Supply Chain Case Study: Diesel Marches into Digital Era

Diesel is using a web-based system from Geac to improve its financial processes.

Diesel, the Italy-based fashion group, has adopted a centralized, integrated application to streamline its financial reporting, particularly related to measuring performance against budget forecasts.

The firm's transition to the new application -- Geac's MPC solution-- took about four to five months and cost several hundred thousand dollars. The implementation has effectively streamlined certain financial activities of the global company, says Antonio Sperati Ruffoni, group CFO for Diesel.

The Diesel empire, founded by Renzo Rosso in 1978 in Molvena, Italy, employs more than 3,500 worldwide, and has annual sales of about $1.2 billion. About 85 percent of revenue comes from outside Italy. Diesel sells through 5,500 retail doors around the world, plus 200 of its own stores.

The MPC software interfaces with Diesel's JD Edwards ERP system, which the company uses for accounting transactions. Analyzing sales and shipment data transmitted to Diesel from wholesale and retail channels, the modular MPC software automatically generates an income statement by line and by brand.

"We needed all the data consolidated in one system, [indicating] which entities have shipped already so we can monitor the process and all the numbers in one environment," says Ruffoni. "Then we have comparison of the budget data, made through MPC, with the actual data."
Ruffoni says MPC is one of several strategic point solutions that Diesel uses to manage its business. It has other software for generating price lists and analyzing margins by product. MPC is a flexible solution for enabling digital collaboration and providing financial reports to management, he says.

The software selection decision
"One reason we selected MPC is because it was built on a web platform," says Ruffoni. "Now everyone is connected to the main application by the web. We save time and effort, and we can also monitor all the data and the stores in a much more efficient way." In the past, whenever Diesel installed an application at each of its store locations, and then had to make a change to the system, it had to reinstall everything in every country where it did business, he notes.

Ruffoni says strong local technical support from Brainware, the MPC distributor in Italy, also gave the Geac technology a competitive advantage over other software, such as Hyperion.

The Geac system comes in different languages and can translate and convert currencies against daily or budgeted rates. But it was the integration between Diesel's JD Edwards' ERP system and MPC that clinched the deal. This connectivity eliminated the need for manual reentry of data, not only saving time but also protecting Diesel from vulnerability to human errors and fraud, says Ruffoni. "If you have an accounting system, and you want to misrepresent a certain number, your system will prevent that," he says.

"MPC is very flexible," Ruffoni continues. "If you want to make changes, you can do it quickly and easily." The solution also can be implemented quickly. For instance, Diesel rolled out MPC last year in China when it began selling there.

Progress toward paperless workflow
MPC has freed Diesel from the dragging weight of paper. "We have to keep eliminating paper and transmit data in a digital way," Ruffoni says. "In the future, we won't be transmitting invoices on paper anymore. Eventually, Diesel should be completely digital." This type of digital exchange will bring greater efficiency to Diesel's collaboration with parties outside of its four walls, Ruffoni says.

But first, Diesel is making sure all the appropriate internal parties understand how to use the system. Between 80 and 100 employees have been trained on MPC, including those responsible for data entry and analysis. These employees are in finance as well as other areas of the business.
Ruffoni says the greatest challenge of implementing MPC was finding the right compromise between getting a high level of information from the system and setting reasonable parameters for it. "If you're asking for too much information, your system becomes more complicated, and it's more difficult to make changes," he says. "You have to decide which information is essential for you to have."

Diesel mapped a plan for how to get the most mileage from MPC, and is seeing a distinct payoff, says the CFO. "MPC doesn't just transmit data," says Ruffoni, noting that you can use the system for monthly budgeting, sales forecasting and more complex activity.

Beyond the strictly
financial factors
There are opportunities for Diesel to take its supply chain management to the next level, he says. In addition to improving EDI coordination, the company wants to build on what it calls its "balance scorecard" -- a system of monitoring critical, but non-financial, factors. "The company needs to keep focusing on the numbers, but also on other topics that are not financially measurable -- for example, how satisfied your clients are, or how good your deliveries are," says Ruffoni. "You need tools to monitor those aspects, and how those aspects evolve."

He says Diesel will follow these steps to achieve the next objective: 1) identify factors that are critical for the company; 2) identify which aspects to monitor and how to measure them; and 3) provide a target for those responsible for developing technological solutions. Diesel's web site once declared: "Diesel does not follow established fashion trends. --It sets them." It seems the same could apply to the firm's supply chain strategies.

Julia Fein Azoulay is an Italy-based free-lance writer who frequently covers the fashion business.