IMT GHAZIABAD

ERP IN RETAIL
Pantaloon Case Study

Contents
Introduction ...................................................................................................................................... 3 What is ERP ....................................................................................................................................... 3 Features & Benefits of ERP ............................................................................................................ 4 ERP in Apparel & Retail Industry ........................................................................................................ 4 Necessity of ERP in Apparel & Retail Industry................................................................................. 4 Problems with Enterprise Applications in the Retail sector ............................................................ 5 Advantages of ERP in Apparel & Retail ........................................................................................... 5 Main Components of Retail ERP System ........................................................................................ 6 Industry Case Study Pantaloon Retail .............................................................................................. 9 About the Company....................................................................................................................... 9 The Solution ................................................................................................................................ 10 The implementation .................................................................................................................... 10 Benefits and Challenges............................................................................................................... 11 References ...................................................................................................................................... 12

Introduction
An ERP system may be defined as a packaged business software system that enables a company to manage the efficient and effective use of resources (materials, human resources, finance, etc.) by providing an integrated solution for the organization's information processing needs (Nah et al., 2001). ERP systems provide firms with two new and different types of functionality: a transaction processing function, allowing for the integrated management of data throughout the entire company, and a workflow management function controlling the numerous process flows within the company. ERP facilitates the flow of information between all the processes in an organization. ERP systems can also be an instrument for transforming functional organizations into process-oriented ones. When roperly integrated, ERP supports process-oriented businesses effectively (Al-Mashari, 2000). Recently, several practitioners have stated that ERP implementations have so far yielded more failures than successes in large organization. Economic liberalization has brought about distinct changes in the life of urban people in India. A higher income group middle class is emerging in the Indian society. Demographic changes have also made palpable changes in social culture and lifestyle . In this environment Indian Retail Industry is witnessing rapid growth . AT Kearney has ranked India as fifth in terms of Retail attractiveness. Indian Retail Industry is the largest employer after Agriculture (around 8% of the population) and it has the highest outlet density in the world however this industry is still in a very nascent stage. The whole market is mostly unorganized and it is dominated by fragmented Kirana stores. A poor, supply chain and backward integration has weakened the whole process. A McKinsey report on India says organized retailing would increase the efficiency and productivity of entire gamut of economic
activities, and would help in achieving higher GDP growth.

What is ERP
Enterprise Resource Planning systems or the ERP systems refer to the software packages that integrate all the data and the related processes of an organization into a unified Information System (IS). An ERP system uses a central database that holds all the data relating to the various system modules. In order to achieve a seamless integration, an ERP system uses multiple hardware and software components. ERP packages are heavily used by larger retail chains. Designed to facilitate the administration and optimization of internal business processes across an enterprise, ERP packages have become the competitive tool for most large retail organizations. An ERP software uses a single database that allows the different departments to communicate with each other through information sharing. ERP systems comprise function-specific components that are designed

to interact with the other modules such as the Order Entry, Accounts Payable, Accounts Receivable, Purchasing, Distribution etc.

Features & Benefits of ERP

ERP in Apparel & Retail Industry

Enterprise resource Planning has become a key business driver in todays world. Retailers are also trying to reap in the benefits of the technology. Enterprise Resource Planning-ERP is, essentially, an integrated software solution used to manage a company's resources. Retailers are using ERP for product planning, parts purchasing, maintaining inventories, interacting with suppliers, providing customer service, and tracking orders. With ERP, retailers can save money in maintaining inventory, reduce the respondent time to the marketing demand, and get competence. More and more enterprises in the world are using it since its initial adoption. A typical ERP implementation in a large retail industry takes between one and three years to complete and costs laks to crores. For these reasons, there is an urgent need to understand the underlying critical success factors that lead to the successful ERP implementations in such firms.

