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SAP at the core of S Group’s €100m IT renewal

Finnish retailer S Group is putting SAP at the core of its IT transformation, which will be complete by 2021

Finland’s largest retailer, S Group, has embarked on a €100m IT system overhaul, which will put SAP at the core.

The retailer is seeking efficiency benefits and preparing for new digital services with a complete renewal of its key systems by 2021.

The project covers all S Group retail processes. These include a new enterprise resource planning (ERP) system, assortment planning, pricing and procurement, as well as basic financial systems. The retailer is also renewing its point of sale system as a separate project, which will run simultaneously.

“We realised our current IT base doesn’t offer us the opportunity to develop our business to meet future challenges,” Raimo Mäenpää, CIO at S Group, told Computer Weekly. “It doesn’t adapt to our needs for dynamism, transparency and the ability to predict. [The conclusion] was we should have an extensive operations management renewal.”

The retailer launched its renewal project in late 2016. In addition to modernisation, the project aims to unify S Group’s scattered IT architecture. The group has grown through company acquisitions and consequently runs dozens of different, partly overlapping, IT systems. A significant part of its IT costs relates to the maintenance of ageing systems.

S Group will address this with a new IT architecture based on the latest version of ERP from SAP, SAP S/4 Hana Retail. S Group has used various SAP systems since the 1990s.

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“When you start to build ERP of this size in Finland there aren’t many alternatives [to SAP],” said Mäenpää. “In addition to technology, the availability of expertise is a factor. Also, we needed to have a Finnish-language user interface and support process [which SAP offers] for our store staff to use.”

S Group will supplement the ERP system with specialised services, such as predictive analytics software from Finnish firm Relex.

Shop-by-shop roll-out

The IT overhaul is a major undertaking for S Group. The project covers the retailer’s supermarket, department store and speciality store businesses, as well as service stations and hardware stores across Finland. It has about 1,100 outlets nationwide.

S Group will transition its outlets one at a time to reduce disruption to store operations and product flows. This requires running the retailer’s old and new IT architecture simultaneously over a transition period.

“This means we always have a fall-back if problems arise. We can control the deployment speed, and if any store experiences problems, we can ultimately bring it back to the old architecture, sort out the problems and try again,” said Mäenpää. “It is an expensive solution, as we will run overlapping systems for years, but from a reliability perspective it’s the only sensible solution for us.”

While elements of the new IT system are already in testing, Mäenpää said the project is still in its early stages. What has proved particularly time-consuming is going through large amounts of S Group product data and moving it to a new data model and system.

But Mäenpää is confident the core system will be ready by 2021. The end result will be a unified, transparent and increasingly predictive management system for S Group’s product flows and extensive data, which will be used as a base for new digital services.

“We will first deploy the basic processes, a kind of an MVP [minimum viable product] solution, and then we already have loads of development ideas on how we will take the system further from there,” Mäenpää concluded.

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