I missed this story from last November
**************************************

Jo-Ann Stores Inc., a $1.4 billion chain of fabric and crafts stores, earlier this month blamed its poor third-quarter financial results on two technology-related issues: continuing start-up problems with a version of SAP AG's R/3 software for retailers and a loss stemming from the company's involvement in an e-commerce venture.

The Hudson, Ohio, company is still in the middle of a $30 million conversion to SAP's back-office applications, a system that went live in April. But Jo-Ann said it's having trouble keeping enough products in stock while processing restocking orders through the SAP Retail software.

"It's just been a very painful systems conversion," said Brian Carney, Jo-Ann's chief financial officer. "It's not necessarily the software's fault, and we're happy that our business will be running on SAP. But it hasn't been easy."

Carney acknowledged that the conversion has taken longer than the company expected and said Jo-Ann still expects to experience out-of-stock glitches in its crafts business during the current fourth quarter. In its third-quarter financial report, the company said it hopes to resolve the problems "as quickly as possible," but it offered no specific timetable.

Jo-Ann's business operations are a difficult proposition for any retail software to handle, Carney said, with 100,000 active product items needing to be tracked at more than 1,000 stores. "We're a very large implementation for SAP," he said. "There's a constant trade-off in performance between needing speedy run times and delivering the kind of detail it takes to place our orders."

Despite the out-of-stock problems, William Wohl, a spokesman at SAP America Inc. in Newtown Square, Pa., said the German vendor still intends to use Jo-Ann as a customer reference for SAP Retail. Such installations are a difficult science at best, he said.

"Since every customer is unique, once you get into these projects is when you start realizing [that] you need to change business processes," Wohl said. "Or you head off in directions that were unexpected."

David Dobrin, an analyst at Synergy Inc. in Boston, said he's not surprised that a retailer such as Jo-Ann is having problems with the installation of a back-office and supply-chain system.

SAP Retail "has always been the ugly duckling" of the R/3 product line, Dobrin said. And the retail industry in general has proved to be a minefield for application vendors, he added. "What retailers need is very specialized and very difficult to build," Dobrin said.

Les Duncan, CIO at Jo-Ann Stores, said earlier this year that the retailer had to customize SAP Retail with help from developers at SAP "to fill some big gaps" in the software's ability to keep track of seasonal products and to manage pricing and promotions.

Par for the Course

That kind of complexity and schedule slippage is par for the course on major enterprise resource planning projects, Dobrin said. "The only people who ever get those estimates [of implementation times] right are the extreme pessimists, and extreme pessimists rarely get any power in an organization," he noted.

Jo-Ann, which warned early last month that its third-quarter earnings would be below expectations, said the results also were hurt by a $1.1 million loss stemming from a minority stake in El Segundo, Calif.-based IdeaForest.com Inc., which sells arts and crafts supplies online.

Last spring, Jo-Ann invested $6.5 million in return for 28.5% of IdeaForest.com as part of a deal leading to the launch of an e-commerce Web site that bears the Jo-Ann name.

Carney said, Jo-Ann executives don't expect to see a profit from the deal with IdeaForest.com until the Web site's third year of operation.

In a related development, Phoenix-based Petsmart Inc. last week warned that its third-quarter financial results will be below expectations due partly to lingering start-up problems related to an installation of SAP's retail applications completed last year.

Computer World

-- Anonymous, February 18, 2001