Dive Brief:
- Ulta Beauty is pushing past hiccups experienced after implementing a new ERP system earlier this year, CEO Dave Kimbell said during the beauty company’s Q3 2024 earnings call last week.
- “We made progress to optimize our new ERP system and help our teams adapt to new processes, balance inventories across the networks and deliver a better guest experience,” Kimbell said during the call, according to a Seeking Alpha transcript.
- Ulta achieved better-than-expected sales growth during the third quarter. Net sales inched up 1.7% year over year to $2.53 billion, while comparable sales rose 0.6% during the period ending November 2.
Dive Insight:
ERP system rollouts are not often seamless, and Ulta’s multiyear project is the latest example.
Dubbed Project SOAR, the system overhaul was announced in 2021 as part of a planned investment of up to $180 million to transform operations and unlock efficiencies.
The beauty company completed the migration of its stores to the platform in July, though teams ran into operational challenges shortly after. Most employees were managing dual systems during the transition and needed to adjust to new ways of working.
“It created challenges to our purchasing, our store allocation and our planning processes and systems,” Kimbell said during the Q2 2024 earnings call in August. “To minimize future disruption, we have identified key legacy processes that are creating friction and implemented proactive monitoring as well as dedicated support to quickly address issues when they arise.”
ERP overhauls have a reputation for disruption. Food manufacturer Lamb Weston experienced reduced visibility and lowered fulfillment rates as it upgraded its infrastructure to SAP earlier this year. Hershey also weathered a sales and inventory dip as part of its phased ERP upgrade in 2024.
While tech leaders believe the upgrade is worth short-term headwinds in most circumstances, success is not guaranteed. Gartner predicts more than 7 in 10 enterprise ERP initiatives will fail to meet expectations by 2027.
It’s up to CIOs to address migration stumbling blocks and, when necessary, opt to cut their losses.
“A change of this magnitude when you're going through [distribution centers] and stores, it's really not easy,” Kimbell said. “We feel like we're really making progress, and we're confident that we're positioned and ready to have a great holiday season.”
Project SOAR, which stands for Strength, Optimize, Accelerate and Renew, has already started to benefit the business, Supply Chain Dive reported in November. While not the primary intent, the new ERP has helped ease challenges related to market fulfillment centers.
