Enterprise Resource Planning (ERP) is seen as a way of using information across an organisation more proactively – in key areas such as manufacturing, purchasing, inventory and supply chain management (SCM), through financial controlling, human resource management and logistics and distribution, to sales and marketing and customer relationship management (CRM).
It is hardly surprising, then, that retailers - along with manufacturers – were among the first to appreciate the benefits of ERP systems and processes. Like manufacturers, retailers face an impressive and constantly growing array of business challenges. Many hoped that ERP would help them to address these challenges head on.
In general terms, retailers must contend with globalisation, greatly increased competition, rising consumer power, and higher costs allied with falling margins. These are all barriers to overcome if market share is to be protected and profitability increased. Retailers want, for example, to improve their operations to enable a more efficient consumer response (ECR). This is a key driver for supply chain integration, which, in itself, requires greatly improved information flow between point-of-sale and back office systems, between head office and branch, and upwards and along the supply chain. (All of this must, of course, be achieved at an appropriate cost.) Another key requirement is to build customer loyalty - many want to use relationship and 1:1 marketing techniques to increase customer retention and build lifetime value. Other critical issues include merchandise forecasting, pricing and promotion management, category and inventory management, store location planning, and financial controlling and human resource management - typically across multiple sites and, increasingly, multiple countries. Faced with such a complex environment, ERP was seen as one way of creating a more flexible, responsive and customer-focused retail organisation.
Many retailers, however, found that improvements in their operating efficiency, gained through ERP, didn’t necessarily translate into improvements in their overall effectiveness. They have started looking for ways to build on their ERP investments, to place customers at the centre of their business. To support this need, Microsoft and its partners are now providing the technology infrastructure that retailers require to exploit their process infrastructure fully - technology infrastructures that are as powerful and scaleable, and therefore future-proofed, as they are cost-effective.
Microsoft aims to add value to and extend the reach of ERP systems. This is achieved by ensuring ERP systems and processes are integrated within an organisational and IT framework - a Digital Nervous System (DNS) - that is optimised for e-commerce, and extends across and beyond the enterprise to enable complete supply chain integration.
Such approaches must, of course, be characterised by high levels of performance, a lower and more easily controllable total cost of ownership (TCO), and carefully defined workflows and collaborative rules, plus appropriate security measures. Microsoft DNS meet all of these criteria.
Based on the five basic tenets of Internet, Interoperability, Reliability, Scalability and Simplicity, Microsoft’s objective is to cut through the complexity of mixed hardware and software environments. By delivering the right mix of products, technologies, methodologies and strategic relationships, retailers will have an opportunity to make the most of ERP - whatever their size, scope or operating requirements.
Software: ERP and Microsoft
Microsoft is a global leader in software for business and personal computing, offering a huge range of products that includes PC-based desktop productivity tools and - critically for ERP - powerful server technologies. Microsoft solutions provide increased productivity, a lower TCO, improved manageability for deployment and operation, ease of use, and reduced training and support costs. So what does this mean for ERP in retailing? In short, a Microsoft-based infrastructure enables you to build and benefit from state-of-the-art ERP solutions. You can link ERP functionality and capabilities across the entire organisation, and integrate supply chains, using a common infrastructure. The result is not only to protect but also to add value to current and planned investments in ERP.
Retail managers understand that the ways in which they can gather, analyse and deliver information - to whoever needs it across the business, and along the supply chain – is a key differentiator in competitive markets. Information, and its by-product knowledge, is what enables retailers to, for example, track changes in the market and react promptly to new trends, constantly reshaping the business, streamlining supply chains and tailoring products, services and promotions to meet customer needs more precisely.
The more a retailer knows about its business, and particularly its customers, then the better the decisions it can take about its current and future direction. 20 or 30 years ago, knowledge management, all be it on a vastly more simplistic level, was possible. The image of a shopkeeper keeping tabs on stock and knowing the products that an individual customer wants – in some cases pre-empting their demand – is familiar. But in recent decades, the scale and nature of retail operations, along with consumer expectations, have changed beyond all recognition. So the objective is enable knowledge management through a powerful IT infrastructure, one that is aligned with the demands of global markets and the consumer age. Within this mix, ERP plays an important role.
On the one hand, retailing can benefit from improved process infrastructures in “core” ERP areas such as procurement and purchasing, merchandising, SCM, financials, human resources, asset management, logistics and distribution, and CRM. On the other, there are many more areas of specialised need that ERP-type systems and processes can help to improve. As a result, a growing number of independent software vendors (ISVs) along with the major ERP vendors are developing and delivering best of breed and customised solutions for retailing.
