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When Canada’s largest book retailer decided to ditch its troubled warehouse management system, it decided to go with SAP Extended Warehouse Management over “best of breed” niche vendors, even though it meant less functionality and more headaches up front.
“We were growing very profitably,” said Sumit Oberai, chief information officer of Indigo Books & Music Inc., based in Toronto. At the same time, the company was pressed to find more ways to cut costs as a way of making itself leaner and more efficient in an increasingly competitive marketplace. “That view of, ‘we need to be more focused on cost’ also helped drive the decision.”
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Indigo Books operates more than 244 stores throughout the country and has a huge online presence. The retailer also sells a long list of other products, including toys, electronics and household goods -- similar to Amazon.com in the U.S.
While SAP Warehouse Management (WM) is a module of SAP ERP and serves the needs of customers with more basic warehousing operations, SAP Extended Warehouse Management system (EWM) is a part of the SCM portfolio and is used for more complex warehouse systems, such as for Indigo and its hundreds of stores, vendors and high volume of individual customers who buy online.
Indigo also runs SAP ERP ECC 6.0, SAP Business Warehouse and BusinessObjects, SAP Human Capital Management for human resources, and SAP Process Integration.
Despite having to forgo some of the functionality the company could have had with niche vendors and having to perform a significant amount of customization to make it retail-friendly, which has delayed part of the deployment, Indigo went with SAP EWM. It meant being able to improve upon its total cost of ownership, Oberai said.
“It does it on exactly the same technology, the same platform, the same skill set, that we have already,” Oberai said, adding that integration was easier. “We don’t have to go and learn something new. We can use the same labor pool to manage multiple systems. Going from ERP to EWM, it’s the same programming language; it’s the same underlying infrastructure that we have running this on. That’s a huge win.”
The decision to move on
Indigo had been using a best of breed warehouse management application for roughly eight years. That software which had long since outlasted its usefulness for a number of reasons, according to Oberai.
“It was a bad implementation,” he said. “There were a lot of data issues, integration issues. Even though it supposedly had a certified connector to SAP, [we had an] an inventory accuracy rate that simply wasn’t acceptable.”
Those “disconnects” created an endless number of headaches -- inventory recalculations, out-of-stocks, not ordering enough inventory or ordering too much, according to Oberai. Those problems have been solved with the current deployment of SAP EWM.
The system also frequently went down, he added. “When we touched it and customized it heavily, we often broke it.”
A "best of breed" shop going SAP
Indigo looked at replacing its warehouse management system while using the deployment as an opportunity to redesign its processes to allow for, among other things, more efficient processes around how the goods are pulled from the warehouse. Those changes have contributed to a higher profit margin.
Although Indigo had moved to a “SAP first” policy in regard to software deployments instead of using so many best of breed applications, it nonetheless looked at a number of niche vendors, including the Atlanta-based Manhattan Associates, whose warehouse management system has a footprint three to four times the size of SAP’s.
“Despite their being a smaller company, in retail they’re a specialist,” Oberai said.
Doing without the bells and whistles
Although SAP EWM addresses Indigo’s needs in a broad sense, Oberai said there are some “bells and whistles” that the company is missing out on by not going with a niche vendor. Most of those the company will never miss, he said, but a few would be helpful to have.
One of the features that would be better with a niche application is a more robust warehouse rearrangement tool that resorts and reorganizes the inventory that’s become more and more spread out among disparate locations over time -- mostly because items get stuck in other places when their original slots become full. SAP EWM has that capability, Oberai said, though it requires a significant amount of labor.
“It’s not 100% black and white that we got the platform and didn’t give up anything,” Oberai said. “But the things we gave up were not sufficiently big to justify going with someone else.”