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May 15, 2010

How efficient Forecasting and Replenishment can increase margins

by Mark Everson

One of the most difficult aspects of high street retailing is managing in store availability in order to minimize lost sales while reducing overall inventory, especially where regular or in season replenishment occurs.

As a retailer, we would always want to satisfy the customer and also ensure that we do not have inventory taking up valuable shelf space and tying up working capital. Therefore we have a delicate balancing act to do between these different demands to always get the sale without having stock rooms the size of the store itself!

Ideally we would like to have the least stock in store at any time, only just enough to satisfy customer demand and replenish when the last item is about to be checked out! This would also translate into reduced warehouse stock with smaller safety stock margins for the inevitable unknown demand.

Historically, we had pretty rudimentary tools to project what demand may look like and usually factored in some leeway to come up with what was believed to be the sell through for the product ranges. This was converted into the supplier orders where some rounding up would have occurred to generate a quantity that would typically put more stock on the shelves than would ever sell.

It is closing the gap in a way that allows us to maintain higher sales while also reducing inventory levels with tools that are accurate and reliable that is a key focus for today's 'bricks and mortar' retailers.

This is where SAP's Forecasting & Replenishment for Retail solution comes in as a dedicated retail only solution of very clever specific algorithms that consider all types of causal factors such as promotions, price changes, weather effects or the results of the store replenishment.  Allied to this its ability to self learn from the results of its replenishment forecasts, we have a tool that can positively affect lost sales while also reducing inventory levels.

A UK retailer found during a pilot that the suggestions from F&R would ultimately lead to increased store availability near 25% while reducing overall stockholding for the sampled range by over 50%...remarkable figures in any ones book! In the highly competitive hard goods market where margins are low and under increasing pressure, this difference can be worth millions.

Other benefits of this accurate forecasting are that collaboration with suppliers has a greater element of certainty leading to reduced changes on both sides, transportation can now be leveraged to greater advantage booking more cost effective transport routes well in advance knowing that fluctuations will be less volatile than earlier and how you manage the warehouse/supply network can be refined to reduce waste or over capacity.

Ultimately one has to trust the solution to deliver the results, as it is often found that human intervention in any sophisticated planning solution typically leads to inaccuracy. The key thing that the stock controllers can do with F&R is to ensure that it is fed with accurate data with at least 12 months history and the solution will produce the results. No matter how intelligent we believe we are, this solution's black box is far more sophisticated and quicker at crunching the numbers and analyzing the data to produce results and can lower costs and maintain your margins.

The biggest challenge a retailer faces with SAP F&R is just leaving it to churn out the results and let it transform your business from one that is dealing with excess stock issues to one that is looking for new ranges to sell!

About the Author

Mark Everson is a Principal Consultant with the Retail CoE. He has more than two decades of rich experience in Business and IT, with 15 years of SAP experience. Mark is the ramp up coach for SAP F&R projects in the UK and Head of SAP Retail consulting, UK. Mark will blog on SAP Retail.

May 12, 2010

Minimize your Customization & Accelerate your Realization - Part III

In Part I and II of this blog we discussed about how package applications provide solution for an integrated Customer Care & Billing system. But with extensive package customization the benefits are overshadowed. However, with a pre-configured package solution, much of the customization can be pre-built and adopted as a hyper package thus reducing the realization period. Part III of this blog will provide insight into the pre-configured package solution available from Infosys for Utility Billing and Customer Care functions. Also suggested is to read fellow Infoscion Parmarth's blog on CIS modernization and the need for an integrated customer care & billing system here.

Infosys' Utility-in-a-Box (UIAB) solution is pre-configured package solution for small and mid market energy and water utilities who plan to upgrade from legacy CIS to a modern integrated Billing and Customer Care platform. This solution provides seamless integration to back office processes and utility specific technologies like AMI, GIS etc. The solution resides on Infosys' utility domain knowledge and industry best practices. Built on SAP platform this solution comes bundled with various artifacts and accelerators and can be extended to incorporate specific needs of each customer.