The fundamental challenge is to bring all of this together, hardware and software, to create an integrated approach to retailing. This typically requires the integration of multiple back office transactional and legacy systems with, for example, loyalty systems, enquiries databases, customer service records and electronic point of sale (EPOS) systems and devices - and, of course, ERP systems. It also means being able to gain access to, and so derive retail business intelligence, from external sources such as demographic, census and market trends data, and supplier systems.
If this can be achieved, then retailers are better placed to meet the demands of the consumer age.
As we have seen, ERP systems typically include core components such as financials, human resources, logistics and distribution. They also, depending on an organisation’s needs, incorporate specially-customised products.
The challenge is to link these elements into a holistic whole (via the DNS) and provide a universal way for people to access, view and use the data and information held in disparate IT systems (via a standard Web browser). In this sense, the Internet changes everything: its ubiquity, familiarity and ease of use can be used to transform everyone involved in the retail supply chain, from manufacturer through warehouse manager to store managers and CEO - into a knowledge worker.
With this approach, information barriers between different systems, departments, suppliers and even customers can, effectively, vanish. Information flow improves across the board. The implications of such an integrated approach to retailing, and retail systems and processes, are clear.
For example, retail managers can balance supply with demand more effectively – and more profitably. They are able to track current trends, anticipate future ones and respond to both in the most effective ways. This might include identifying the best (or worst) companies in the supply chain – in terms of service delivery, pricing or product quality - and then taking appropriate action. Or monitoring and tracking purchasing patterns to target specific groups of customers, and then market directly to them (people with young families, vegetarians, diabetics, and so on). Managers can focus on and adjust retail margins at the right time, without having an adverse impact on sales (sales forecasts, gained by accessing multiple systems, can be produced swiftly and easily). And companies can manage inventory and optimise stock levels, therefore reducing capital costs; they can, for example, eliminate “shelf warmers” while ensuring there is enough stock of goods that are forecast to be popular at certain times of the year.
Building linkages in retail organisations and across retail supply chains - to enable ERP knowledge management - requires the deployment of powerful DNS that are based on:
· Web-enabled PCs to empower employees at every level by offering a single enterprise portal through a Web browser. This becomes the digital dashboard - fully customisable for use with specific line of business applications, and to meet individual needs (for example, providing merchandising, departmental or store managers with key performance indicators) - to drive more effective knowledge management;
· reliable e-mail and messaging systems that speed the flow of information and therefore enable knowledge management across retail organisations and along supply chains – from supplier to customer, if required;
· a familiar and easy-to-use Office and BackOffice suite of software that meets a multitude of needs, and requires little or no end user training;
· powerful database and data warehousing capabilities to ensure data and information are not only stored in the optimal ways (in retailing today, this typically means organising and accessing data in customer rather than product or function focused structures), but also ensuring the resulting insights are available “to the right people in the right place at the right time”; and
· retail industry, line of business and even organisation-specific applications that are developed and delivered by the leading ERP vendors, plus specialist solution providers, and are seamlessly integrated within a DNS framework.
Microsoft technologies for ERP are as robust and scaleable as retailers need them to be. Their performance and flexibility has been demonstrated repeatedly – they routinely set price/performance records, and come top in industry benchmarking tests.
In September 1999, for example, benchmark tests by Microsoft, Compaq and SAP indicated world-record performance for retailers. The SAP Retail Module, running on SQL Server and Windows NT, produced a benchmark number of 3.01 million sales data line items per hour - the best such result ever published on any platform, and exceeding the previous record of 2.4 million. And in June 1999, SQL Server achieved similar world-record performance results on Windows NT Server for the SAP R/3 sales and distribution benchmark and the Transaction Processing Performance Council’s TPC-C benchmark.
Moreover, in July 1999, PC Week Labs reported on Doculabs’ testing of eight leading platforms, which found that Windows NT Enterprise Server led the way in scalability and performance. Using the @Bench benchmark, that measures a platform’s ability to handle large-scale e-commerce applications, cost-effective Compaq hardware running Windows NT outperformed several far more costly setups, handling more than 10,000 concurrent users and serving 2,500 Web pages per second – more than 250 percent faster than any other platform.
Having this flexibility to adapt and grow is essential in an industry where customer behaviour and market conditions are unpredictable - where even minor seasonal variations can have an impact on the bottom line. When it’s difficult to know what retail decision makers will ‘need to know’ in the next six months, let alone two or three years down the line, having such flexibility to accommodate change is vital, enabling retailers to address the inevitable growth in data volumes, the addition of new data sources, and the opportunity to exploit new business approaches such as e-commerce (particularly as on-line retailing assumes an ever-higher profile).
