Dublin department store Arnotts is about to complete a two-year IT overhaul that will be the backbone of future growth. Joanna Perry learns why educating staff has been key to its success
Politics and people have proved just as important as software in Arnotts’ recent technology journey. Arnotts business systems director Paul Dickson claims it is people, organisations and business strategy that cripple software projects, rather than actual software issues.
This is something he has been mindful of throughout the project to implement Oracle Retail applications across the business and 21 separate sales departments.
Starting in May 2005, the first year of the project was focused on deciding how the system would work and, more importantly, how Arnotts staff would have to change the way they work in order to adhere to what Dickson considers the best practice inherent in the software. The software was configured rather than customised and there was a strong emphasis on promoting the technology as an enabler.
The idea was to create a more efficient organisation and, as such, a better delineation of duties was necessary. In addition, the implementation of the software was tied in with a set of business objectives. These included reducing the stockholding and bringing in third-party logistics and off-site replenishment, so Arnotts needed a fully integrated supply chain.
Dickson says: “We also had to work on pushing the margin harder, because twice a year [during Sales], our margins went to hell. It was called the most genuine Sale in Ireland – and it was, but it ruined our margins for the year.”
In total, about 90 per cent of the business’s footprint has been affected by technology change during the project, because Chip and PIN, HR and restaurant systems were also implemented and the local area network and tills were replaced. Dickson says: “We had to do things physically – reorganising people, etc – in addition to buying the software.”
Throughout the process, Dickson has sought the assistance of some of the most talented and influential staff within Arnotts to effect the change smoothly. These people were made responsible for communicating the change and were given incentives to do so.
“The only way not to affect the organisation is to not implement the software at all. So you must manage the impact from the start. We had a campaign team to filter down information from the top to the lowest levels,” says Dickson. This included running “sheep dips”, where all 650 staff were spoken to every month about what the company was doing and why it was doing it.
In addition, change management was identified as a process in its own right. A new HR director, who had previously worked at Selfridges, was brought in and a dedicated change-management team was created, which developed all the training material.
“We dealt with the organisation and people issues very quickly. Where buyers couldn’t make the change, we dealt with it,” says Dickson. “The end product is about having people in the organisation who understand what we are trying to achieve. The whole issue of politics and people will kill you if you don’t address it.”
For Dickson, this no-nonsense approach was the only option if the system changes were to ripple through the company correctly and offer a long-term solution. He says: “You have two years of what you are doing, but maybe 100 years of living with what you have done.”
Two departments went live with the new systems and processes to kick off the 18-month roll-out and a further two have been added every four weeks, except during Sales. Ladies fashion and gifting, the final two of the 21 departments, are due to go live imminently.
Dickson says that this gradual introduction has helped build confidence and created a feeling that what is happening is making a real difference to the business. When the system went live, Arnotts uncovered significant, long-standing operational inefficiencies. “We found that we were being over-delivered, there were substitutions and rebates weren’t being applied,” he explains. “It really opened our eyes and caused a bit of a scare.”
In July, Dickson met with 10 of Arnotts’ worst suppliers. He explains: “They were screwing up our business. For the first time, we could tell them this.”
Effectively 10 to 15 years of development has taken place within the space of two years at Arnotts. However, Dickson appears to have not only succeeded in implementing systems that will support the future of the retailer, but to have done so while retaining the respect of his colleagues too, which is no mean feat.
The user’s view
Arnotts head of homebuying Ger Ryan says that, before the systems were implemented, it was clear that things needed to change, because buying decisions were being based on instinct rather than concrete data.
He says: “People weren’t focused in terms of what worked and what didn’t and there were huge operational costs attached to managing the stock. There was also no clear brand positioning in the store.”
Ryan was previously a buyer at both Musgrave and Tesco in Ireland, so had come from a working environment where everything was underpinned by information. He supported the introduction of the new systems for the long-term benefit of Arnotts, but was aware that it could create problems in the shorter term. “I was also aware of the impact it would have on the people. It was a relatively successful business, so there was a risk,” he says.
However, he adds that the changes to the buyer’s role at Arnotts that came with the introduction of the new system have been a success. “Before the change, their title was buyer manager, because they were also responsible for everything in their department and the management of the shopfloor,” he says.
“Now, they have become buyers, with a 100 per cent focus on their strengths. They are taking more time to make product selections and it has allowed the development of store operations to manage the day-to-day operation of the store, such as visual merchandising.”
Now, planning is better, sales are improving and Arnotts is forecasting sales and seasonality more accurately. Because the company is aware which brands are most popular, it is able to give them a higher profile on the shopfloor. Ryan says: “Previously, everything was judged on six-month cycles, looking at sales and gross margins.”
Backing the winners
Bedlinen, which was the first homewares department to go live as part of the pilot, shows the results that can be achieved. Ryan says it was chosen to go first because he felt it would get the most benefit from the system. He explains: “Bedlinen has a huge range of promotional buys and fashions. And we thought we were becoming less relevant to a younger audience, but I couldn’t validate it.”
Since the system went live, the bedlinen department has also been relocated from a 16,500 sq ft to 10,000 sq ft space in store, so it was essential that Arnotts took the winning lines and shaved off the losers.
The results have been impressive, claims Ryan. “We have grown sales on an absolute basis and doubled gross margin because we are delivering better on the space. We are doing everything better with less product,” he says.
In addition, he reveals how perceptions of the IT department have been transformed as a result of the project. “Prior to this, the IT department was seen as no more than a group of people who came along to fix problems with computers and tills and didn’t really contribute to the business. Now it is seen as a core department that is providing key support and tools to drive the business,” he says. “They are seen as commercial people now, not just IT people.”
Some structural changes are still to happen, as the staff seconded to the project team are reintegrated back into the business. However, Ryan says that he expects the future development of the system to be undertaken through collaboration by business managers and the IT department.
He concludes: “It is the single biggest change the business has gone through and I firmly believe that it will keep us relevant. It would be hard otherwise to attract new people, but that’s not the case now.”