HARVEST CHAPTER 11 FILING RAISES IS TESTING, INTEGRATION QUESTIONS

DENISE ZIMMERMAN

LITTLE ROCK, Ark. -- Harvest Foods' singling out of information systems failures as a prime reason for filing for Chapter 11 bankruptcy protection has puzzled industry observers and raised questions about integration and testing procedures.

The 56-store company blamed its liquidity problems on "acute computer information systems failures, which led to inventory stock outages and the loss of essential retail and wholesale revenues" in a public statement about its Chapter 11 filing last month in the District Court of Delaware.

The company refused to elaborate on the nature of the problem other than to say it stemmed from the unsuccessful integration of systems from Harvest and the recently acquired Rand's wholesale business. Harvest outsources management information systems to Integrated Systems Solutions Corp., a subsidiary of IBM, White Plains, N.Y., which also refused comment.

One retail MIS executive whose stores compete in the same markets with Harvest said he was surprised by the finger-pointing.

"They said their new computer system was responsible for a lot of outs in products. In my experience, that would not happen if the software had been strenuously tested prior to going live with it," said the executive, who requested anonymity.

"With adequate testing, things like that shouldn't happen. It's when people cut short the testing that it does happen," he added, stressing he was not familiar with the specifics of the Harvest situation.

Whether or not Harvest's IS problems were responsible for its Chapter 11 filing, systems integration continues to be a tough nut to crack for retailers of all sizes, especially with more and more consolidation of the industry, observers said.

Philip Johnson, program director of server operating environment programs at International Data Corp., Framingham, Mass., said food retailers face significant challenges when trying to integrate systems.

"Historically, [supermarkets] have developed a lot of in-house applications, and when they were developed, often no thought was given to the issue of mixing and matching with other systems.

"In order to take two fundamentally proprietary, stand-alone systems and turn them into one, you almost have to start from ground zero and do it all over," he said. "It can be that complex."

Johnson, who also stressed he had no knowledge about Harvest's specific situation, said the chain's outsourcing of MIS operations may have had no bearing on the matter. Third-party integrators can provide a more global view than an in-house staff because they probably have seen more types of systems.

"Somebody who's seen lots of systems should understand that flexibility in design and reworking should be key components to the strategy," he said.

An outsourcing firm "should have a better perspective, but it doesn't necessarily mean the company allows them to use that perspective," he added.