In short, retailers have an assurance that Microsoft ERP-DNS platforms will continue to grow in line with organisational and market demands, and customer expectations.
Microsoft technologies are truly industry standard. This means that existing investments in desktop applications are protected, and that retailers have an opportunity to exploit their ERP solutions long into the future. The key to Microsoft’s approach is integration: across software, platforms and technologies, and by linking seamlessly with any other systems required – ERP included. Microsoft technologies are particularly well suited to serving the needs of the extended enterprise, scaling up as required. The Windows environment can, in fact, deliver major benefits at each stage of the retail supply chain: from Windows CE for hand-held devices, through terminals, portables, desktop PCs and workstations, to servers, server clusters, and the heart of the data centre.
The next generation of Windows, Windows 2000 will be the key platform in the digital economy. Windows 2000 is the foundation of DNS that are optimised for ERP, SCM and e-commerce.
Windows 2000 Server, for example, is a comprehensive Internet and applications platform that delivers increased reliability, availability and scalability, plus end-to-end management features that reduce operating costs. The Standard edition is ideal for small and medium sized retailers, while the Advanced and Datacenter editions enable organisations to scale right up to the data centre to, for example, meet the needs of multi-site, multinational operations.
For business end users, Windows 2000 Professional is the most powerful and reliable Windows operating system to date. In terms of optimising ERP solutions, it supports more effective ways of working through applications transparency, offers complete interoperability, full Web integration, and enables simpler systems set-up and management. All of these are important prerequisites for enabling more integrated, responsive and customer-focused retailing.
Designed for software developers and ISVs, the Distributed interNet Applications (DNA) architecture provides the fundamental building blocks for a DNS - and is the key to unlocking the potential of ERP. DNA is the point where distributed computing and the Web come together. A unified framework for providing distributed applications, it specifies how to develop robust, scalable, distributed applications using Windows. It can be used to extend existing data and external applications to support the Internet, plus a wide range of client devices, thereby maximising the reach of applications. As such, DNA helps to deliver on the promise of e-commerce for all.
Microsoft Component Object Model (COM) technologies - including DCOM (Distributed COM), COM+, Microsoft Transaction Server (MTS) and ActiveX Controls – open up the ERP environment, enabling retailers to leverage tools in their ERP-DNS to meet precise requirements. The result is an infrastructure as flexible as retailers needs it to be.
Enabling cross-platform compatibility and speeding applications development, COM enables organisations and developers to create and then “plug” best of breed, proprietary and third party solutions into their ERP-DNS infrastructure. High levels of customisation mean retailers can address their specific needs – sales forecasting, merchandising, new store footage assessment, ECR and so on - not to mention budgets and time scales. In short, COM technologies provide for "componentised" ERP solutions that are open by definition.
The language of e-commerce, XML (Extensible Markup Language) holds enormous promise for retailers looking to integrate ERP systems and processes within a DNS/e-commerce framework - and in doing so, achieve universal communications with anyone, anywhere. Microsoft is providing XML standards support through BizTalk, a broadly accepted, easy-to-use framework that enables millions of organisations to meet and trade on the Internet irrespective of platform, operating system or underlying technology. As such, BizTalk delivers on the promise of traditional EDI to enable integrated supply chain management. Vendors such as Baan, Commerce One, J.D. Edwards, Navision, PeopleSoft, SAP, Scala, Staffware and TanData have already endorsed BizTalk.
The flexibility, scalability and performance of SQL Server have led to growing numbers of ERP, SCM and CRM applications being developed using this database management system. SQL Server provides the strongest possible foundations for fully integrated, ERP-focused DNS.
It delivers a platform that, for example, seamlessly links the Microsoft Office suite through to Web browsers; one that supports Internet, intranet and e-commerce applications, offers complete data warehousing capabilities, and simplifies mobile and distributed systems. It is also fully scalable from laptops and small servers through to terabyte-sized customer-focused data warehouses. In fact, SQL Server (along with other Microsoft technologies) has the steepest gradient in the industry in terms of increasing power and performance.
VCI is a worldwide consortium of 200 independent software vendors (ISVs). Founded on an e-commerce strategy, its remit is to deliver an infrastructure that enables companies to integrate best of breed applications in a true plug and play environment, link with entire value chains of trading partners, and dynamically share information in real-time. By integrating supply chains seamlessly - end-to-end, from supply through to demand - the objective is to enhance value chains from front office to back, and beyond.
