Case study: Salvatore Ferragamo steps into the future with SAP

Italian shoe and other luxury goods maker Salvatore Ferragamo is standardising on SAP ...

Italian shoe and other luxury goods maker Salvatore Ferragamo is standardising on SAP to support international growth and demand, especially in Asia-Pacific.

"With legacy systems struggling to support this growth, we had no choice but to standardise on one system globally," said Walter Carmagnini, chief information officer at Ferragamo.

The company, which was started in Florence in 1927 and counts Angelina Jolie and Gwyneth Paltrow among its celebrity customers, operates more than 550 stores in over 100 countries, including the UK, with around 2,700 employees worldwide.

The company is committed to Italy and has kept all production in the country, despite 92% of sales taking place elsewhere in the world, mainly in leather goods (71%), followed by silk goods (18%) and fragrances (11%).

"With double-digit sales growth, especially in Asia, we realised the need for complete visibility of our merchandise distribution and centralised IT governance," said Carmagnini.

Resolving piecemeal IT development

The autonomy given to each geographical region in capturing markets meant that IT grew independently, with little commonality in systems across the business, he said.

In the highly competitive fashion industry, it is important to ensure that customer demand is always met, which requires real-time information from across the business.

The only real choices for the global fashion retail industry are SAP and Oracle, he said, but with SAP already running most in some parts of the company and the choice of competitors like Prada, SAP was an easy and logical choice for homogenising the IT infrastructure.

Success in retail fashion depends on being able to react quickly to changes in local markets and global economic conditions, said Michele Norsa, chief executive at Ferragamo.

Having SAP across all regions will streamline global business process from back office functions to point of sale in retails stores as well as provide the data foundation the company needs for flexible and rapid responses, he said.

Norsa, emphasises the need for real-time information, looking at sales figures six times a day, starting with Japan and working westwards to north and south America.

"SAP is a global information technology provider able to meet our needs for seamless functional capabilities, centralised architecture, and multi-national support," he said.

Roll-out plans

The company plans to roll out SAP for Retail for centralised control for stock management and distribution in four phases, starting in 2011 with the fastest growing region of China, including Taiwan, Hong Kong and Macau.

The roll out will include SAP NetWeaver Process Integration to connect legacy systems with SAP, and SAP NetWeaver Business Warehouse to create consistent database information.

The second phase in 2012 will cover Japan and Korea, and phase three and four will cover the US, Europe and Latin America in from 2013 to 2014.

"Our strategy is to start simple and close to SAP standards over the next four years, implementing enrichments only when needed," said Carmagnini.

The aim is to achieve one SAP system globally to create a consistent database of information to enable the company to make better business decisions, he said.

Mobile impact

Another important benefit of transforming Ferragamo's IT infrastructure is to enable the company to better meet the demand for e-commerce and the use of mobile devices to improve customer relations.

"With a global and technology-savvy customer base, international retailers such as Ferragamo are under significant pressure to deliver a quality experience to both in-store and online shoppers," said Agostino Santoni, managing director, SAP Italy

Only by aligning operations with real-time global visibility can they meet these expectations, but with the commitment of top management, Ferragamo is off to a good start, he said.

Ferragamo started e-commerce operations only a year ago, but predicts that the online store will be one of the top 30 stores in 2011.

The company, which runs its e-commerce site directly without third-party involvement, plans to ramp up online communication with customers in 2011.

Ferragamo is not looking to software-as-a-service, just yet, choosing instead to concentrate on standardising and optimising its IT infrastructure.

"We are still in a learning phase, and therefore must continue to be directly involved," said CIO Carmagnini.

While retaining tight control on all aspects of the business, Ferragamo is looking to the future by ensuring that its IT infrastructure will support continued expansion both geographically and in cyber space.

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