SAP Fashion Management provides a central perspective of all sales channels, making the solution attractive to companies beyond the fashion industry.
It’s been almost 10 years since SAP industry presales expert Ulrike Karl began working on retail fashion. She was responsible for the solution’s go-to-market in Germany. Together with Christian Schröder, responsible for worldwide business development in fashion software, Karl gives us an inside look at SAP Fashion Management, a new application available since early December.
For the first time, SAP Fashion Management provides companies with a completely transparent perspective of retail, wholesale, online sales, and real-time information. How will this impact the industry?
Most fashion companies comprise separate business units such as retail, wholesale, and manufacturing. In the areas of design, purchasing, and sales, these units often work completely independently of each other, which results in large, separate volumes of data that the company then has to consolidate – a very laborious process. Ever-shorter seasonal trade periods are accelerating business and progressively making this situation worse.
So if we want to support our customers holistically and more effectively, we need to merge the data and, consequently the systems. For a long time now, vertical solutions have failed due to performance problems: The sheer volume of data simply couldn’t be processed fast enough. When Vishal Sikka [SAP chief technology officer at the time] and Hasso Plattner [co-founder of SAP] presented the in-memory approach, we immediately knew that this could mark a turning point.
You were tasked to fuse existing solutions with each other and develop a solution that responds to the trend of verticalization within the fashion market, and to deliver a view of sales channels and even production. How did you go about doing this?
We knew that we couldn’t simply stack the two existing solutions on top of each other, so in 2011, we founded a co-innovation group to work towards a new concept for the whole industry through co-innovation with partners and customers. We regularly exchanged ideas with leading fashion retailers. Using a solution backlog, we communicated what processes and functions should be integrated into the new solution.
By early 2013, the industry requirements were clearly defined, so we were able to begin with development. The ramp-up phase, a testing phase with selected customers, started in May 2014.
What are the key advantages for customers?
We would like to illustrate this using a few typical examples.
- The multi-channel perspective: Vertically structured companies like Adidas, s.Oliver, Zara, and Esprit traditionally sell their products to specialist stores or other retailers. They make use of their verticalization knowledge to forge new sales channels, and to sell their wares from many locations, as well as through their own stores or through an online shop. This makes them an multi-channel company. On a systemic level, these sales channels should really be mappable separately, ideally for every step of the entire process, from planning to sales. At the same time, however, all company processes must be aligned with the requirements of end customers and retail spaces. This in turn requires continuous, vertical transparency across the entire supply chain, from manufacturing to retail. The central task and goal is joint “in-season” management, with information flowing freely along the entire value chain. This opens up new opportunities for a centralized control, and enables the deduction of operational regulatory measures for unexpected or unplanned situations.
- Data availability within a system: Vertical retail business is particularly dependent on the availability of sales and stock data from retail spaces. In fragmented system landscapes, data availability is usually nonexistent or insufficient. The ideal scenario is when the vertical planning for a season is built on top of this data, feeding into an appropriately structured range of goods or line of fashion for each respective sales channel.
- Increased supply chain flexibility: Connecting pre-stage processes also leads to greater efficiency and speed in logistics and distribution along the entire supply chain. Through prompt in-season merchandising and resupply mechanisms, the vertical approach leads to greater flexibility and faster response times when it comes to unexpected situations in sales channels and retail spaces.If, for example, an online shop has an abundance of a certain product in stock while there is a shortage of and demand for the same product in the company’s retail stores, stock levels can be adjusted across channels according to demand, and in real time.
- Physical separation of stock: Stock may be physically separated according to certain criteria, such as by country of origin or quality-based criteria. Therefore, country-specific import restrictions or lower-grade quality products no longer pose a problem in the supply process. This kind of segmentation was not possible before.
- Improved analysis: In addition, new analytic methods provide promising opportunities for more efficient control of company processes. Cross-channel transparency of sales, stock, and buying habits of consumers and customers helps vertically operating companies to recognize trends early on, develop demand-oriented product ranges for individual sales channels, and make these available “just in time.” This allows them to respond to current market conditions and initiate a resupply of goods in a timely manner.
- Reduced costs: The biggest and most obvious technical advantage is that vertical companies will, in the future, only need to run one system, thus lowering costs (*total cost of ownership) through harmonized processes and reduced administration.
What requirements must a company fulfill to implement the software?
As I’ve already mentioned, it’s fairly normal for individual companies to have subdivisions or departments working completely independently of each other. This applies to planning, to purchases, all the way to sales.
The same holds true for sales channels such as retail, wholesale, and e-commerce. The exciting question is: How will these companies be organized in the future? It’s very clear that successful collaboration between different areas is necessary, and that it offers big optimization potential. One prerequisite for this is that the company launches some form of change management.
Naturally, SAP does its best to support customers in their business transformation. The biggest challenge that many companies still face today, however, is providing a harmonized and integrated shopping experience across all sales channels. This doesn’t just apply to the fashion industry.
What other industries are you referring to?
Basically, our solution is suitable for all retailers that sell their products through multiple channels. It’s particularly useful for retailers that have seasonal business. This could be an electronics retailer selling Apple iPhones, for example, or a hardware store restocking its inventory with snow shovels in December. We didn’t even think that far ahead when we called the solution SAP Fashion Management. For now, however, our priority is to finish developing SAP Fashion Management to deliver on the aforementioned optimization potentials.
In Q3 2015, textile production processes will also be integrated into this vertical solution. As such, companies will no longer have to plan their seasonal business far in advance. They’ll also be able to respond to unforeseen demand quickly and place replenishment orders, enabling the production side to respond to trends immediately.
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