Why core systems need to be integrated

Despite the historic problems with the implementation of early enterprise resource planning (ERP) systems, major retailers are...

Despite the historic problems with the implementation of early enterprise resource planning (ERP) systems, major retailers are now implementing these systems in order to provide competitive information to operations managers, buyers and merchandisers.

As retailers seek greater control over their businesses, most have recognised that legacy systems and point solutions must be integrated if they are to make key performance indicators available across the enterprise.

As UK retail sales start to slow, retailers need to know in an instant what margin they are earning on every product line.

Getting this information is a challenge to retailers with a large legacy systems base. However, it can be relatively easy to start the process, by automating a particular area of the business through which real benefits can be won quickly and inexpensively.

Automating a single area, such as procurement, can also be the trigger for future developments. Once an otherwise sceptical workforce can see what can be achieved, their buy-in is more likely to be assured.

However, longer-term, piecemeal implementations can have only limited impact. They can be replicated by competitors and can divert attention away from the real goal, to work from the centre outwards, to integrate core systems.

A further limitation of the piecemeal approach is that it can disguise the simple fact that, unless core systems are integrated, retailers do not have access to important data that will support these individual solutions, notably information on margin management, comprehensive stock and movement across the whole enterprise. In short, individual solutions cannot be fed with integrated data and do not in turn generate integrated data.

The solution is to start to implement one of the fully integrated systems such as SAP or Retek, as most of the large retailers have already done. These solutions are not exclusive to large retailers.

Most software suppliers have created a set of templates that contain processes common to most retailers, so that they can get the benefits right away without having to do their own development.

Early attempts to use such systems (ERP) suffered from too much complexity due to poor software, poor implementations, too high expectations and an attempt to do things too quickly.

However, the software that is in its third or fourth iteration is now much more robust and the critical issues of implementation are better understood. This means more of these are achieving success and giving the retailers the critical up-to-date information they need to manage their businesses.

Retailers should start considering and planning to implement such an integrated solution. At the start, they should look at firms that have done it and see the problems they have confronted and the real benefits they have achieved.

Those benefits can be dramatic, as B&Q International, which has 61 stores in China, Turkey, Taiwan and Poland, has discovered. It has adopted integrated systems to achieve better customer availability and cost reductions.

The company can now can record sales and margin accurately and, as a result, has boosted margins. It also says that it has given itself a lead over its competitors.

At Japanese fashion retailer Uniqlo, integrated retail and financial systems enabled it to open 15 stores in the UK in just 12 months and has given the business the infrastructure to support rapid future growth. Uniqlo plans to open at least 50 stores by September 2004.

The implementation was unusual - if not unique - in a number of ways. Rather than the usual growth pattern of starting with a small system and building or replacing as the business develops, Uniqlo had the vision and resources to invest in a full-scale solution from the start.

It began with a system suited to a much larger company, but it is a system it knows will support its end growth target and beyond.

Simon Thomas, Uniqlo IT director, says, "Normally when you open a store you have to phone up to find out what they've sold.

"On the first day we had a full breakdown of sales and total visibility of stock - which is particularly vital."

Chris Montagnon is an associate director with retail systems company Novasoft. He was formerly IT director at J Sainsbury

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