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October - November 2006 51
The definition of ERP has become
stretched in recent years due to
vendors like SAP and Oracle
acquiring or developing more retail-specific
technologies in order to offer retailers a
more sector-specific set of solutions.
Whereas the term once stood for more
efficient management of financial,
material and human resources, in the retail
sector it can now refer to a wide range of
solutions under centralised management,
including supply chain, merchandising and
trading applications.
But despite the efforts of vendors to
attract retailers, doubts persist in the
sector, mostly connected to the time it
takes for an implementation to provide a
return, and whether ERP is of much value
to smaller retailers. Some non-ERP
software vendors believe ERP is
fundamentally unsuitable for retail.
“ERP systems, within the
classic definition, have not really
been designed with retailers in
mind,” says Simon Bowes,
VP of marketing and
business development
(EMEA) at JDA Software.
“That doesn’t mean
there aren’t some
core functions that
can’t be run with
ERP functionality. But when it comes to
merchandising and other retail-specific
functions, retailers are best served by an
integrated environment with specialist
technology.”
However, Sarah Taylor, retail industry
director for Oracle (EMEA) disagrees.
“These systems provide retailers with
insights into remaining competitive,” she
insists. “They want to improve their use of
information and want to optimise
their systems. It’s about getting to the
stage where they can react quicker, and be
more proactive.”
Among Oracle Retail’s customers is
Arnotts Department Stores in Dublin, which
uses its solutions for merchandising, supply
chain management and planning. The
retailer was already searching for an
integrated solution to replace legacy
systems, when a change of ownership in
2005 led to the development of a new
expansion strategy, including a new, €700
million flagship development in the centre
of Dublin. This meant new implementation
needed to support the new strategy.
“The central motivation was to integrate
the merchandising, replenishment, store
inventory, warehousing and financials
systems,” says Paul Dickson, director of
information systems and business
processes at Arnotts. Retek (now part of
Oracle Retail) was chosen on the basis of its
experience working with other department
stores, including Selfridges, and Galleries
Lafayette in Paris. The project began in
May 2005, with the
solution going live
12 months later,
and ran in
parallel with a
revamping of
the retailer’s
b u s i n e s s
structures.
Seeing is believingEnterprise Resource Planning (ERP) systems can help retailers improve
visibility across the entire business. However, its true value is still under
debate says David Adams
feature l ERP and systems integration
51, 52, 53 ERP and systems intergration.qxd 19/10/2006 11:45 Page 2
52 October - November 2006
feat
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According to Dickson, change on this
level is at least as hard to achieve at a
cultural level as in technical terms, but he
also believes the retailer is reaping the
reward for its infrastructure renewal.
“We’re getting far stronger control over
inventory, replenishment, markdown
management and planning,” he says.
Box fresh
Oracle Retail has also worked with Tesco to
create a strategy called Tesco-In-A-Box,
which enables some or all of a suite of
technologies covering merchandising, sales
auditing, inventory and warehouse
management functions to be implemented
whenever the retailer opens an operation in
a new country.
Over the last three years implementations
have been carried out in countries such as
Turkey, South Korea, Malaysia, Thailand,
Hungary and Poland. “It means they
can get to market really fast, they can
implement their own business practices
without compromises, and simplify the
way they operate around the globe,” says
Oracle’s Taylor.
Other vendors of ERP, or ERP-type
technologies aimed at the retail sector have
also made changes to their offerings over
the last few years. K3’s ERP solution for the
retail sector is based on Microsoft
Dynamics technology and has been
implemented by American Golf. The retailer
initially used the solution as a financial
system, but has now rolled out K3’s retail
system at all of its 63 stores and eight
franchises in the UK, where it is used to
manage EPoS, inventory management,
warehousing and distribution functions.
“Like a lot of companies, they had several
different solutions and a very small IT
department,” says Paul Makin, sales director
at K3. “They now have a fully integrated
solution, including distribution and stock to
their 71 stores, through to the financials
and everything else.”
Counting the cost
Many champions of ERP for retail still run
into problems when trying to justify the
cost of implementations to the board.
Although ERP is supposed to generate cost
savings, it can be expensive to run and
maintain licenses for lots of different
systems, as well as to build interfaces
between systems designed to deal with
different data formats using different
methods. Even the relatively modest
requirements of American Golf still
required an investment of £500,000.
But Paul Makin argues that working with
a provider that is not also the author of the
technology it sells can offer additional
economic benefits. “If we failed to provide
the right level of ongoing support for a
retailer they could walk away and get
support from someone else working with
Microsoft,” he says. “Whereas if you buy
from a software author you’re stuck with
them. That’s an important differential.
