eLWIS: The Unraveling of Lidl’s SAP Odyssey – What Went Wrong?

This was meant to be a monumental and transformative undertaking for the Lidl grocery store chain, with success seeming almost guaranteed. Both Lidl and the German software giant SAP were industry leaders in their own right.

Approximately a thousand employees and hundreds of consultants collaborated to implement a new, company-wide inventory control system for this discount grocery chain, which boasted an annual revenue close to €80 billion.

The project, which had been in planning since 2011, went by the code name ‘eLWIS,’ pronounced like Elvis in German. It stood for “electronic Lidl merchandise management and information system.” SAP even recognized Lidl as one of its best customers by awarding them a prize in April 2017.

However, by July 2018, eLWIS met an untimely demise before its full implementation. Lidl was forced to revert to its old inventory system, essentially starting from scratch, as one insider revealed to the German newspaper Handelsblatt.

All of this unfolded after an estimated expenditure of EUR 500 million on eLWIS.

Lidl is a part of the Schwarz Group, the fifth-largest retailer globally, with 2018 sales totaling EUR 104.3 billion. Lidl contributes significantly to this figure, making up 80% of the group’s revenue.

Lidl’s first discount store opened in 1973, mirroring the Aldi concept. By 2019, Lidl had expanded to over 10,800 stores across 29 countries.

Both Lidl and Aldi share a zero-waste, no-frills approach, passing cost savings on to customers. They often display products in their original delivery cartons for customers to take directly. Empty cartons are replaced with full ones, and staffing is kept minimal.

Unlike Aldi, Lidl generally offers more branded products. Lidl also sources many low-priced gourmet foods from a single European Union country for its global chain, while incorporating local products from the region where each store is located.

Timeline of Events:

2011

In 2011, Lidl made the decision to replace its in-house legacy system “Wawi” with a new solution based on “SAP for Retail, powered by HANA.” The old merchandise management and information system had reached its limits, plagued by process interruptions, redundant data storage, integration gaps, and functional limitations. SAP claimed that Lidl’s system was becoming increasingly complex due to numerous interfaces, modules, and a decentralized server structure.
The new solution aimed to integrate process chains from suppliers to customers and provide real-time key figure analysis and forecasting. Lidl also hoped for more efficient processes and simplified master data handling for its 10,000+ stores and 140+ logistics centers.

2014

Sven Seidel was appointed as the new CEO of Lidl after the removal of Karl-Heinz Holland, citing “unbridgeable” differences in future strategy.

2015

Lidl initially implemented the new electronic merchandise management and information system in its Austrian stores in May 2015. Stores and hubs in Ireland and the US also adopted the new solution.

2016

Lidl worked on harmonizing internal data transfers from branches to country systems for the new ERP system. Software AG’s webMethods integration platform was used for this purpose. René Sandführ, a member of Lidl’s management board, mentioned that over 30 systems from the existing infrastructure were integrated into eLWIS by autumn 2016.

2017

CEO Sven Seidel stepped down in February 2017, succeeded by Dane Jesper Højer. Alexander Sonnenmoser, Lidl’s head of IT, also left the company. Despite these changes, SAP awarded Lidl as one of its best customers in 2017.

2018

In July 2018, Jesper Hojer and board member Martin Golücke decided to terminate the entire eLWIS project. An internal memo cited that the originally defined strategic goals couldn’t be achieved with reasonable effort. The company emphasized that it wasn’t a decision against SAP but rather a choice for its own system. Lidl intended to make its old modular system (Wawi) future-proof by incorporating lessons from the SAP project.

What Went Wrong

Issues arose when Lidl realized that the SAP system relied on retail prices for inventory management, whereas Lidl traditionally used purchase prices. Lidl refused to change its pricing approach and instead customized the software, which ultimately led to problems.

Requirements Gap

Lidl’s insistence on retaining its existing pricing model created a significant “requirements gap” between the software’s capabilities and Lidl’s needs. This compelled Lidl to customize the software extensively.

Project Duration

A seven-year ERP implementation was unsustainable in a rapidly changing retail industry. Customizations added complexity, and Lidl’s inability to adapt quickly further hindered progress.

Executive Turnover

Lidl experienced frequent executive turnover during the project, leading to a lack of alignment and momentum.

Change Management

While SAP software is successful for many retailers, the key is aligning it with your business’s specific needs. Lidl’s reluctance to adapt its processes to fit the software’s capabilities contributed to the project’s failure.

Expertise of System Integrator:

There were allegations that the system integrator, KPS, was too slow. Lidl’s requirements exceeded the software’s capabilities, leading to challenges.

How Lidl Could Have Done Things Differently

Evaluation

Lidl should have closely examined the software’s characteristics and suitability during product demonstrations and the Proof of Concept phase. They needed to ensure that the chosen solution aligned with their specific needs.

Stop Earlier

Lidl should have intervened when costs exceeded the budget and progress stalled. Recognizing when to halt a project is crucial.

Less Customization / More Change

Reducing customization and focusing on organizational change management could have improved project outcomes.

Executive Sponsorship

A dedicated project director with end-to-end responsibility should have been appointed to ensure alignment and accountability.

Closing Thoughts

While writing off EUR 500 million is painful, Lidl’s management made the difficult but necessary decision to recognize the project’s shortcomings. Despite the financial loss, Lidl must now prioritize modernization and further development of its business processes. The lesson here is that trying to fit a square peg into a round hole doesn’t work for large ERP projects.