Miller, who presided over the ill-fated IT project, will be replaced by Angela Morrison, director of European strategy at rival supermarket chain Asda. Sainsbury’s recently announced that it had sorted out its IT problems, and had improved the reliability of its network and distribution systems by 90%.
Despite this, the debacle has been an embarrassing episode. In October, Sainsbury’s announced that it would be writing off GBP260 million ($462 million) in redundant IT assets and supply chain systems, and renegotiating its outsourcing project with Accenture because it had failed to deliver the anticipated increase in productivity and the costs today are a greater proportion of sales than they were four years ago.
As a result, Sainsbury’s is writing off GBP140 million ($250 million) from redundant IT systems, and GBP120 million ($213.6 million) from automated equipment in the new fulfilment centers. It also lost some GBP30 million ($53.4 million) in the value of its stock from disruptions caused by the IT systems.
The project, which was signed in August 2000, was hailed by Accenture as one of its flagship BTO deals, and the largest of its kind in the supermarket retail sector, intended to transform the way Sainsbury’s delivered goods and services to its customers through new IT and supply chain systems.
Accenture was hired under the watch of former CEO Sir Peter Davis to take over the management of the payroll and IT infrastructure underpinning Sainsbury’s 530 stores, in a seven-year deal when some 800 Sainsbury’s staff transferred to the outsourcer. The deal formed part of Sainsbury’s GBP1.8 billion ($3.2 billion) business transformation program designed to help it recover ground in an intensely competitive sector.
Sainsbury’s had been expecting to generate savings of GBP35 million ($62.3 million) annually through the outsourcing deal, from its initial GBP200 million ($356 million) IT budget. The deal had been extended for an additional three years in February 2004, giving the contract an expiration date of 2010.
