Mission Produce's new ERP left it blind to avocado inventory and added $4.1M of costs

Mission Produce, an avocado supplier, told investors on its first-quarter 2022 earnings call that it experienced operational issues from 'significant challenges' implementing its new ERP system. CEO Stephen Barnard said the problems left it without visibility into on-hand inventory, which 'resulted in considerable fruit that was moved at below average returns or not fit for sale'. The lack of visibility also led the company to source a large amount of product from third parties 'where we typically do not recognize meaningful margins'.

Operating expenses rose $4.1 million in the quarter, primarily from problems with the new system, and the company paid about $1 million in consulting costs. Barnard said: 'While we weren't naive to the risk of disruption to the business, the extent and magnitude was greater than we anticipated.' The company hired a third-party firm, added protocols and processes to restore visibility, and expected further consulting costs in the second quarter.

Mission had adopted the new system to improve operational visibility and serve customers across larger geographic areas. Its old system, Barnard said, had been built over 30 years through piecemeal acquisitions. Supply Chain Dive cited a Boomi survey finding that over half of company ERP modernisation efforts fail.

Operating expenses rose $4.1M in the first quarter, about $1M was spent on consultants, and fruit was sold at below-average returns.

The company replaced a system built up over 30 years through acquisitions with a new ERP, and lost sight of its on-hand inventory.

Without inventory visibility, perishable fruit was moved at below-average returns or became unfit for sale.

The shortfall in visibility pushed it to buy product from third parties at thin margins.

Barnard said the company knew the risk of disruption but the extent and magnitude exceeded its expectations.

Replacing a 30-year-old patchwork system gives you the least visibility during cutover, exactly when a perishable inventory business needs the most.

Mission hired a third-party firm and put new processes in place to improve visibility, and Barnard said the fundamentals of the business remained intact. The company expected to keep paying consultants during the second quarter while it fixed remaining issues.