Microsoft are also making their products
more tightly integrated. In the future they
will be morphed into familiar Excel or
Word-type environments. So your training
requirements shouldn’t be so heavy or
costly, because the products will look and
feel so standard.”
It’s clear that the greater degrees of
flexibility being offered by ERP vendors of
all kinds means that retailers are no longer
faced with the old black and white choice
between best of breed point solutions and
a single vendor. An ERP implementation can
be based on solutions supplied by more
than one vendor, as is the case at
Carpetright, which has implemented K3’s
Navision solution in its stores to unite EPoS
and order management applications
alongside an SAP solution for core systems
at its corporate headquarters.,
“We don’t force people to buy SAP for
everything,” says Richard Mills, industry
principal for retail in the UK at SAP. “Our
strategy is around plugging and playing
with everything. We have got all this
functionality, but it’s the customer’s choice.
We’re trying to help them build more
flexible infrastructures.”
There would be little point trying to do
anything other than this in a sector
characterised by such varied requirements.
The big ERP vendors have certainly not
reached the point when they might
claim to be suitable for every specialist
retailer. For the time being, there is still
plenty of room in the market for
specialised management systems such as
Prologic’s CIMS, an integrated multi-channel
enterprise management system for
fashion and lifestyle retailers, built
on an Oracle database, and used by
retailers including Paul Smith, Select,
Liberty, and Hobbs.
Perhaps the most important change,
suggests Mike Davies, UK head of retail
technology specialist Enabler, is that the
ERP vendors have realised how quickly
retailers need to see a return on their
investments. “These projects can now
generate cash faster, instead of taking
years to generate any money,” he says.
Small packages
Keeping costs down and bringing in returns
quickly is arguably even more important for
smaller retailers.
ERP vendors and resellers now offer a
range of vanilla-type products aimed at this
end of the market. They include NovaRetail,
developed by SAP specialist CIBER
Novasoft, which incorporates 44 common
retail and wholesale processes.
“Eighty per cent of the processes in
retail are more or less the same between
retailers,” points out Thomas Carey,
business development manager at CIBER
Novasoft. “So we don’t need to cover the
same ground each time we roll out the
solution. We can go into those companies,
show them how it works, and then
customise the other 20 per cent, which
reduces timescales, and cost.”
Recent implantations include the airport
retailer Alpha Retail, owner of outlets
including Alpha Airport Shopping and World
News. Alpha used novaRetail to speed up
the implementation of new systems
serving its head office, warehouses, and
stores. SAP technology was used to run
core financial, stock management,
replenishment and warehousing systems;
and the overall project also encompassed
integration with a new EPoS solution
and mobile computing platform.
The project went live after
11 months. It reduced
implementation time means
reduced costs, which has
a knock-on effect on
licensing costs. “This
means these customers
can start seeing ROI
just a few months
after implementation,”
says Carey.
Stephane Weishard, director
of strategic consulting at JDA
51, 52, 53 ERP and systems intergration.qxd 19/10/2006 11:46 Page 3
software, is pleased with the evolution
of ERP. “That they are making supply
chain and specialist retail solutions proves
they were not able to deliver the value that
was needed with a big ERP solution,” he
says. However, he does question whether
large suites of different types of
applications pulled together under an ERP
umbrella can deliver true integration. For
Weishard, integration is all-important, and
ERP may not always be the answer, for a
multi-national retailer trying to manage an
international supply chain, or a retailer
acquiring a rival, for example.
But whether working with an ERP vendor
or a systems integration specialist, retailers
would be wise to remember that all an
implementation ever actually offers is a
toolset. It will not deliver any benefits
unless the business processes, logistics,
and, perhaps most important of all, the
human element have been given as much
attention as the IT infrastructure. As
Arnotts’ Dickson says: “The big
challenge, once you’ve proved that
the software works, is implementing
the managerial
and cultural changes required to operate
an ERP environment. That’s always an
element people ignore, and it’s usually
something that hurts them when they
go live.”
So in the end, what’s most important is
that everyone in the organisation
understands the purpose of an integration
project, whether based on ERP, integrating
best of breed technologies, or a flexible mix
of the two. “Before embarking on any
implementation, ask yourself, ‘what’s the
compelling reason for change?’” says
Enabler’s Davies. “In a way there’s not much
difference between the multi-billion dollar
projects and the work we’ve done with the
smaller guys, because it all comes down to
defining that compelling reason. These
things are not just IT projects, even if there
is a large IT element. It’s all about increasing
the commercial benefit to the business.”
Whatever else ERP might be these days,
if it cannot bring a commercial benefit to
the business, retailers will no doubt end up
investing their money elsewhere.
October - November 2006 53
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