A key element of VCI, Microsoft’s ActiveStore Initiative provides a fully integrated, generalised platform for the retail environment, accessed via a standardised Retail Business Interface (RBI). A collaborative effort by more than 700 retailers, ISVs and systems integrators, ActiveStore defines an information systems framework for retail operations, one that enables business applications to work seamlessly between vendors. In business terms, this means improving end-to-end supply chain efficiencies - from the blending of raw materials, say, to products being taken from shelves by consumers - by enabling the real-time, dynamic sharing of business information between trading partners. ActiveStore is an important enabler of ERP-DNS implementations for the retail sector.
E-retailing is here
E-commerce is fundamentally changing the retail trading model. Micosoft and its partners believe that, to succeed, retailers require e-commerce-based DNS that is fully integrated with Web-based supply chain solutions; this means solutions that are fed by, and feed back into, ERP systems and processes.
In fact, with a strategy that is firmly based on the Internet, intranets and extranets, Microsoft is helping to define the future of e-commerce and, therefore, online retailing. Microsoft is delivering on the promise of traditional EDI, extending the reach of ERP and making electronic trading communities accessible to all – business-to-business, business-to-consumer. As long ago as April 1998, the Aberdeen Group stated that “Microsoft is defining the shape of electronic commerce, and the people who don’t recognise that now are the people who will be explaining it to their board later.”
The value of on-line retailing is growing daily. Retailers recognise the enormous potential of Internet technologies to integrate supply chains, and to reach more customers in more places more cost-effectively. Today, e-retailing is no longer a choice - it is a business necessity.
In February 1999, US Secretary of Commerce William M. Daley made this point forcefully: “This past year, we saw e-shopping come of age… On-line retail sales in 1997 ranged from $2.2 billion to $4.3 billion. That comes to a $3 billion average for 1997. The Commerce Department's e-commerce report last year… projected sales would double for the next several years… it turns out, last year's projections were conservative. In 1998, on-line sales ranged from $7.4 billion to a high of $13 billion. The average in 1998 was $9 billion. We have jumped from an average of $3 billion in 1997, to $9 billion last year. That is not a doubling - but a tripling. And this sharp upward trend is expected to continue. Between 1998 and 2000, sales are projected to triple again. So by the year 2000, retailing on the Internet will be a $30 billion business. We are seeing the early dot.com companies being joined by major retailers expanding. And small businesses are flocking to the web. In fact, since 1997, the percentage of retailers with websites has more than tripled - from 12 to 39 percent. For any business, large or small, not to have an e-commerce strategy is a big mistake. Transaction costs are lower; companies can reach a wider audience; they can better manage their inventory; and consumers are hungry for it. As we all know, e-commerce is global.”
Microsoft is in the vanguard of enabling true e-commerce for all retailers, whatever the scale or complexity of their operations and supply chains – through technology approaches and platforms like BizTalk, and through business and technology initiatives like ActiveStore.
The Internet will, ultimately, support a huge range of activities; people will use it to access information, buy products and services, plan trips, and keep in touch with colleagues and friends. In terms of retail operations, the challenge is to meet the needs of an employee’s Web workstyle – how they choose (and are able) to use Web technologies to support their activities, whatever they may be. BizTalk will provide the key to this.
And because the Web will soon extend into many more homes (IDC, for example, predicts that more than 500 million adult users in the Internet by 2005, and there are already 44 million in Europe), it will be equally important to deploy the Web to get closer to customers in the easiest and most accessible ways. As home (and office) based shopping takes off, addressing an individual’s Web lifestyle must be reflected in the ERP-DNS approaches adopted.
Crucially, Microsoft supports both of these views: addressing a Web workstyle and Web lifestyle. Microsoft solutions enable retailers to use their ERP systems to empower employees, partners and suppliers like never before. ERP systems, data and processes can, as required, be deployed as a key part of strategies that are intended to, for example, build stronger relationships across internal departments, with business partners and suppliers, across logistics and distribution operations, and with consumers in general.
For many retailers today, ERP is actually spelt “SCM” for supply chain management. For them, ERP is about optimising every stage of the SCM cycle: from planning through execution to logistics. The imperative is to cut through the complexity of supply chains, to speed information flow, and ensure the integration of suppliers, partners and customers within efficient (and cost-effective) trading communities. ERP has, in the past, been seen as a way of managing and optimising supply chains. It is only recently that a “wired world” is making this vision a reality. At every stage of the chain, people want access to all the information they need to make the best decisions, and to react to events in the fastest and most appropriate ways. This is what Microsoft enables, through an infrastructure that unites every aspect of the retail business – people, partners, processes and customers - within a single, powerful framework (the DNS) and “powered” by a vendor/customers initiative designed to deliver seamless, fully-integrated solutions (VCI and ActiveStore).
