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Sainsbury’s Warehouse Automation project failure 2003-2005

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Shyama Chandani

on 18 September 2013

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Transcript of Sainsbury’s Warehouse Automation project failure 2003-2005

Sainsbury’s Warehouse Automation project failure 2003-2005
Sainsbury's Supermarkets Ltd
Sainsbury’s is the common name of the Sainsbury's Supermarkets Ltd

J Sainsbury plc is the parent company

The third largest chain of supermarkets in the United Kingdom with a market share of 16.5%

Sainsbury's Business Transformation Programme
Sainsbury's CEO Peter Davis launched the “Business Transformation Programme” in 2000

Main focus areas of the project were Supply Chain Management, EPOS (Electronic Point of Sale) and the outsourcing of Sainsbury’s IT processes to Accenture

Estimated £2.16bn for the whole project

Objectives of the Project
Increase efficiency and streamline operations in warehousing

Improve a barcode based fulfillment system

Upgrade the mainframe-based warehouse management system

Increase the scalability of the system (Capable of handling 2.5 million cases a week from around 2,000 suppliers)

To gain the advantage over its competitors as efficiently and cost effectively as possible

Project Timeline

Warehouse automation project was started as a part of this “Business Transformation Programme”.

Accenture had warned Sainsbury regarding the scope of the project, but top management decided to move on.

February 2004

Sainsbury's simplifies its contract with Accenture by having an agreement with another firm to handle the relationship between the two companies.

Project Timeline contd
July 2004
Sainsbury's chairman Peter Davis stands down because of the firm's continuing poor performance

September 2004
Sainsbury's was lagging behind in implementation and was set to miss the January 2005 deadline

New systems were launched with many complications

Sainsbury mentioned that the warehouse automation project was achieved the objectives as expected even though the system was not performing well

Sainsbury has announced that the warehouse automation project was a failure

Cost of Loss/Damage

Waste of time
Disturbances for the core business activities directly
Reputation Loss

Analysis of what went wrong
Going for the “big bang” approach without proper assurance about the system

New systems are tried out in all four depots at the same time

"Instead of a step-by-step approach, Sainsbury's went for a sort of big bang and found out that it was worse off than before it introduced the new system”
-Paul Smiddy, Retail analyst at investment bank RW Baird
Lack of contingency planning

Shifted to manual warehouse managing processes

Hired around 3000 additional employees to manage

Analysis of what went wrong Contd
Inappropriate project and contract management

"We are responsible for some of the supply chain systems. However, the IT automation systems within Sainsbury's four new automated depots are not. We are not responsible for the strategy, development and operations of these systems"
- An Accenture spokesman 

Weak outsourcing governance

“Sainsbury's review of its IT and renegotiation of its outsourcing contract with Accenture suggested that the retailer had not devoted sufficient resources to managing its relationship with the outsourcing supplier”
-Bola Rotibi, senior Analyst at Ovum Ltd

Final Outcome
Warehouse Automation Programme is a part of this main project under Supply Chain Management

It was partially outsourced to Accenture

The plan was to automate four warehouse depots of Sainsbury’s
Sainsbury’s employees failed to understand the functionalities
System does not fulfilled the user requirement
Over budgeted and redundant functionalities
Lead back to manual process by abandoning the new system
Sainsbury's Warehouse Automation Project
How failures could be avoided
Management strategies

Appoint the suitable leaders
Increase transparency of cost and scope of the project
Encourage communication between business and IT
Better understanding of the scope and the project estimation
Divide the scope in to several phases and outsourcing them to several IT organizations or achieving it step by step

Strategies for planning

Plan the scope of the project in an achievable way (not in a hypothetical manner)
Plan the optimum budget after negotiations with the IT sector
Contingency planning
Work schedule planning (With proper economic and technical feasibility reports)
Assign responsible people in the maintenance process (So there will be someone specifically to answer what and where the process went wrong)
Strategies for preparedness

Keep track of such situation:
When actual cost > Estimated cost
Milestones were missed
Failure in covering the scope
When the actual IT system does not align with the business strategies
When the actual IT system does not satisfying the requirements
Don’t put all the eggs to the same basket
Avoid big bang approach
Business managers need to Engage with IT suppliers to understand the key business and IT risks and and design a delivery strategy to tackle them as early as possible.
Keep close to the project throughout, to ensure that assumptions are validated, risks managed and progress properly monitored.
Remember that value includes is a combination of benefit and cost.
A square peg in a round hole won't fit any better as time goes on. Put another way -- problems that go unaddressed at rollout will only get worse, not better, over time.

Key lessons learnt?
Disaster recovery and current position
After the failure, they recruited acceture employees for in house development.
And after some time, improved warehouse system with IBM,VoiteQ solutions
And now in 2013, with "Manhattan solutions" optimized the system.
Bad decision making by top management

"It sounds like the management did not understand fully what it was trying to do. Someone must have realised that what they were trying was not really feasible"
-Robert Brent, supermarket analyst at KBC Peel Hunt
Analysis of what went wrong Contd
Analysis of what went wrong Contd

Team No 05
Full transcript