Necessity of ERP in Apparel & Retail Industry

In the current business environment, the retail industry faces two major challenges that threaten its profitability and the long-term survival prospects. The twin challenges are: 1) Market competition - To beat the competition, retailers have to understand consumer demand at the point of interaction and respond to the various inputs in real time across the enterprise. This calls for a proactive approach on the part of the retail organization to sense the specific requirements of the consumer before other competitors and respond to them in real-time ensuring customer satisfaction in the process.Moreover, margins in the retail business generally are very low and that removes any scope for waste or inefficiencies in the business processes. Efficiency is critical to survive in the retail industry. A proactive approach on the part of the retail organization requires an enterprise wide monitoring and control of the various business processes that may ultimately lead to the desired efficiencies and longterm customer satisfaction and profitability. 2) Regulatory pressures - In order to meet the regulatory standards, the retailers require an enterprise wide process visibility, data access and near-instant performance reporting. However, the need for flexibility, process efficiency, reliable information, and responsiveness is very hard to achieve given the existing portfolio of legacy, home grown and packaged software applications used by a majority of the retail organizations. Therefore, a retail business would benefit immensely from an integrated IS infrastructure which continuously monitors and dispatches the necessary information of the flow of goods all the way from supplier to the cash register and then back to accounting as well as other functions of the retail organization. A combination of flexibility, process efficiency, reliable information and responsiveness is critical to a retail business and ERP packages have been introduced to tackle the elimination of IT complexity albeit with some implementation challenges to the line of business and IT management staff.

Problems with Enterprise Applications in the Retail sector

Integration of the various business functions is an essential prerequisite for synchronization among the different business activities involved in a retail business. A number of large retail chains around the world has already invested in packaged software suites to integrate their core business activities. However, a lot of retailers are still using fragmented legacy software applications to manage their core business functions which results in somewhat lower levels of effectiveness and efficiency. Moreover, a majority of Chief Information Officers (CIO) in the retail sector believes that it is cumbersome to rip and replace their existing information systems handling the routine management of the retail operations. Most of the existing retail applications used by the businesses lack an all encompassing approach and require some degree of customization before they can be fully integrated with a business process. Major problem areas in the existing enterprise applications in Retail include: Outdated architecture Most of the legacy enterprise applications in retail have an outdated architecture that is inflexible and rigid. This inflexibility and rigidity pose a challenge to the business efficiency. The lack of flexibility prevents the legacy software to be used with the contemporary products available in the market that may add muscle to the retail operations. Todays business environment demands real time adaptability from the software systems. 1. Limited scope Most of the legacy systems were designed to take care of specific problems tasks and as a result, lacked an enterprise wide approach to the problem solving process. This makes such systems unsuitable for use in the contemporary business environment that is highly competitive in nature. Modern businesses require an enterprise wide approach to retail management process and legacy systems fall short of such a requirement. 2. High maintenance costs Legacy information systems are costly to maintain. The cost component is high because such systems are no longer used in the industry and require specialized personnel for maintenance purposes. Moreover, the maintenance cost of legacy systems keeps on increasing with the passage of time. The older an information system is, the higher are its associated maintenance costs to be borne by the retail business. 3. Integration and scalability problems Legacy software does not allow addition and integration of new applications. This prevents such systems from scaling up or integrating with similar systems used by the associates or business partners. Such integration and scalability problems tend to multiply as the size and scope of retail operations increases. 4. Increased risk to the business A combination of old and new information systems makes the whole system susceptible to failure or crash. The heterogeneity in the system is the primary cause of risk. The solution lies in a close knit, homogeneous information system that can integrate seamlessly with other such systems in real time while imparting the muchneeded stability to the whole system.

Advantages of ERP in Apparel & Retail

Primary advantages: Retail specific components Unlike a general ERP package, retail ERP suite offers retail centric components that are customized to meet the specific requirements of a retail organization in an effective and efficient manner. This makes a retail ERP suite much more suitable to meet the specific requirements of a retail organization.

