Wawa: Need retail software, will travel

It was only after traveling to Europe to visit multiple customers that Wawa chose SAP for Retail over competition from Oracle and Retek.

Amidst the battle over Retek between SAP and Oracle and an internal systems overhaul, executives at Wawa ultimately

needed a European road trip before they knew which retail software was right for their operation.

Based in Wawa, Pa., the chain of 500 stores and gas stations in the mid-Atlantic U.S. was replacing its financials and its aging price book and barcode scanning system in 2005. The company was considering SAP and Retek for the retail component, combined with either Oracle or Radiant for financials.

At the beginning of the process, SAP was at a disadvantage.

"We didn't see a lot of retailers in the U.S. using SAP retail solutions," said Wawa's chief information officer Neil McCarthy. "They kept saying, 'We're committed to retail, this is the next big industry we're going to focus on.' But we didn't know if we could believe them or not."

But Wawa knew that SAP had more retail customers overseas, so company executives decided to take their research to the next level, McCarthy said.

"We actually went over to Switzerland and Germany to see some customers over there that were using SAP end-to-end to run businesses very similar to ours," he said.

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One customer that helped ease Wawa's mind was Migros, a chain of about 1,000 stores in Switzerland. The company operates stores the size of Wawa's as well as larger, Wal-Mart-sized locations. Migros does all its ordering in SAP, and Wawa was able to see how orders were generated, manufactured and then delivered multiple times per day, according to McCarthy.

"It was exactly some of the things we're doing -- or want to do," he said. "So when we saw that, we thought, 'OK, if it's working for them, it should work for us.'"

Wawa also spoke with Retek and Oracle customers, and found another aspect of the products that gave an advantage to SAP.

"One of the things we heard loud and clear from [every Retek customer] we talked to was that Retek was a great product and the people there were great, but upgrades were like a brand-new install," McCarthy said.

Wawa had been through tough upgrades with other software, and preferred what it considered the SAP model.

"What we heard from SAP customers was that it might be a little harder to get it installed," McCarthy said, "but once it's installed, the upgrades are a little easier."

At the time Wawa was making its decision, SAP and Oracle were in the midst of a battle to acquire Retek. Initially, it appeared SAP had a deal for the retail software maker, only to see Oracle step in and trump SAP's bid.

After visiting with customers and developing a relationship with SAP, however, Wawa believed SAP when it said it would place a greater focus on retail, even after losing out on Retek, according to McCarthy. In fact, in the months after Oracle bought Retek, SAP acquired retail lifecycle price management vendor Khimetrics and Triversity, a POS (point of sale) software vendor.

Looking back at the decision, McCarthy thinks Wawa may have dodged a bullet by choosing SAP -- avoiding the transition time when Oracle was integrating Retek into its portfolio.

"Had we picked Oracle and Retek, and then Oracle acquired Retek, it might have been better for us in the long run," McCarthy said. "But I don't know if that integration is going as smoothly as they had hoped, so I think we made the right choice."

Wawa installed SAP financials in 2006 and rolled out SAP for Retail from April through December of 2007 at a rate of about 30 stores per week. While the store-level switchover to SAP went fairly smoothly, according to McCarthy, there were some bumps at the corporate level.

"None of us had ever been through [such a big implementation] before," he said. "You talk about how hard it's going to be, but until you're living it, you can't really prepare for it."

For example, Wawa was not using purchase orders before installing SAP, and in the new system, invoices were being received by Accounts Payable, which was then supposed to reconcile them with a corresponding purchase order (PO). But for the first couple of weeks, bills were backing up because employees were simply not using the PO functionality.

"Once we realized what was wrong, we changed the behavior," McCarthy said. "But we could've gotten in front of it and prevented a lot of the angst."

With the product installed, Wawa expects to see benefits in space management, inventory tracking, and automated ordering for each store.

McCarthy also described how information about the profitability of merchandise will be vastly improved.

"Today, if we make a sandwich and sell it for $3.99 and all the ingredients cost $2.99, we consider the profit to be $1," McCarthy explained. "But what about the labor? What about the electricity to keep the meats cold? What about the wrappers?"

SAP for Retail will enable Wawa to attribute costs down to the item level, he said, allowing the company to determine how profitable products really are.

"If we make $1 on a 2-liter of soda and $1 on a sandwich, that's two very different things because one has a big labor component and one doesn't," McCarthy said. "[With SAP] we'll get a better sense of the true profitability of items and make better decisions on when to discontinue something or when to let it run for a longer period of time."

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