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Retailers seeking more value from existing SAP applications

Retailers are restraining their IT spending and finding ways to derive more value from existing applications.

NEW YORK -- It's been only six months since Hastens went live with its SAP ECC 6.0 implementation, but it's already trying to make the ERP system more efficient.

It's part of the luxury bed company's strategy to derive more value from its existing applications. The Swedish company is re-examining the entire project, focusing on areas in which it intentionally sacrificed -- like planning modules and improving supply chain with supplier portal -- in order to get the system up and running quickly (the implementation took 17 weeks), according to its CIO Dominic Luzi.

Overall, he said, Hastens is trying to identify where the highest costs are in the bed-building process, as well as where it can better coordinate with suppliers.

"We are spending a lot of time cleaning our house," said Luzi, whose company is running SAP ERP and CRM. "Right now, it's very important to do everything we can to keep costs to a minimum, to keep inventory to a minimum, and to make sure we're prepared for when the economy turns around."

Many retailers are focusing more on ways to derive immediate value from their existing applications and less on pursuing large-scale projects that will produce a return on investment (ROI) over a longer term, according to attendees at this year's National Retail Federation (NRF) trade show.

In general, retailers are restraining their IT spending, according to a study by the NRF Foundation, the research arm of the NRF. That said, survey respondents said they will invest in improving business processes and technology that enhances key business strategies. They're looking for ways to be more customer-centered, knowledge-based and integrated with suppliers in order to better manage inventory, the report states.

The trend was evident at this year's show, where the common remark from vendor representatives, consultants and customers alike was how slow foot-traffic was compared with years past. Like the consumers the retail industry serves, browsers at this year's show were sparse. Retailers interviewed on the show floor said they knew exactly what they were there for, and in many cases, it was a tool that would present them with clear, short-term ROI.

Customers' changing buying patterns have already caused Hastens to make a change in its supply chain. Buyers wanted beds immediately; they had no patience to wait the typical six to eight weeks after ordering them. To meet these customer demands, Hastens is using SAP to help with stock-keeping. Luzi said that it's building up some stock so that it can tell customers, "Well, we don't have that one, but we do have this one."

"We've taken a bit of a risk by building out some stock, but it's paying off," he said, because while floor traffic to Hastens' stores is down, sales are staying level in probably 70% of them.

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Wawa Inc., a Pennsylvania-based convenience store chain, has no large software purchases planned for 2009, according to John Baldino, senior director of business transformation. The company was looking into some new modules for price optimization from SAP. But since Wawa went live with SAP financials in the second quarter of 2006, it has also implemented modules for merchandising, supply chain management and business warehouse.

"We decided to just kind of wait and see," Baldino said. "Really we're still trying to swallow this whole thing, so we thought, 'Why are we adding more things on now? It's just making it harder to get the benefit out of them.' "

Wawa will instead spend money to hire consultants in order to learn how to optimize the system and gain better control over inventory.

Retailers are also seeking better applications efficiency by exploring shared services models. Creating shared services for six separate business units is this year's goal for Reliance Retail, a grocery and fashion retailer based in India. CIO Timothy Kasbe said he thinks a 70/30 model will work well for them, with 30% of the applications being customized.

For Coldwater Creek, a women's apparel and accessories retailer, the challenge will be not re-examining its existing applications. The Sandpoint, Idaho-based company is still working on a large-scale ERP implementation it started in March 2008.

That means resisting the urge to invest any money back into the legacy systems that it's replacing with SAP and instead pushing forward with the full-scale replacement, according to David Edwards, divisional vice president of business transformation for the company. Coldwater Creek went live with financials and SAP human capital management (HCM) in August 2008. The company plans to go live in May 2009 with the merchandising modules for merchandise management and a point-of-sale data management system for sales order management and sales audit.

"This next year is really just a continuing story of getting through all of our core transactional system and implementing SAP successfully and cleanly and crisply, and starting to be able to leverage that integrated platform we've been talking about," Edwards said.

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