1. Segment specific expandability option Within the retail sector, there is a wide variety of different segments that vary in their nature and scope of operations. A retail ERP package has provisions to meet the varying needs of the different segments within the retail sector. 2. Support for the store system Retail ERP suite offers support for the store systems that form the pivot of a retail business. The critical functions include keeping track of the inventory, ordering and replenishment, loss prevention and task management. This makes retail ERP system suited to the specific needs of a retail organization. Secondary advantages: Configuration and scalability A good retail ERP system allows a high degree of customization and is easily scalable to attune itself to the size of the organization and its level and scope of operations. Such configuration and scalability prove to be a boon in managing the retail operations across an enterprise. This allows a retail ERP system to grow with the organization. 1. Phased implementation support Modern retail ERP systems provide support for phased implementation. This feature allows the software package to be implemented in a step-bystep incremental manner rather than in one go. This makes the transition to an ERP package a lot easier. This feature allows the users to acclimatize themselves to an ERP package that may initially seem complicated to use. 2. Support for advanced functionality Modern retail ERP systems provide support for advanced functionalities that is helpful in the decision making process such as formulating pricing strategies, merchandise planning, inventory optimization and store execution. The advanced functionalities help the users formulate business strategies to introduce efficiencies in the critical business processes. The top management uses this feature to set the benchmarks and achieve the desired results. 3. Workflow automation and enterprise process management Modern day retail ERP packages offer workflow automation and enterprise process management to make the workflow smooth and seamless across the entire enterprise. This allows the management to monitor and keep track of the workflow while also undertaking the enterprise process management leading to the identification and removal of any inconsistencies in the business process. 4. Technology and application integration A good retail ERP system allows technology and application integration to allow a platform independent, seamless transfer of processes across different modules running on different technologies in an enterprise wide environment that may include interaction with legacy systems and external entities such as the suppliers and the customers. Such integration provides the critical enterprise-wide view to the management.

Main Components of Retail ERP System

The main components of a retail ERP system include the following: 1. Merchandise management
It constitutes the primary component of a retail ERP system that supports the merchandise management operations undertaken by the retailers. This component includes activities such as the setting up, maintenance and management of the retail outlet, keeping track of the prices of the items, inventory, and the different vendors etc. This component of the

Enterprise Resource Planning (ERP) system also offers some key reporting functions as well as the allied business intelligence Modules. The merchandise management component also offers an integrated interface to the other retail applications thereby acting as a bridge between the different retail applications supported by the retail ERP suite aimed at facilitating more efficient retail operations. Merchandise may be defined as any product, service, idea or entity of value that can be offered to someone in the market for a price and that offers to satisfy a genuine need or want of the consumer. A typical retail chain offers hundreds of thousands of different products to the customers. All such products may be termed as merchandise since they are of an economic value to the customer who pays for such products to satisfy his/her needs or wants. The merchandise management component takes care of all the activities related to the management of the merchandise offered for sale at the retail store. In a nutshell, the Merchandise management component of an Enterprise Resource Planning (ERP) package covers all the activities centered on the merchandise offered at the retail store.

2. Retail planning This element of the ERP system allows the retailers to undertake the planning activities at a large as well as a small scale as per the need of the situation. It focuses on the different strategies to be employed in order to help the retail store in increasing the sales of the merchandise. The retail-planning component focuses on achieving the economies of scale and attaining the desired efficiencies by increasing the merchandise sales at the retail chain. This component helps the retailers in planning the various sales and promotional events aimed at boosting or increasing the sales of the merchandise offered at the store. This way, retail planning forms an important and critical component of the retail ERP systems as it performs the critical function of offering the planning activities that may be undertaken at the micro as well as macro level to give a push to the merchandise sales at the retail store.

The retail-planning component is extensively used by the middle and the upper management in formulating favorable promotional strategies to stimulate the sales and ensure increase in inventory turns at the retail store. Hence, retail planning may be called as a critical component of the retail ERP systems.

