivery delays for customers, according to the company’s CIO.
HBC, operator of The Bay and Zellers stores,
finally launched its “big ticket” system in March of this year. The project, which required changes to almost every aspect of the company’s IT infrastructure, caused a loss of approximately $10-million in sales and revenue. The loss was highlighted in the company’s first quarter financial results report, which was released last month. The report also said that most of those sales could be recovered in the following quarter.
“It’s a massive change and as with any change in people, process and technology you always run some degree of risk,” said CIO Gary Davenport. “We took all kinds of steps you typically take in projects to mitigate risks, but given the magnitude of the change . . . we certainly ended up having more problems than we wanted.”
HBC began its transition to “big ticket” – large in-store items like furniture and appliances – several years ago. The company has pursued an aggressive overhaul of its IT systems for more than half a decade and convened a partnership of some of the world’s largest technology vendors to help out. Microsoft, IBM and Oracle formed the backbone of the partnership and have collaborated on several occasions to help HBC revitalize its infrastructure.
The “big ticket” piece replaced a 32-year-old paper-based system and was designed to be “much more real-time and immediate in terms of servicing the needs of our customers,” said Davenport. It included components from HBC’s regular technology partners.
Davenport didn’t elaborate on how or why the project slipped out of control, but said that delivery times of big ticket items were affected and customers experienced delays. Those delays contributed to the $10 million in lost sales. “If you push your deliveries out of one month into the next you impact the sales you can declare,” he explained.
HBC’s delivery partner TNT N.V., a logistics organization that operates in dozens of countries, did not return calls for comment at press time.
“Part of the issue is, as projects get bigger it’s harder to manage them,” said Rena Granofsky, an analyst at retail consulting firm, the J.C. Williams Group. “With large players sometimes it just becomes more complex and more difficult to manage. This must have been an especially large project.”
Davenport said that additional testing may have helped, but the tremendous scope of the project meant that the company couldn’t afford to be too reticent about its implementation. “This is a type of system you can’t just phase in,” he said. “It has to be all in at the same time.”
HBC and its technology partners are currently “taking steps” to fix any problems that are still outstanding. “I don’t think there’s a lot of finger-pointing going on. The importance is to resolve the situation and make sure we’re meeting the needs of our customers,” said Davenport.
Hudson’s Bay isn’t alone when it comes to IT projects whose reach exceeded their grasp. In 2001, Sobeys Inc. infamously split with its partner SAP. The food retailer claimed that SAP’s enterprise software failed to meet its ordering and processing needs for stores in Ontario and Atlantic Canada. Sobeys pulled the plug on the ERP system one year after it was initially implemented.
“The problem with some retailers is they’re always looking for the huge project to solve their problems,” said a retail analyst who asked to remain anonymous for the purposes of this story. “There is a point at which projects become unmanageable. The Bay has a talent for it. (The big ticket system) was the showcase project that was going to give them faster delivery, more reliable systems and lower costs.”
Davenport said that HBC is setting its sites on other major projects. In three months it will take the wraps off a “merchandise continuum project” which will allow a single view of the data generated by its three properties – The Bay, Zellers and Home Outfitters – allowing the stores to share efficiencies and all carry top-selling items.
Granofsky said that HBC’s big ticket implementation is a blemish on its record, but the company is still regarded as leader in retail technology. “There are always challenges and they’re still out there innovating,” she said.
HBC’s broad-ranging goals are all designed to improve what Davenport calls “information systems agility. . . . You’ve got millions of transactions, thousands of customers and low margins, so (there’s) little room for error.”