Clorox will go live on a new ERP system in July as it wraps up a multi-year transition to SAP S4/HANA Cloud.

Speaking at an investor conference June 4, Clorox CFO Luc Bellet said the ERP upgrade will enable the company to optimize its operations and grow profit margins. The company outlined its plans to upgrade SAP in 2021 and later delayed the transformation during a cyberattack in 2023. Overall, Clorox has said its final tab for the SAP upgrade will be about $560 million to $580 million based on projections given in February by executives.

During Clorox's second quarter earnings call, CEO Linda Rendle defended the SAP project and noted that it will deliver a strong long-term return. Clorox has been operating on a 25-year old ERP system. When analysts questioned why the ERP transition was so expensive, Rendle said it was the first upgrade in more than two decades and in the greenfield project Clorox also invested in a data lake as well as AI.

ERP was also a big topic for analysts on Clorox’s third quarter conference call in May.

Speaking June 4, Rendle said the SAP overhaul is more than just an upgrade and about process and digital transformation. The company is also overhauling its data infrastructure to be more efficient in the future. The project falls under Clorox's broader transformation effort called Ignite.

"Upgrading ERP systems is expensive and risky. Courtesy of Clorox we now know that an average of $20M+ needs to be put aside to pay for the upgrade. It likely did not help for Clorox to wait for 25 years - but it is a key data point for any CIO out there looking into moving to SAP S/4HANA," said Constellation Research analyst Holger Mueller.

"We fundamentally have changed and will complete a digital transformation. This is not just an ERP upgrade to the next set of software. This is building a complete data infrastructure across the company, changing the way that we do global finance, changing our ERP, and putting a suite of technologies around that in an effort to create value for our company," said Rendle, who added that Clorox is looking to claw back 900 basis points of gross margins lost due to inflation.

Bellet said the ERP transition has been a "very complex undertaking fraught with risk." However, Clorox has seen many of its peers already go through the ERP transition. "While we're not necessarily proud to be kind of last to the game, that gives us a lot of benefits. And we've been working with very capable consultants and have been working with many of those peers. And we've been embedding learning from their past launches, from their past mistakes in our plans. And we've also been working pretty closely with our retail partners, which had a lot of really good suggestions," said Bellet.

Clorox first piloted the new ERP system in Canada before the US launch. In January, the company moved its global finance reporting to the new SAP system. Clorox also built up inventory at its retails to mitigate risks on out-of-stock conditions. Typically, Clorox has an average of 4 weeks of inventory at retailers and it plans to add another 1.5 weeks.

"Once we're past implementation and stabilization, we're quite excited about having a new ERP because it's going to fundamentally modernize the backbone of our operations. Now just that means a lot more opportunity for productivity in supply chain and working capital and in admin," said Bellet.

The CFO added that Clorox will focus on net revenue management, personalization and other processes that will benefit from a clean data core.

Here's what's next:

  • Clorox will go live in July with order fulfillment and order management.
  • Manufacturing facilities will move to the new ERP system over the next six months.
  • The cadence is transition period for the first half of fiscal 2026 and then optimization.
  • Productivity gains will really accrue in fiscal 2027 and fiscal 2028.

Business Research Themes

Data to Decisions, Next-Generation Customer Experience

Roles

Chief Financial Officer, Chief Information Officer

Tags

Cloud SAP, Cloud ERP