3. Supply chain planning and execution

It provides support to the internal as well as the external supply chain process. It covers both the planning and the execution part of the supply chain management in retail. Supply chain forms the backbone of the retail operations. The supply chain represents the flow of information, finances, and materials as they move in a process from the supplier to the wholesaler to the retailer and finally to the end-user or the consumer of merchandise. Supply chain planning and execution is an integral part of the retail ERP system. Retailers aim to take advantage of the operational synergies. To meet the requirements of such retail chains, the supply chain planning and execution component of the retail ERP systems allows the retailers to keep track of the entire supply chain beginning at the manufacturer and ending at the consumer. It allows a retailer to keep track of all the activities and processes comprising the supply chain of the merchandise offered at the retail store. This helps retailers run their businesses in an effective and efficient manner by closely monitoring their supply chains and ensuring its management in a smooth and efficient manner to ensure profitability in the business. Store operations This element of the ERP system takes care of all the operations related to the store management function. The store operations are central to a retail chain since the retailers keep the majority of their inventory at the stores. Moreover, the store operations are unique to the retail ERP systems as the other ERP packages do not offer such a comprehensive component like the store operations as offered by a retail ERP system. The store operations component includes the store specific inventory management, sales audit, returns management, perishables management and the labor management. The store operations component can also include the customer management and the associated promotion execution systems. 4. Corporate administration This component aims to serve the information needs of the administration and usually includes the process management and compliance reports required by the top management for the decision-making purposes. This feature also includes other corporate financial reports such as the accounts receivables, accounts payable, general ledger and the asset management reports. The corporate administration component may also include the corporate-level Human Resource Management (HRM) systems. Thus we can see that the corporate administration component plays a critical role in providing the necessary information to the top management to get a general idea of the health of the retail business by way of the various financial reports generated by this component provided in the retail ERP systems.

The corporate administration component can be termed as the eyes and ears of the top management in the retail business. This component makes available the necessary data required to provide an insight into the financial health of a retail business. Moreover, this component of the retail ERP system is used for generating specific compliance reports submitted to the industry watchdog or other monitoring agency that may require reporting of such data on a periodic basis. These reports not only help the management in meeting the mandatory disclosure norms but also help in the formulation of effective management strategies to achieve the desired results in terms of sales or profits that are calculated using the same financial indicators.

Industry Case Study Pantaloon Retail

About the Company
Pantaloon Retail is the flagship enterprise of the Future Group, with a presence across multiple lines of business. The company owns and manages multiple retail formats that cater to a wide crosssection of Indian society. Headquartered in Mumbai (Bombay), the company operates through four million square feet of retail space, has over 140 stores across 32 cities in India and employs over 14,000 people. The company registered a turnover of Rs 2,019 crore for FY 2005-06. Pantaloon Retail forayed into retail in 1997 with the launching of its fashion retail chain, Pantaloons in Kolkata. In 2001, it launched Big Bazaar, a hypermarket chain. This was followed by Food Bazaar, a food and grocery chain. Next up was Central, a first of its kind located in the heart of major Indian cities. Some of its other formats include, Collection i (home improvement products), E-Zone (consumer electronics), Depot (books, music, gifts and stationary), aLL (a Little Larger, fashion apparel for plus-size individuals), Shoe Factory (footwear) and Blue Sky (fashion accessories). It has recently launched its e-business venture, futurebazaar.com. The group's subsidiary companies include, Home Solutions Retail India Ltd, Pantaloon Industries Ltd, Galaxy Entertainment and Indus League Clothing. The group also has joint venture companies with a number of partners including French retailer Etam group, Lee Cooper, Manipal Healthcare, Talwalkar's, Gini & Jony and Liberty Shoes. Planet Retail, a group company owns the franchisee of international brands like Marks & Spencer, Debenhams, Next and Guess in India.

Pantaloon: ERP in retail

Needing an organisation-wide IT solution to help it perform better, Pantaloon decided to implement an ERP system from SAP. By Kushal Shah

More than eight years after it forayed into the retail business, Pantaloon Retail decided to implement SAP to keep itself competitive in the rapidly growing Indian retail market. Store operations have never been as important to retailers as they are now. Successful retailers are those who know that the battle for customers is only won at the frontline, which in the case of a retail chain is at its stores. Pantaloon was regularly opening stores in the metros and there was an

Rakesh Biyani

urgent need for a reliable enterprise wide application to help run its business effectively. The basic need was to have a robust transaction management system and an enterprise wide platform to run the operations, says Rakesh Biyani, Director, Pantaloon. The company was looking for a solution that would bring all of its businesses and processes together. After a comprehensive evaluation of different options and software companies, the management at Pantaloon decided to go in for SAP.

