Inside Logistics

Liqui Moly blames logistics woes on software

Systems launched in January negatively affecting results


July 17, 2019
by

ULM-LEHR, Germany – Motor oil and automotive chemicals producer Liqui Moly blames new software for production woes this year.

In a statement the company said, “The introduction of new company software in January has turned Liqui Moly into a permanent building site. The system that was supposed to simplify 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 in question manages purchases, controls production, handles shipping and issues invoices. The previous software had been in use for decades and was increasingly reaching its limits.

But instead of the anticipated minor teething issues, there were major difficulties that are still ongoing. Difficulties that have had a direct impact on business operations.

“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,” Prost said.

“In my entire professional career, I have not had to apologize 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,” Prost added.

Liqui Moly says it 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.

The company is shouldering the costs of these logistics issues, and added in its statement: “In addition to the huge cost of having the software installed, every day produces new things to trouble shoot and problems to solve.”

Compared to the first half of 2018, turnover has fallen slightly by 0.8 percent to € 259.6 million, and this is only because the high backlog of orders cannot be fully processed due to the computer problems. Earnings for the half-year fell by around 30 percent to € 11 million.

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

The company says the issues are irritating, but do not threaten its future. Prost said expansion plans will continue, including building a new central warehouse, to simplify logistics processes.

“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.”

Liqui Moly sells its products in more than 120 countries and generated € 544 million in sales in 2018.