DHL writes off $A518m on SAP Upgrade

Sometimes, plans for new technology doesn’t go as smoothly as we would hope. Such is the case with DHL, which is now being forced to take a €345 million write-off. However, SAP, the company that was in charge of creating the new software upgrade is heavily stressing the fact that it wasn’t their fault.

“Recent media reports suggest there is a connection between SAP and problems with the implementation of a new logistics system at DHL,” SAP had announced last Friday. “These statements regarding SAP are incorrect.”

The project itself, called the New Forwarding Environment (NFE) was a software upgrade for the Global Forwarding division of DHL and was meant to offer a battery of new capabilities, including increased visibility for shipments, better documentation for shipments, as well as management of operational milestones. However, with progress being a slow go, DP-DHL had forewarned investors of the likely financial impact that would occur due to the implementation issues.

DHL’s loss was formally acknowledged earlier this month through its earnings report, where it also announced a further hit of approximately €200 million. A part of the loss is due to the cost of removing the newly added software from DHL’s pilot locations. As the saying goes, once bitten, twice shy, and DHL is no exception. The company has admitted that they are going to be more cautious in the future when it comes to new technology upgrades.

SAP, on the other hand, isn’t looking to take the blame for the failure. “We are not the general contractor,” said SAP’s head of strategic innovation and senior director of global corporate affairs, Hilmar Schepp. “It is SAP’s software. We sold the licenses, but we are not responsible for the implementation.” Fortunately for SAP, DP-DHL is also in agreement.

“As far as we can judge at present, this is not primarily an issue with the base software provider, technically or commercially,” confirmed DHL representative Daniel McGrath. SAP was merely responsible for the the base software for the NFE program, and had nothing to do with implementation. IBM, however, might not be in the clear, as they were to serve as the general contractor for the NFE solution. Without naming names, it would seem that someone is clearly to blame for the issues DHL is currently experiencing.  “At this moment in time, we would prefer to refer to the roles within the program, without specifying the names of individual partners/suppliers,” McGrath said. “We expect the general contractor who is primarily responsible for the program to fully deliver in line with their contractual obligations,” he added.