Metcash CEO Confronts IT System Debacle/Lemon.

In his March 14, 2024 article in the Australian Financial Review, Tony Boyd sheds light on the troubled IT system implementation at Metcash, the project has incurred a staggering $200 million cost overrun, with no end in sight to the challenges.

Doug Jones- CEO has been sold a lemon not only in terms of the IT systems he has inherited but also a board & management team that selected and oversaw the initial stages of the project.

This debacle offers critical lessons for Australian retailers seeking to modernize their systems and stay competitive against international players and e-commerce disruptors.

An analysis of best practices in enterprise system implementations is demonstrated by Bestseller China   Back in 2015 to 2017 Bestseller China a USD$10Billion 7,000 store bemouth was coming under pressure from international fast fashion & eCommerce players that necessitated the update of legacy systems and the customer experience. The CEO and Head of Strategy/Systems developed a transformation strategy to get ahead of the game not just catch up. This included the selection of best-in-class systems from around the world based on the SAP ERP platform. The overriding selection criteria was that it had to improve the customer experience. The internal IT team of approx 175 staff was left out of the selection process as they were considered tactical implementors not strategists. The successful $10 billion transformation at Bestseller China reveals several key factors that Metcash appears to have overlooked.

1.       Executive Leadership: ERP selection, strategy, and oversight should be driven by the CEO and board, not delegated solely to IT teams and system integrators, who may prioritize design and development over successful implementation.

2.       Enterprise Transformation: Implementing ERP & other systems is an enterprise-wide transformation, not a tactical IT project. It requires a strategic, customer-centric approach involving various processes across the organization.

3.       Proven Best Practices: The purpose of adopting world-class ERP systems is to leverage proven, reliable best practices and processes, not to customize or copy existing inferior practices. Top ERP vendors like Microsoft, Oracle, and SAP have extensive experience in implementing systems for retailers in supermarkets, liquor, and hardware so why not leverage that experience

4.       Module Implementation: While finance modules may be the easiest to implement, they should not be mistaken for the entire project's complexity.

5.       Vendor Partnerships: Partnerships like Metcash's with Microsoft and KPMG, while mutually beneficial for product development, may not always prioritize the client's best interests or cost-effectiveness.

6.       Comprehensive Planning: Metcash appears to have failed to document and account for the diverse processes and systems within the organization, leading to scope and cost escalations.

7.       Internal IT Capacity: A robust internal IT team is crucial to support and guide the implementation process, reducing overreliance on external consultants.

As a relatively small player in the global retail market, Australian companies should prioritize selecting and adopting best-in-class ERP, pricing, merchandise planning, inventory, and CRM systems to keep pace with industry disruptors like Amazon and Alibaba.

By learning from the Metcash experience and following proven best practices, Australian retailers can position themselves for successful digital transformations and enhanced competitiveness in the rapidly evolving retail landscape.

Metcash and its shareholders have paid the price for the board and senior management's naivety, poor strategy, and lack of international experience.

I have worked globally for many Retailers, FMCG, and Consumer businesses and it is apparent to me that Australian retailers have a very thin layer of talent. The key role of the CEO at Metcash is in my opinion to renew the board and management team and replace where appropriate with a mix of talent and experience, high in EQ, and open to change and best practice.