Invacare blames botched Oracle ERP project for Q4 miss

A troubled roll out of a new Oracle Corp. ERP system led medical products maker Invacare Corp. to warn Wednesday of an expected $30 million revenue shortfall during its ongoing fourth quarter.

Invacare, based in Elyria, Ohio, began working last year on replacing a collection of homemade legacy applications with a comprehensive deployment of Oracle’s E-Business Suite 11i. Initial implementations of several financial processes went smoothly, but Invacare hit problems in October when it went live with its new order-to-cash system.

“Our systems were locking up,” said Invacare Chief Financial Officer Greg Thompson. “We had a lot of hang-ups by customers when we couldn’t answer the phones in a timely way, and when we did talk, we couldn’t give them complete information on our stock availability and when we could ship the product.”

Invacare is working with Oracle’s consulting staff on its ERP implementation. The problems lie not with glitches in Oracle’s software but with Invacare’s specific configuration, Thompson said. “All implementations are unique,” he said. “We had lots of review by our own team where we stress-tested the system, and everybody thought we were ready to go.”

Invacare’s ERP stumbles have led to lost sales and overtime costs for its manufacturing, distribution and customer-service departments. Higher than usual return levels and extra expense for expediting product orders are also adding to the debacle’s cost. Invacare said Wednesday it now expects net sales for the quarter ending Dec. 31 to total $370 million to $380 million, 3 percent to 6 percent lower than last year’s fourth quarter and well below the 2 percent increase in sales the company previously projected.

More than two months of sales interruptions have taken their toll, but most of the kinks are now out of Invacare’s systems, Thompson said. Invacare expects to have its sales process running normally again and its order and invoicing backlog cleared up by the start of next year.

Thompson said he has no complaints about how Oracle has handled Invacare’s situation. “Oracle has been very helpful in working with our teams to resolve all the issues that we’ve identified. They’ve been very cooperative all the way up to the most senior levels,” he said.

An Oracle spokesman did not immediately return a call for comment.

Still, the jury remains out on whether Invacare’s ERP project will justify its cost. Thompson is hopeful the new Oracle system will deliver enough value to offset this quarter’s shambles.

“There’s still a lot to be done,” Thompson said. “We’ve made a big investment, and we expect there will be big returns through improved customer-service visibility.”