Sometimes business presents challenges. Other times it gives you opportunities. Every so often, the stars align so that the opportunity comes along at the right time to address the challenge. Apparel companies have reached just such an inflection point.
First, the challenge: The list of existential threats has never been greater. Customer shopping preferences and buying behaviors have shifted radically. The competitive landscape has been turned upside down by powerful, nontraditional new business models.
In response, apparel companies must make fast, fundamental changes to their business. They need to better integrate with retailers, including with the development of private brands. They have to sell direct to consumers and build lasting relationships. And they can no longer avoid true mastery of omnichannel commerce to achieve seamless customer insights and experiences.
Now, the opportunity: transforming your business by modernizing your ERP system. A new digital core can optimize your mission-critical processes, create new capabilities to better understand and anticipate customer needs, and provide a foundation that lets you take advantage of emerging technologies such as big data, artificial intelligence (AI) and machine learning (ML).
Rising ERP Spending Drives Growth in Offerings
Many companies recognize the ERP imperative. Across industries, companies spent $389 billion on enterprise software, Gartner reports, a number that will grow 8.4 percent in 2019. The industry investing the most? That would be retail (neck and neck with insurance), according to Research and Markets. In fact, retail-industry spending on digital transformation was expected to leap 20 percent in 2018, IDC says.
But exactly how have the stars aligned around apparel-industry challenges and the ERP opportunity? Software companies have introduced industry-specific variants of their ERP software that can help propel apparel brands into the digital future. New systems have the capabilities to allow retailers to manage customers, stores, distribution centers and web channel inventory in one place, on a real-time, in-memory platform.
An apparel-specific ERP solution based on in-memory technology can deliver new capabilities:
· Data analytics — Near-real-time analytics enable you to understand buying trends and shifts in customer behaviors and preferences as they are happening. That can allow the business to rapidly respond to changing demands and deliver personalized offers in the right channel at the right time.
· IT simplification — With retail, wholesale and manufacturing processes all in one solution, you benefit from a simpler application landscape and simplified business processes. You can manage pricing, promotions, assortments, planning, warehousing, transportation — all your core processes — in a common IT footprint. Operations are better integrated, and performance is faster — crucial to businesses that manage a large number of stores, SKUs and transactions.
· Merchandising — Apparel-specific ERP supports key processes around merchandising, including assortment planning, pricing and promotion management, and merchandising analytics. Importantly, these can now be managed together with wholesale and manufacturing processes. You get an end-to-end view of all your products, all your labels, all your inventory and all your stores.
Merchandise management features allow you to manage seasonal processes, distribution curves, value-added services, transportation chains, characteristic value conversions and more. New apps enable store managers to perform store walkthroughs and order products, print labels, transfer stock and more, right from their mobile device. Real-time metrics help you to understand which products are selling and which fashions your customers want. That enables you to adapt your merchandising mix to current conditions and present customers with the right products and offers at the right time.
· Procurement — New ERP solutions support merchandise buying, invoice management and private-label manufacturing. Just as important, you can benefit from one set of master data, with transparency across processes. Innovative features such as a stock/requirements list can give you an always-current view of stock and requirements. And a purchase-order workbench can help you quickly adapt purchasing documents to changing circumstances.
· Supply chain management — You can now optimize all your supply chain processes, from forecasting and allocation to warehouse management and transportation management. Two capabilities are especially helpful to fashion brands.
First, a single customer data repository can enable you to collect, cleanse and centralize multichannel customer and point-of-sale (POS) data. The repository can then prepare that data for forecasting and make it ready for consumption by other applications.
Second, advanced warehouse management features support sophisticated warehouse processes integrated with supply chain logistics. You gain visibility and control to optimize inventory tracking, cross-docking and multichannel fulfillment.
· Omnichannel commerce — Let’s face it: If you’re not working toward omnichannel visibility and customer experiences, you might as well close your doors now. But every apparel company knows that true omnichannel commerce is hard to achieve. Solutions now offer functionality that supports in-store, online and mobile commerce; omnichannel customer order management; omnichannel customer service; and omnichannel customer insights and personalization.
