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  • ERP Implementation Failure at Revlon

    Case Code: ITSY116
    Case Length: 13 Pages
    Period: -
    Pub Date: 2020
    Teaching Note: Available
    Price: Rs.400
    Organization : Revlon, Inc.
    Industry :Cosmetics & Toiletries
    Countries : United States
    Themes: Enterprise Resource Planning/ Management of Information Systems / ERP Failure/Change & Risk Management in ERP implementation
    Global Economic Impact of Coronavirus – Assessment and Mitigation (B)
    Abstract Case Intro 1 Case Intro 2 Excerpts

    Excerpts

    Restructuring at Revlon

    In June 2016, Revlon acquired Elizabeth Arden, Inc. for US$870 million, less than six months after its largest shareholder, Perelman, was contemplating seeking strategic alternatives for Revlon so that the company could compete better with deep-pocketed rivals such as Estée Lauder and L’Oreal SA . The acquisition was touted as an attempt to revive both the ailing beauty companies. In the fourth quarter ended June 30, 2015, Elizabeth Arden reported a net loss of US$108.7 million compared to US$155.9 million during the corresponding period of the previous year. Net sales fell to US$175.5 million from US$191.7 million. Revlon’s revenues also declined by about 1.5% and its profit fell by 5% in 2015 (See Exhibit I). For the first nine months of 2015, Revlon’s net sales were US$1.39 billion, a 3% year-on-year decline. The company’s net income declined by 18% during the same period to US$31.3 million. Though a significant part of this drop was attributed to fluctuations in foreign currency, Revlon’s performance in both the professional and consumer segments was not very strong..

    ERP Implementation

    As part of the restructuring, Revlon found itself needing to integrate its processes across business units. Both the brands decided to streamline their operations and integrate their ERP. Elizabeth Arden was an early adopter of Oracle Fusion Applications while Revlon ran on Microsoft Dynamics AX . As most of Revlon’s acquired brands ran on SAP, the company decided to migrate to a new ERP model SAP S/4HANA (See Exhibit II)..

    ERP Implementation Failure

    Revlon implemented the new ERP SAP S/4 HANA at its manufacturing plant in Oxford, Northern Carolina, to integrate the planning processes of deliveries, search for suppliers, production, and distribution and also financial transactions. Unfortunately, things took a wrong turn there...

    The Impact

    The ERP changeover proved disastrous for Revlon. The new ERP system disrupted the company’s business operations and cu stomer service levels and had an adverse effect on its business, prospects, results of operations, financial condition, and cash flows. Reportedly, the introduction of the new system increased demands on its management team and staff, which diverted focus from other corporate priorities..

    The Road Ahead

    In March 2019, Revlon’s CFO Dolan said that the SAP ERP issues had been resolved and that the Oxford plant was up and running in normal mode. She said that the company had developed a robust service recovery plan and a remediation plan to address the issue and would continue to enhance its internal control environment going forward..

    Exhibits

    Exhibit I: Revlon: Statement of Operations
    Exhibit II: Microsoft Dynamics 365 Finance and Operations vs SAP S/4 HANA
    Exhibit III: Revlon: Segment Profit and Operating Losses
    Exhibit IV: Revlon Key Financials
    Exhibit V: Revlon’s Revenue Growth (2016-2019)
    Exhibit VI: Revlon’s ERP Remediation Plan

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