Sainsbury Warehouse Automation Project

I've noticed that quite a few people have dropped by in search of information about the Sainsbury Warehouse Automation Project that went so horribly wrong. So here is some information and links, extracted from my forthcoming book: Getting value from IT projects: an essential guide for business managers.

In 2004 UK food retailing giant J Sainsbury reported its first ever half-year loss of £39 million, when it wrote off £260 million of IT expenditure. The new system had made it into production but proved to be unworkable. Four newly automated warehouses were closed and Sainsbury had to take on 3,000 staff to stock shelves.

The project began in 2000 when new CEO Sir Peter Davis arrived and launched, ‘The Business Transformation Programme’. The key planks of the four year programme were supply chain management, EPOS (Electronic Point of Sale) and the outsourcing of IT to Accenture. The warehouse automation project was at the heart of the supply chain management overhaul. Three years on Davis reported that the Business Transformation programme was on track and had delivered cumulative savings of around £700 million. The Accenture contract was to be extended for 3 years.

In March 2004, Davis moved upstairs into the role of chairman and Justin King was appointed as the new CEO. Davis was due to serve as chairman until July 2005 but left in June 2004. In October of that year was Justin King who broke the bad news about the loss15. The announcement resulted in an unseemingly row between Sainsbury and Accenture. Accenture released a statement saying that ‘IT automation systems within Sainsbury's four new automated depots are not, and never have been under the scope of the existing contract’. The £2.16 billion, ten-year, outsourcing contract with Accenture was terminated a year later.

The key questions that this raises in my mind are, first, how does one get three years into a programme before finding out that an essential part of the solution is not fit for purpose? Second, how does the CEO find himself doing a rosy presentation of progress, when things are going pear shaped in the background? We don’t have the answers but there are some lessons can be learned. Business managers need to:

Establish a culture that welcomes bad news about project progress.
  • Engage with IT suppliers to understand the key business and IT risks and and design a delivery strategy to tackle them as early as possible.
  • Keep close to the project throughout, to ensure that assumptions are validated, risks managed and progress properly monitored.
  • Remember that value includes is a combination of benefit and cost.