Some say that IT is no longer a differentiator. Certainly it is true that all larger retailers run enterprise resource planning (ERP) systems, but that doesn’t mean that a new implementation can’t make a big difference to a company.
In the past three years, both Dunelm and Carpetright have implemented SAP ERP systems within their businesses. For the former, this journey has been about supporting planned growth and, for the latter, the upshot has been a change in perception about IT and the IT department.
Dunelm was using systems that coped well while it was relatively small but, by 2004, the company realised it would need to upgrade if it was to continue to grow. Dunelm finance director David Stead explains that the retailer looked for a system that could support its continued growth but, when the process started, he did not expect SAP to be the software that the company settled on.
The software has a reputation of being a system for so-called “big” businesses. SAP says that is a preconception that no longer holds, because what it offers is an integrated suite of software, rather than one, large system where a retailer must take or leave it all.
Dunelm was able to use a preconfigured version of the software provided by SAP partner Ciber (now Ciber Novasoft) and went live with merchandising and warehousing systems in February 2006. Stead says that it was helpful that the retailer had these critical bits of the system “under its belt” before it was floated later that year. In the past 18 months, Dunelm has also gone live with SAP’s financial software.
Although Dunelm is something of a unique business because store managers choose what to stock, it has not had to make major changes to the system to make it suitable for its business processes. Stead explains: “There was nothing fundamental [to change]. The biggest challenge was the way we received goods in stores. Most suppliers deliver to stores every week, so there is quite a lot of direct interaction between stores and suppliers. Getting the order transmission and receipt process in place was different from the standard.”
But the benefits have been significant. “The base-level change is that we have moved from a lack of confidence in the systems and information that they hold to having a high degree of confidence that the systems will be working. We had up-to-date sales by store and item already, but what’s new is up-to-date stock information,” he says.
Cultural change
The implementation of the system has also had a significant impact on store staff. Stead says: “The second [change] is that we have moved from a manual, paper-based approach to one that is much more system-based. This has meant a cultural change for store managers. They have a lot of control over what they order – the system enables this to happen, but we don’t auto-replenish.”
One thing that’s common to Dunelm and Carpetright is that they are making ongoing improvements to their businesses using systems. Outlining his plans for Dunelm’s systems, Stead explains: “We believed that the business had a huge amount of growth potential and we couldn’t support it with our old platform. We needed scalability and reliability. We have ticked these boxes and now want some hard benefits, such as measuring the availability of best-selling lines, because it is hard to be 100 per cent sure about the impact that this has on sales.”
“Our challenge now is to go around the business and see what we could do to make life easier and more efficient.”
He adds that, over the next month or so, the retailer will run a workshop with its store teams to see what could work for them. One idea could be to introduce auto-replenishment on 50 per cent of the products stocked, so that store managers can focus on the ordering of products that vary more by store.
“I see technology becoming more obvious in stores as we develop our internet and multichannel offer,” says Stead.
In addition, Dunelm has explained to its shareholders that it will be making investments in its web site in the next 12 months. Stead admits that the site is pretty basic and has been running for a couple of years. At the moment, it does not integrate with the retailer’s SAP systems. Stead says that, while this is not an issue at the moment, it could become more important if Dunelm’s online business is to be developed.
Meanwhile, at Carpetright, which went live with its SAP implementation in 2005, much good has come of the IT department introducing the system.
Carpetright group IT director Ian Woosey explains some of the business areas that the system affects. “We use it across our head-office functions, such as finance, buying and inventory management, and use SAP BW for all our business reporting. All purchase orders are processed electronically and matched in the SAP system,” he says.
Previously, the retailer had run several bespoke systems and had different hardware, with knowledge spread among a few members of staff. Now, it has one computing platform and one source of data.
Carpetright recognised that there were major risks associated with such a significant systems replacement project, so it went further than many other retailers to make sure that everything would run smoothly. From the start, the retailer made sure that those who would be using the system played a part in its design and introduction. “We seconded in some of the best people in the business for the entire project, [starting] from the blueprint design phase and they worked closely with the interested parties,” explains Woosey.
This was followed up with a low-risk implementation strategy. Master data and reporting went live first and were allowed to bed in for a few months before the project continued and the rest of the systems were rolled out.
“We had a really good team and planned it meticulously. We did a couple of things that people don’t do normally. For instance, we tested the handover three times, over three weekends, so we knew what to expect. And we also ran real volumes [of data] through the test systems. So when we went live in June, it was really the fourth time we had gone live,” says Woosey.
Since then, Carpetright has begun to enjoy the benefits that you would expect from a modern ERP system. “It is cheaper to run than what we had before and the data is accurate. We have sales data every 15 minutes, so we can find out information very quickly,” he adds. “EDI has made us much more efficient. We have a full procure-to-pay cycle for the majority of our suppliers.”
However, the perhaps less obvious, but important benefit to the business has been the way that the success of the implementation has raised the profile of the IT department within the company. “Before that, IT was perhaps a little distant. This was the first really big project that was delivered,” says Woosey.
The retailer has since relocated its central support office and distribution centre to a single site at Purfleet, Essex, consolidating four other sites. Woosey says that, during this process, there was a good spirit between the IT department and the rest of the business.
As at Dunelm, the introduction of the system has allowed the retailer to make improvements to business processes and this is ongoing. “Now that we have got a good foundation, we will look to develop SAP further, with more automation,” Woosey adds.
Poorly thought-through ERP implementations can really hold a retailer back. However, these two case studies illustrate that, by following best practice, the introduction and use of major systems can be a big success.
Carphone Warehouse: ERP for it
Carphone Warehouse IT service and operations director Peter Schofield says that, unfortunately, the area where ERP from the major software vendors is lacking is in producing a package for the IT department itself.
Speaking at the Retail Solutions conference at the end of June, he said that the IT department would benefit from systems. “How does your IT team run itself? If you were in HR, you could buy Oracle HR. But there isn’t an ERP system to help you run your IT department.”
Schofield said that, with packaged applications lacking, Carphone Warehouse has had to build a system itself. Using virtualisation technology from VMware and data centre automation technology from Enigmatec, the retailer wants to get to the point where potential problems – such as a shortage of processing power for a certain application – are spotted by a system and remedied automatically.
However, to begin with, Schofield says that actions that the system wants to take still have to be authorised by a human being.
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