The Solution
Some of the qualities of SAP retail solutions are that it supports product development, which includes ideation, trend analysis, and collaboration with partners in the supply chain; sourcing and procurement, which involves working with manufacturers to fulfil orders according to strategic merchandising plans and optimise cost, quality, and speedvariables that must be weighted differently as business needs, buying plans, and market demand patterns change; managing the supply chain, which involves handling the logistics of moving finished goods from the source into stores and overseeing global trade and procurement requirements; selling goods across a variety of channels to customers, which requires marketing and brand management; managing mark-downs and capturing customer reactions, analysing data, and using it to optimise the next phase of the design process.

In a Nutshell
Aim : To deploy a robust transaction management system and an enterprise-wide platform to run its operations. SAP retail solution SAP team with the help of Novasoft, Singapore Around 1,200 About six months About $10 million

Solution Implemented by Number of users Time taken Cost of implementation

: : : : :

The implementation
The implementation was outsourced to a third party. The implementation was done by the SAP team with help of Novasoft which is based out of Singapore, says Biyani. Some people from Pantaloon also assisted in the project. About 24 qualified people worked on this SAP implementation. SAP was chosen as the outsourcing party on a turnkey basis. This project was headed by Pantaloons Chief Information Technology Officer, Chinar Deshpande. Three Phases SAP implementation is not a single phase process. The project was divided into three phases.

Chinar Deshpande

The first phase involved blueprinting existing processes and mapping them to the desired state. In this phase, the entire project team worked on current processes within the structure of the organisation, analysed and drafted them. This blueprint was later used in the formation of new states of the solution. Since the SAP would combine all the processes, each and every one of these had to be evaluated. In the second phase, the SAP platform was developed with the help of Novasofts template which was predefined by SAP after evaluation of Pantaloons needs and expertise in retail solutions. The last phase in this project was for stores to switch over to the new system and for current data to be ported. Before the SAP implementation, all the data was unorganised. This data had to be migrated to the new SAP application. The project was flagged off on 15th June 2005 and took about six months to finish. It went live at the head office on 1st January 2006. The stores went live on SAP from 1st January 2006 to 30th June 2006.

Benefits and Challenges

The key challenges in this project were not in the implementation. Rather, the difficulties were faced during the data migration and in managing the interim period when the project was underway for about six months. Migrating unorganised data to an organised format is a challenging task. Pantaloon has not been able to see immediate benefits from this implementation. This application certainly has long term benefits which will be seen when the performance of various aspects will be analysed. It is too early to calculate RoI. We have already started working on MAP (Merchandise Assortment Planning), Auto-Replenishment and Purchase Orders. We hope to use these systems to optimise our inventory and cut it by about two to four weeks (depending on the line of business), says Biyani. Maintenance & Hardware This application is currently being used by around 1,200 employees across the organisation. For maintaining this implementation and its related applications, Pantaloon has an in-house team and it has outsourced ABAP resources. They are also in the process of setting up a SAP Competency Centre. The system runs on a HP Superdome server on HP UNIX 11i and the database is from Oracle. The cost of this project was about $10 million. Future projects After the successful implementation of SAP for its retail chain, Pantaloon plans to go ahead with IT projects such as implementation of WMS with RFID, Customer Intelligence and CRM. Inventory and Promotions Optimisation will be pursued later this year.

References
http://www.cio.in/case-study/pantaloons-makes-it-strategic-function http://www.integratedsolutions.co.in/case%20study/Pantaloon%20%28ERP%20In%20Retail %29.pdf http://www.scribd.com/doc/39641020/ERP-IN-PANTALOON http://www.scribd.com/doc/39641020/ERP-IN-PANTALOON http://aberdeen.com/Aberdeen-Library/7194/RA-enterprise-resource-retail.aspx