The UIAB solution is based on the objectives discussed in the last part of this blog. It provides for rapid implementation- as fast as 9 to 12 months, which is a fraction of typical package implementation timeframe of a similar scoped project. The scope of UIAB covers the meter to cash cycle and customer service processes, typically in use at most utilities. The box includes bundled developments such as interface templates, reports, forms and legacy data migration templates and bundled documentation such as generic process documents, configuration manual and training manual for the pre-configured processes.

The UIAB is recommended to be implemented using the Infosys proprietary PACE® (Pre-configured & Accelerated CIS Enablement) methodology. This is a unique methodology designed towards accelerated implementation of the packaged customer service and billing solution. The demo driven approach involves key users right from the design phase, captures delta modification to pre-configure solution and artifacts shortens realization timeline. There is a high focus on what you see is what you get ideology.

There are clear benefits to be achieved by opting for a packaged customer service and billing solution. However, UIAB as a pre-configured solution focused on utility retail, goes a step ahead. It provides for a rapid implementation, it is a pre-tested quality solution and an overall lesser risk involved in terms of failure post implementation. The UIAB solution from Infosys is presently available on SAP platform and is built on ECC (IS-Utilities) and CRM. A detailed document on UIAB can be downloaded here.
 

May 10, 2010

SAP BW and Business Objects Integration : Part 1

SAP acquired Business Objects in 2008 to provide customers with a full suite of business intelligence and information management solutions on a single platform with deep integration to SAP Business Suite and NetWeaver. The intent was to offer SAP customers with a market leading suite of reporting, analytics and dashboard capabilities. We have come a long way since then - on the ground SAP Business Intelligence (BI) customers are faced with multiple challenges like widening stack of products, evolving roadmaps, and frequently changing product names. In the below sections, we evaluate some essential steps of this evolution from a technical as well as business perspective.

While tool coverage, openness, rendering focus on functionality the integration aspects between SAP Business Objects and SAP NetWeaver BW and their corresponding challenges need the due consideration, very aspect on integration acknowledges the presence of two separate platforms, coupled together with BAPI and Web Services introduces technical challenges/constraints, that need to be taken to conclusion to realize the complete benefits SAP business intelligence platform has to offer.  Before customers can commit to the new SAP BI platform (NetWeaver BW and Business Objects tools) they need to consider protection of investments already made especially since cost is a significant deterrent for moving towards Business Objects tools given this is a premium offering subject to additional licensing and consulting costs. Customers need to carefully evaluate and balance the tool's value additions to the licensing and consulting costs. ROI and benchmark studies summarizing the technical and business challenges are thus a must before embarking on the SAP Business Objects journey. 

Integration Challenges.jpg

These challenges can be categorized based on the implementation phase as well as existing landscape, for e.g. tool fitment, migration issues and architecture may be more relevant challenges for in the initiation phase of the project; a SAP driven organization embarking on a new SAP Business Objects implementation may not have to worry about migration issues; similarly, if an organization already works with BO, change management and usability may not be a challenge while performance of the solution may apply. The technology and business challenges and life cycle stages below need to align to provide a consistent and stable roadmap to organizations for flawless implementation of the SAP BI platform. 

Lifecycle Stages.jpg

To summarize, the integration between the two platforms is still evolving and the new release planned in late 2010, will bring in substantial improvement in this regard. It is expected that BEx Queries and Business Objects Universes will converge into a single, common semantic layer and going forward all innovation and development in SAP BI front-end will be focused on SAP Business Objects solutions and their integration to SAP NetWeaver BW and BW accelerator, considering this it becomes imperative to stick as close as possible to standard functionality in the front-end deployments, as programming might be difficult to migrate automatically, also expected is the update on the pioneer project (Advanced Analysis).

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