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SAP S/4HANA rollout at Queensland Health went so well that hospitals bent over backwards to avoid using it

Leading to AU$540m in late invoice payments

Updated Invoices worth AU$540m were paid late after a finance and supply chain system built on SAP S/4HANA went live at Australia's Queensland Health.

A report by the Queensland Audit Office [PDF] shows that the ministerial department responsible for operating the state's public health services experienced a troubled launch of the new system, which had been delayed twice and over-ran its budget by AU$33.5m.

The finance and supply chain system had been set to go live on 1 November 2018, but was put back to January 2019 and eventually went live on 1 August 2019, according to the report.

It said: "While the system operated as implemented, deficiencies in managing staff training and system customisation resulted in staff and vendors of Queensland Health soon encountering problems. Staff and vendors both experienced an adjustment period as they became familiar with S/4HANA."

Within the first four months of going live, the system was the subject of 17,181 service desk requests. At the same time, AU$540m of vendor invoices were paid late due to improved quality controls and system configuration issues.

Queensland Health, which runs 16 hospitals and health services across the state, began its upgrade project in 2016 with a plan to replace its 22-year-old finance and materials management information system, also based on SAP technology, with one based on the in-memory HANA database and related applications. The original budget was AU$105m, but by November last year that had increased to AU$135 million.

Lack of training on the new ERP system seems to have been at the heart of the problems.

As a result, 15 of the 16 hospitals operated by Queensland Health adopted manual workarounds to solve problems after the go-live date. These included placing direct orders with suppliers to bypass the need for inventory to go through the centralised distribution warehouses, despite warehouse stock being available for order; placing urgent off-system orders via email or telephone instead of through S/4HANA; and using corporate credit cards to pay outstanding invoices to reduce the risk of vendors withholding supplies, the audit report said.

It also found that hospitals had trouble ordering supplies in the right quantity and that users did not fully understand the system capabilities and processes.

Additionally, the health department had technical difficulties with a reporting tool external to S/4HANA. The problems resulted in the organisation being unable to produce reports on vendors charging goods, vendors with bank account changes and duplicate vendor master records.

Neither Queensland Health nor SAP have responded to The Register’s request for comment.

Although the launch of the new ERP system was beset with difficulties, the audit report did note that overall it had "significantly improved Queensland Health's supply chain management capability". The software also resulted in increased purchasing power and better demand management.

Updated at 08.59 GMT on 29 September

Following publication of this article, Queensland Health sent us a statement, saying the report by the Audit Office "focused on the implementation phase of the project only".

"We note the Auditor-General found that while this was a challenging change process, the new system did not impact the healthcare we provide to Queenslanders," a spokesperson said.

"The report identified that SAP S/4HANA significantly improved Queensland Health’s inventory management capability in comparison to the previous system - this is critical in the current COVID-19 environment." ®

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