Furniture retailer MFI is back on track with the implementation of a new supply chain system, having seen earlier problems take a chunk out of company revenues.

MFI recorded an operating loss of £46 million for its UK retail outlets and a 9.4 percent decline in turnover to £825 million in the year ending 31 December 2004.

Much of the decline followed problems implementing a new supply chain system from German software giant SAP. It was forced to pay out £36 million in refunds for missed deliveries as a result.

“2004 was a poor year in UK Retail with performance severely impacted by the issues around the new supply chain systems. We are making progress in addressing these issues and 2005 will be a year of stabilisation and recovery in UK Retail,” said chief executive John Hancock.

The new system was introduced in March 2004, and MFI first acknowledged the plan was in difficulties in July. A full review carried out in September revealed some technical problems as well as the need for higher data quality and better demand forecasting capabilities.

But MFI said in a statement that the problems were now in hand, and the “supply systems are stabilising”.

Typically, with this type of problematic implantation none of the parties involved want to apportion blame. But when the problems first came to light, SAP insisted that the problems at MFI were not caused by defects in its software. The implication being that the problems arose either because of changes to its code, or with other systems its software was integrating with.

Now MFI acknowledges that “critical software” components were rewritten, although it does not identify which parts of the software it is referring to.