Furniture retailer MFI has ditched two board members after serious problems with its SAP inventory system forced it to make a profit warning .

The £50m system was supposed to turn things round for the troubled retailer but it is now facing an additional £30m bill to sort out problems with customer orders and fix the system. MFI became aware of the problem in July but said it was dealing with the symptoms rather than the causes. A review of August Bank Holiday sales revealed the true scale of the problem.

The man responsible for the supply chain, Gordon MacDonald, and chief finance officer Martin Clifford-King are "leaving the company by mutual agreement". Chief executive John Hancock will take on responsibility for the supply chain.

MFI told the Stock Exchange late last week that profits for the second half of the year would be materially below those for the first half because of significant problems with its inventory system.

But major shareholders are unhappy with how the announcement was made and blame senior management for not getting a grip on the problem earlier. MFI shares are trading today at 107.5p, down from a year high of 190p. They have fallen more than 20 per cent in a week.

Goldman Sachs has downgraded the retailer, to "under-perform" from "in-line", because it believes supply chain problems will take longer to fix than expected.

A spokeswoman for MFI told Computer Weekly that the firm is now going through each of its 8,000 product lines to check orders and distribution channels.

A spokeswoman for SAP would only tell the Register that MFI was a customer and that "this is not an SAP software related issue".

The Register

-- Anonymous, September 14, 2004