· Support for emerging technologies — Forward-thinking retailers are exploring potential uses of emerging technologies such as AI, ML and “conversational commerce.” In 2018, the retail industry invested $3.4 billion — more than any other sector — in AI for capabilities such as automated customer-service agents, expert shopping advisors and omnichannel merchandising, IDC reports. By 2022, at least 5 percent of digital-commerce orders will be predicted and initiated by AI, Gartner anticipates.
AI and ML can optimize manufacturing processes, improve customer interactions and automate routine tasks. As just one example, ML can train the system to match incoming payments against existing invoices, fully automating the processes.
Focus on Business Case, not Technology, for a Successful ERP Implementation
Every apparel company can benefit from these features but migrating to a new ERP system is far from trivial. To control risk, accelerate timelines and achieve the desired business outcomes, smart apparel companies will:
1. Establish a vision — Don’t start with the technology. Start by clearly articulating what you want to achieve as a business. Then identify the technology that will help you get there.
2. Make a business case — ERP migrations and implementations can involve a significant investment in time, focus and cost. You need a solid business case for every capability you invest in.
3. Create a roadmap — You might start with the fundamentals and then add innovative features. Or you might first go for quick wins and do the heavy lifting later. Either way, you need a road map to get you from Point A to Point B.
4. Execute — Establish clear milestones and metrics to chart your progress and accurately measure whether you’re fulfilling your vision.
5. Continually assess — Even a big-bang ERP implementation isn’t “one and done.” A key benefit of a new digital core is the ability to continually improve and achieve new competitive advantages.
If you’re upgrading to a newer version from the same solution provider, keep in mind the transition might involve a complete reimplementation, not just a technical upgrade. Start with an assessment of your existing applications and processes, because your processes might be suboptimal, you might want to include additional applications in your solution footprint, and existing custom-developed applications might not run properly.
If you’re migrating to a different solution provider, consider that some can involve large sets of applications, business functions and business processes. A big-bang approach will likely overwhelm your IT staff and your users. Start with the basics to achieve a solid foundation and build in meaningful iterations. Most companies should start with financials, merchandising and store integration, and then add procurement and supply chain.
Case Study: Seamless Commerce Pilot
Apparel companies not ready for a full ERP replacement might initiate a transitional plan that generates quick wins through pilots of new processes and technologies. Depending on the business case and most urgent needs, quick wins can show value that might justify a more substantial investment later.
For example, a company looking to improve gross and operating margins could run seamless commerce pilots to target customers in a more customized manner by connecting all inventory from legacy and/or multiple ERP systems through analytics.
Seamless commerce brings together inventory reports from multiple ERP systems to provide a view of inventory in every channel. You can then analyze them to marry business, customer and demographic data, and understand your products at a deeper level. For example, you can better understand the products that are selling in the store versus the website, or how demographics such as age and education influence buying patterns.
These insights can help you better target customers by improving the product mix and local or regional outlets. Additionally, you can become more predictive and suggest what a customer “might also like” based on past purchases. This example illustrates that, depending on a company’s vision and business case, the path to ERP pilots or an entirely new system can look very different.
Cloud ERP Adoption on the Rise
Regardless of your starting point, you’ll need to decide whether to run your new ERP solution on-premises or in the cloud. In the past, many apparel companies chose to maintain their ERP solutions on-premises, because they believed they could achieve better control or security.
Today most recognize that the cloud can deliver advantages in lower capital investments, more predictable ongoing costs, the ability to quickly scale up and down with changing business models, and data protections that keep up with evolving threat and regulatory landscapes.
Keep in mind that some cloud-native ERP offerings are intended to be more of a one-size-fits-all solution, with limited apparel-specific capabilities or customizability. Look for an ERP solution that’s specifically optimized for the apparel industry and that allows you to decide on the on-premises, cloud-based or hybrid deployment option that best meets your unique needs.
ERP solution capabilities specifically for apparel companies have expanded in the past year, opening a new door of possibilities to facilitate adoption of digital technologies and better serve customers. By developing an approach based on your specific business case, you can fully realize the benefits of the technology.
Anil Das is a senior manager in the SAP practice at Capgemini, a global leader in consulting, technology services and digital transformation. Anna Flyagina is go-to-market leader for consumer products, retail and distribution at Capgemini.