An insider view of Avon’s ERP troubles in Brazil
Posted by By Angelica Mari at 21 December, at 16 : 13 PM Print
As the chief executive of cosmetics giant Avon steps down amid slowing sales and profit growth, IT Decisions looks at one of the key factors linked to the company’s poor performance in Brazil – a marred implementation of an enterprise resource planning (ERP) platform.
Last week, the door-to-door cosmetics seller said Andrea Jung was to quit as chief executive after disappointing sales in core markets including Russia and Brazil. The company generates the vast majority of its revenue outside the US.
The roll-out of an Oracle ERP suite underpinning core supply chain and finance operations has posed huge challenges for the company’s operations in Brazil. IT Decisions spoke to a senior source close to the entire process and found that the implementation had been postponed five to six times during a three-year period before its completion in July.
According to the source, the introduction of the platform – which replaced bespoke software that had been in use for at least two decades – demanded a significant effort in terms of the myriad of processes that had to be consequently changed.
“The technical project itself was very well structured and you would expect that cultural change is necessary for it to work, but for a project of that magnitude you need a sponsor right at the top. So even if there is resistance to change, things get done with support from above,” the source told IT Decisions.
“There are people within Avon who are working towards making it a truly global business with global processes, but there also people who are keen to keep it as it is – a gigantic company that has grown organically over the years where regions have total autonomy to do things however they like,” the source added.
The troubles around the implementation have resulted in large numbers of IT staff leaving the company in the last 18 months, according to the source.
The insider suggested that there seems to be a disconnect in terms of IT strategy too: a separate large-scale ERP project was launched recently with a view of transforming other customer service areas. SAP was chosen to supply products for that body of work.
“The [SAP] project will be significantly more complex. And if we work on the assumption that the same difficulties around change will remain, it would be fair to say that this project will take six to seven years to complete,” the source said.
Without citing exact numbers, the source said that the cost of the Oracle roll-out was “quite high” and that the upcoming SAP project will also represent a considerable expense to the company.
When it comes to advice to other companies undergoing similar challenges, the executive insisted that, without senior backing, initiatives around changing systems supporting the core of a large operation are doomed to failure.
“The Avon experience presents a series of lessons to managers and companies from any industry sector. If an organization is ready to lead an ERP roll-out that touches on its key processes, it needs to have a senior sponsor that will protect the project and avoid more serious consequences,” the insider said.
Sanford Bernstein & Co analyst Ali Dibadj told the San Francisco Chronicle that Avon’s management needs someone “to shake them out of their entrenched ways of doing things.” The company is currently looking for a replacement for Jung.
Avon did not respond to requests for comment.
Image by Elena Pérez Melgarejo licensed under Creative Commons.
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Diego, 1 year ago
My mother works as an Executive (is also known as Executive Sales) at Avon Company and she know well how difficult is at each campaign the lack of a bunch of product into her boxes, she manage a bunch of 160 sellers or more. The sector where she works is the last to have your profits and products to be billed, when the products arrive to her and their sellers, virtually the boxes comes completely empty because of lack of products. I just know that these problem comes happening almost 2 years since the factory moved to Minas Gerais.
Teresita, 1 year ago
Very insightful, in so far as to caution IT execs and teams to enlist the collective efforts of all affected IT constituencies when implementing a major infrastructure integration. But I would have expected the Oracle Project team to have that plan available to the Avon.
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Preston Williams III, 1 year ago
Systems integration can be quite challenging in a multi-lingual/multi-cultural environment, especially when deploying a high end ERP/CRM solution. While working as a Project Executive with IBM Global Services, I managed an exciting project in Brazil which ensured end-users’ easy access to complex IT environments. The engagement was successful partly because we worked tirelessly through team-oriented collaboration as we implemented a proprietary electronic grid solution during Duke Energy’s acquisition of Paranapanema.
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[...] An insider view of Avon's ERP troubles in Brazil As the chief executive of cosmetics giant Avon steps down amid slowing sales and profit growth, IT Decisions looks at one of the key factors linked to the company's poor performance in Brazil – a marred implementation of an enterprise resource planning … Read more on IT Decisions [...]
Jim Hutton, 1 year ago
When an IT project involves enterprise processes (international finance and supply chain being good examples) the corporate leaders (CFO, CEO) have to become involved as the risk of project failure places a risk to the ability of the whole corporation to function as well as the adverse external consequences that would follow. It can not be a strictly “IT project” with the CIO being the highest involved stakeholder.
We all know the reluctance of corporate leaders to get involved in an “IT Project” but they must when it involves the core enterprise processes; otherwise they are abdicating their responsibility for the company to (at best) the CIO; at worst, some IT PM.
Corporate leader involvement shouldn’t just be status reviews; they should include direction setting (especially when issues arise of a nature that the Avon ERP project experienced).