For example, Delhaize ‘Le Lion’, a leading Belgian retailer and food distribution group, operates some 1,904 stores in nine countries under 16 brand names. The company turned to Microsoft technologies as the basis for its new systems infrastructure, one that is closely aligned with the needs of the business. Michel Eeckhout, Executive Director responsible for Supply Chain and Information Technology, says this architecture “ensures the deployment of collaborative working processes based on a Digital Nervous System. It also meets our needs in terms of internal management – all of our subsidiaries throughout the world take part in this process of sharing information – as well as our data exchange requirements with the various suppliers linked up to the system.” For the company’s 3,000 suppliers, the SCM system will be used to “transmit all sorts of logistics-related messages, such as orders, invoices and dispatch notes, all based on the same electronic standard method.”
DNS is all about collaboration: uniting the extended enterprise and its diverse software and hardware within a powerful infrastructure that is optimised for retail knowledge management.
The final element in delivering ERP-DNS solutions for retailing also lies in collaboration – with the leading ERP vendors, and with ISVs. Microsoft is committed to developing strong relationships with such companies.
Microsoft’s strategy is to support partners in all fields - from business applications vendors, systems integrators and consultants, to hardware vendors and IT service providers. This approach enables retailers - irrespective of their size or sector - to choose and use best in class solutions that meet their operational and strategic needs, time scales and investment criteria. All such tools and solutions can be brought together, within a DNS framework, to drive more effective retailing as opposed to retailing that’s merely efficient.
Microsoft maintains close relationships with all of the leading ERP and e-commerce vendors, and many more specialised providers. These include Baan, Commerce One, Deloitte & Touche, Geac, ICL retail Systems, J.D. Edwards, Lawson, Navision, PeopleSoft, Sage, SAP, Solomon Software and Systems Union. Organisations like this recognise that Microsoft has something new to offer the world of ERP: an infrastructure that augments, extends and enhances their own product portfolio.
For example, one of the UK’s fastest growing retailers – Vision Express - chose SAP Retail, running on a Windows NT platform, for its new, fully integrated enterprise-wide information management system. This replaced an existing mix of systems that had started to restrict the company’s ability to grow. SAP worked alongside management consultants Coopers & Lybrand to deliver a solution that combined financial information and merchandising; critically, the system ensures a single version of the truth across the business (some 165 UK stores, plus 79 in mainland Europe). Sales information is gathered from every store each day, and is fed to head office to support financial, stock control and replenishment systems; managers have fast access to accurate and up-to-date information. The reduction in the number of interfaces has, meanwhile, meant a major reduction in system overheads.
And Marks and Spencer, one of Europe’s largest retail groups, chose Windows NT as the basis for its new enterprise-wide IT infrastructure. The first system to be rolled out, the New Store Infrastructure, connects the company’s stores and terminals across Europe. ICL Retail Systems, a Microsoft partner, has developed a new point-of sale application that draws on SQL Server database capabilities.
Microsoft products, technologies and partnerships are designed to extend and enhance the retail sector’s ERP capabilities, helping companies to become as effective as they are efficient. This can mean rapid and measurable returns on ERP and all other ERP related investments. Properly implemented, a DNS framework should enable retailers to achieve objectives such as:
It is also important to remember that ERP systems no longer have to be “monolithic”. By effectively commoditising the technology infrastructure required to link the core components and processes of ERP, Microsoft has made ERP knowledge management - and all of the benefits covered above - accessible to organisations ranging from regional or local-based retailers, to international trading groups. And with the Web effectively making the marketplace global, companies can use a Microsoft DNS to extend their reach into new markets. And throughout, retailers can rest assured that a Microsoft infrastructure is not only powerful enough to meet the business challenges they face today, but can also scale up to address their changing needs and process requirements.
Affordability and total cost of ownership (TCO) are equally important issues, especially considering the significant investments that organisations can make in ERP and IT in general. Microsoft DNS are not only designed to be highly cost-effective, they can also actively contribute to a lower and more easily controlled TCO (through, for example, ease of management and deployment, and reduced training costs).
By linking ERP across the enterprise, and by integrating any other systems, processes and organisations required along the extended supply chain, retailers can, in short, control costs, increase productivity, achieve a lower TCO, deliver superior customer service, improve CRM, and embrace e-commerce approaches rapidly and pragmatically.