Valentino Fashion Group has embraced technology to stay ahead in the increasingly competitive world of high fashion. Joanna Perry visits Milan to learn how the business has been transformed
Valentino Fashion Group general manager Luca Vianello doesn’t look like a techie. The sharp-suited Italian originally joined the company as manager of planning control and IT. Having demonstrated how IT can play a key role in a high-fashion house, he’s now running the show.
Marzotto Group, which owned Valentino when Vianello joined, had owned both the Hugo Boss and Valentino businesses but, in 2005, it made the decision to split the company into Valentino Fashion Group and a separate business, which would focus on textile and clothing production. Vianello became chief financial officer for Valentino Fashion Group and has also been covering the position of general manager since January last year.
The group is divided into two parts, which are called Black and Red. The Black part includes the Hugo Boss businesses; the Red part includes Valentino, Marlboro Classics, M Missoni and Lebole.
Under Vianello, the Red side of the business has embarked on an implementation of SAP software that was a first for Italy’s high-fashion industry. Since then, many other Italian fashion houses have taken similar steps to modernise their businesses.
The SAP project began in 2003, when the software was selected to optimise the organisation and its financial and operational processes. The company wanted to manage its retail operations better, as well as improve the efficiency of its supply chain. A new operating model was required and Vianello says that IT systems were important to change the processes and organisation.
Several factors have impacted on high-fashion companies in the past decade, meaning the traditional way of doing business has come under increasing pressure.
Valentino Fashion Group IT manager Patrizio Buda explains that the systems were needed to back the company’s internationalisation. “IT has to enable and support the business and in fashion this means supporting globalisation. International sales are a reality, as well as the relocation of production processes,” he says.
“Another major trend is customers. The customer is the third dimension of the business with the product and the store. We have to recognise customers in all parts of the world and through whatever channel they choose to address us.”
SAP Italy managing director Augusto Abbarchi says the technology is so important because customers have more control than ever before. “In the past, the designer set the trend for one year. Now, the customer is much more powerful and the company must react faster. You cannot wait a year for the new collection to address customer needs.”
Abbarchi adds how the jet-set lifestyle of luxury customers complicates things for retailers that try to focus on customers. “You have to serve customers of different cultures in different countries and this adds complexity to the model. For instance, you might be selling to Japanese customers in Europe or the US, rather than to Japanese customers in Japan. “If you are a high-fashion customer, you want to be recognised everywhere you go,” he explains.
Other factors that drove the need to implement modern systems included a significant increase in the ranges within each collection. The group not only sells clothes, but also shoes and accessories.
The plan has been to introduce the core SAP systems at all of the subsidiaries within the group’s Red division, as well as its operating countries: Italy, France, the US, Hong Kong and Tokyo.
The SAP financial system is complemented by SAP AFS, a specialist apparel and footwear supply chain application, and a reporting data warehouse. These three systems interface with four other external applications: a product development management solution, a warehouse solution, a point-of-sale system in stores and a sales force automation system.
The project began with the introduction of the financial system across a large part of the business in 2003 and this proved important when it was then demerged from Marzotto in 2005. Vianello says that the use of SAP within the finance department meant that the demerger was easier to complete. The financial system was extended to the Hong Kong business last year and this year Japan will be the last of its operating countries to have its legacy financial system replaced.
In 2004, Marlboro Classics became the first business unit within Valentino to implement SAP’s AFS specialist apparel and footwear software. Last year, the AFS roll-out was extended to the Valentino business unit. By the end of this year, the group plans to have AFS up and running across all its brands.
Marlboro Classics business unit manager Paolo Vazzoler is now able to laugh about his business being the guinea pig before the AFS system was rolled out to the other brands. However, going first meant a lot of hard work and late nights before the systems settled into place. He says: “The project was a nightmare with a rainbow at the end.”
The bigger picture
The project involved changing systems that had been in place and customised over the brand’s 20-year history. The systems implementation was accompanied by a wider transformation within the company and its supply chain. Vazzoler says: “Before then, we thought like a manufacturing company. From 2005, we changed not only our systems and processes, but also our attitude, from that of not only a producer but also a company that thought of the needs of the customer.”
65 Marlboro Classics-branded stores have opened since the system was introduced, proving that retail is growing in importance to the designer fashion industry. However, Marlboro Classics does not operate all of its stores directly; it is sold through 17 directly operated stores, 390 shop-in-shops and more than 1,800 multi-brand outlets.
Vazzoler admits that, during 2003 and 2004, Marlboro Classics was delivering products to stores late in the season because of deficiencies in the supply chain. The merchandise is produced in 15 countries, but all of the quality control is conducted centrally by the company. This created a nightmare in terms of the flow of goods and, as such, spring/summer products were still being sent out in May, when the collection should have been distributed by the end of February at the latest.
This was not seen as so much of a problem when the brand was supplying a large number of small suppliers that could wield little power. However, as Vazzoler says: “Now we work more with a few big groups and they go crazy if you cannot meet their requests.”
He adds that, with the SAP system in place, he can sit his IT manager down with people from important stockists, such as French retailer Galeries Lafayette and the two can work together to manage supply processes better. Vazzoler says: “We now have seven different ways to box goods, depending on the needs of the store to which they are being sent; this was unthinkable before.”
Therefore, everything is controlled and Marlboro is able to tell its stockists when products will arrive five months before they are produced. In addition, the company works to a model where 20 per cent of products are put into production before the season starts and the other 80 per cent are manufactured based on orders from stockists.
It used to take 20 days for manufactured goods to be delivered after they had been purchased by stockists. With AFS in place, stockists in Italy receive their goods two days after ordering, with the rest of Europe waiting three days.
Another advantage of the AFS system is that, although the brand has about 30 distributors or agents around the world that don’t run SAP, the company is able to translate their systems to its own, so there is a level of integration. Vazzoler says that whenever his business enters a country, he feels that he is protected with his SAP system, because the software vendor is global.
In the next four years, there are likely to be more advances in the technology that the group uses. Buda says that it is examining customer relationship management systems at the moment and that it may go with SAP’s offering in this area, but only if it proves to be the best option for the company. “Our strategy is not a religion; it is not SAP at all costs,” he says.
The group is also re-examining the choice it made four years ago to keep running a separate warehouse management system. Buda says it will look at the value that could be gained by moving to an integrated SAP warehouse management system.
Other projects on the radar include the implementation of new retail systems, a product life cycle management system, a corporate portal and the introduction of better management reporting and scorecards.
Buda sums up why technology has such an important part to play in the future success of the group. “We are trying to link the creativity of the stylist and the mathematical minds that must produce this vision. The solution must pull together these two worlds and make them fit.”