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July 17, 2019

Lubricants supplier remarkably frank about software slip-up

It has to be the frankest statement we at just-auto have seen from a company in a long time: "The introduction of new company software in January has turned Liqui Moly into a permanent building site."

By Olly Wehring

It has to be the frankest statement we at just-auto have seen from a company in a long time: "The introduction of new company software in January has turned Liqui Moly into a permanent building site."

The Ulm, Germany based aftermarket lubricants supplier added: "[The] system that was supposed to simplify [our] processes and reduce costs… has had precisely the opposite effect and negatively affected the half year results."

"If we were listed on the stock exchange, I would have to issue a profit warning," said CEO Ernst Prost.

The software is used to manage purchases, control production, handle shipping and issue and "is key to Liqui Moly's prosperity or decline".

The previous software had been in use for decades and was increasingly reaching its limits. So, after years of preparation, it was replaced at the turn of the year.

But instead of the anticipated minor teething issues, there were major difficulties that are still ongoing.

"Despite the support of a well-known software company, we have still not succeeded in getting our production and delivery levels back to where we and our customers expect them to be," added Prost.

Understandably, customers are becoming frustrated and angry.

"In my entire professional career, I have not had to apologise so often to customers, as I have had to in the last six months. The level of service that we are currently delivering really pains me," said Prost.

The company is also incurring considerable extra costs, for example, because containers can only be half filled, delivery vehicles have to wait longer than planned to be loaded, or air freight needs to be used when items that are needed urgently do not arrive by ship in time.

"It's not our customers' fault that we are having problems, so we are doing everything we can to minimise the impact on them and to bear any additional costs."

These expenses are not the whole story either.

"In addition to the huge cost of having the software installed, every day produces new things to trouble shoot and problems to solve."

All of this has hit the bottom line.

Compared to the first half of 2018, turnover fell 0.8% to EUR259.6m because a high backlog of orders cannot be fully processed due to the computer problems.

Earnings for the half-year fell by around 30% to EUR11m.

"I never would have thought that in 2019 a change of software could send a whole company skidding off the road," said Prost.

"We will not be making any short-sighted decisions such as short-time working or redundancies," he added.

"We will stay on track, we will continue with our expansion strategy, we will employee new people, we will invest in new products and new markets.

"The current issues have highlighted areas where we can invest to improve even further."

Building a new central warehouse, for example, would simplify logistics.

"The storm that we are currently going through is a lot stronger than predicted. Big waves are breaking over our ship, some of the crew are getting wet and some of the passengers are a bit nauseous. But our ship is seaworthy and not at risk. And the storm will soon be over. I hope that, together with our software company, we will have resolved all the computer problems by the end of the year at the latest."

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