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

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52 October - November 2006

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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

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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.

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