Dive Brief:

• Mission Produce experienced operational issues in the first quarter due to "significant challenges" implementing its new ERP system, CEO Stephen Barnard said during a Q1 earnings call.
• Barnard said issues with the implementation led to a lack of visibility into its on-hand inventory, which "resulted in considerable fruit that was moved at below average returns or not fit for sale." Struggles with visibility also led the company to source a large amount of product from third-party providers "where we typically do not recognize meaningful margins."
• The avocado supplier hired a third-party firm and is making progress on solving remaining implementation issues. The company also implemented additional protocols and develop new processes to enhance visibility. "Despite the challenges, the fundamentals of our business remain intact," said Barnard. 

Dive Insight:

ERP implementation challenges limited Mission's "ability to effectively manage our supply chain during the first quarter of 2022," according to Barnard. Operating expenses rose $4.1 million in the first quarter primarily due to problems with the new system.

"While we weren’t naive to the risk of disruption to the business, the extent and magnitude was greater than we anticipated," said Barnard. 

The avocado supplier paid approximately $1 million in consulting costs related to the implementation of its ERP system, and Barnard said he expects some costs to be incurred in the second quarter as Mission continues work with the consultants on a daily basis to remediate problems. 

Mission adopted a new ERP system to enhance operational visibility and better serve customers across larger geographic areas. The old system was built over the last 30 years through piecemeal acquisitions, Barnard said.

Across the market, companies have turned to ERP to keep up with increased consumer demand. Fender Musical Instruments Corp. sold a record number of guitars in 2020 and moved to cloud ERP to match pace. Meanwhile, Clorox upgraded its ERP system last year for real-time data visibility and improved demand planning.

While ERP upgrades offer operational benefits, they also carry risk as Mission's experience shows. Over half of company ERP modernization efforts fail, a Boomi survey found last year.

"The biggest challenge every business faces today is unifying their increasingly fragmented digital ecosystem so they can create the integrated experiences expected by customers, employees, and partners," Chris McNabb, then CEO of Boomi, said in a statement last May.