Beauty company Avon has pulled the plug on an SAP-based order-management system and plans to cut 650 jobs globally. The cuts are part of a previously announced $400 million cost-saving initiative, although they’re expected to include positions in North America and those related to the service model transformation (SMT).
The company said in a securities filing that a pilot of the new software in Canada caused “significant business disruption in that market, and did not show a clear return on investment.” It wants to cuts its losses and plans to take a pretax non-cash charge of about $100 million to $125 million on the software.
SAP spokesman Jim Dever told The Wall Street Journal it only worked on the back end of the system, but SAP CEO Bill McDermott told InformationWeek in an October 2011 interview that it was an effort to have Avon ladies placing orders on iPads.
“[Former CEO and chairman Andrea Jung] wanted [goods] ordered on the iPad so the whole demand-driven supply chain would react instantaneously. This was innovating a 100-year-old company and making it brand new again,” McDermott said.
Apparently, however, this drove its independent sales reps away.
As InformationWeek put it:
… the technology worked, but it was so hard to use that Avon salespeople — many of them part timers who network among friends and hold in-home parties — left the company in droves. That’s not consistent with the kind of consumer-grade app experience that has made tablets so popular in sales and retail settings.
The company has put the kibosh on its planned global rollout.
The job cuts – which are not the independent sales reps – are the third set of layoffs since the company announced its cost-saving initiative in Nov 2012. It announced plans to eliminate about 1,500 jobs in December 2012 and 400 jobs in April 2013.
The company also has exited certain markets, including South Korea, Vietnam and Ireland, and pointed to Brazil, Russia and China as markets in which it needs to grow. However, a federal bribery investigation has been distracting and expensive for the company.