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Case Study

 

Pick n Pay Benefits from a New Retailing Solution

insiderPROFILES

July 1, 2010

When a South African retail chain, Pick n Pay, felt hindered by insufficient legacy systems, it decided to roll out a full ERP system. This profile highlights the company’s impressive IT modernization project — from building a solution around SAP for Retail to improving performance to learning important project management lessons.
 

Facing increased competition, savvier shoppers, and aggressive growth goals, South Africa’s ubiquitous Pick n Pay chain of grocery and general merchandise stores decided the time had come to hone its competitive edge. The old Pick n Pay legacy systems were hampering business operations and were not providing the company with the edge it needed to stay ahead of the competition. A familiar “buy one, get one free” promotion, for example, required someone to manually hard code the relevant pricing changes in five different databases spread throughout the country. For this reason, Pick n Pay took the first step on a five-year journey to roll out a full ERP system throughout the company.

“The legacy systems in place made us question our ability to enact some of our business decisions and processes,” recalls Bronwen Rohland, Director of Supply Chain, Sustainability, Information Services, and e-Tailing for Pick n Pay.

But now, the expansion strategy and the new, modern IT solution that supports it are starting to pay off. “Customers are becoming more selective about where they shop, so it’s important for us to make sure we get every item into our customers’ baskets when they are in our stores,” Rohland says. “We can do that because we know the right items to put on our shelves and can make sure we have sufficient quantities of those products in stock in order to drive sales.”

Clear Criteria

When Pick n Pay began its IT modernization project, it set its sights on a new ERP system that could manage everything from its financials, HR, and payroll data to its inventory and vendor information. The company also wanted a solution that would provide greater visibility into its supply chain and deliver accurate customer information to be sliced and diced by analytical programs for better sales and marketing decisions and customer insights.

But with all the ERP choices on the market, Pick n Pay wanted to make sure it found the right fit before it ripped and replaced its core legacy system. So Rohland and her team sent RFPs to a handful of vendors and created scorecards to compare each solution’s features to the company’s business requirements.

SAP’s product line eventually stood out for a number of factors. In addition to meeting Pick n Pay’s requirements for comprehensiveness, the solution was backed by SAP’s technical support infrastructure. Also getting high marks were SAP’s size and R&D roadmap, which assured Pick n Pay that the application would continue to grow with technological advancements over time. “We became convinced that the package was going to be robust and technologically sound,” Rohland says. “With an SAP architecture in place, we’re going to future-proof ourselves.”

Bronwen Rohland

Bronwen Rohland, Director of Supply Chain, Sustainability, Information Services, and e-Tailing, Pick n Pay

But before making a final decision, Rohland and her team contacted several other retailers that were using the SAP technology to investigate how well the suite specifically met the needs of retail users. Could it handle the sales volumes? Did updates come regularly for key areas such as supply chain, warehousing, and point-of-sale (POS) activities? “We found that each SAP solution was very robust and very close to our business requirements. It was just a very good fit,” Rohland says.

Pick n Pay committed to a range of SAP products, which included the SAP for Retail industry solution and add-ons such as SAP Forecasting and Replenishment and SAP POS Data Management. According to Rohland, this combination of software offered an integrated solution with a single source of information and greater visibility into Pick n Pay’s supply chain. Filling out the collection was SAP NetWeaver Business Warehouse, SAP Business One, SAP NetWeaver Process Integration, and a number of other modules.

“We can manage our inventory better because we now have a view of what the shop layout should be and how much stock holding we should have on the shelf.”

 Bronwen Rohland, Director of Supply Chain, Sustainability, Information Services, and e-Tailing, Pick n Pay

On Guard for Gotchas

Even with the project scope and product selection in place, Pick n Pay wasn’t quite ready to launch the solution. Knowing that large projects like these require rigorous attention to detail, Rohland first sought to identify every potential stumbling block she could find. “We wanted to go in with our eyes wide open,” she says.

Based on her interviews with other retailers and companies who had previously implemented SAP systems, the Pick n Pay project team created a list of potential problems that grew into a risk matrix, which eventually included 30 gotchas that had surprised the other companies. This document became a guide for the Audit and Risk project stream Rohland formed to make sure all these known problems were addressed before they affected Pick n Pay’s project. The team members even matched each risk with the implementation schedule, so they knew in advance when in the launch each potential problem would rear its head.

“We used the risk matrix as a guide for ‘Go/No Go’ decisions,” Rohland explains. “We would tick off each risk and ask questions like: ‘Have we checked that people have been trained? Do they have all their system sign-ons and log-ons? Did we check that the printers are able to produce orders and customer receipts?’ All the little things that tripped other companies up, we built into our go-live checklist.”

Pick n Pay

 

Smart Partnering

Another critical key was finding the right implementation partner. Pick n Pay wanted a company with expertise not only in SAP technology but also in the intricacies of retail businesses. It chose HCL AXON, which at the time of the project was operating as UCS Solutions. The due diligence paid off. “I had the top SAP skills in South Africa working on my project,” Rohland says. “They became true business partners who understood our business 100 percent.”

 

The relationship was so seamless that consultants were sometimes mistaken for full-time Pick n Pay employees. “That’s why they’re still our business partners today,” Rohland adds. (For more information about how HCL AXON was an integral part of Pick n Pay’s successful implementation, see the sidebar to the right of this article.)

The implementation team took a stepped approach to rolling out the new SAP solutions. Starting with an area closest to headquarters, the team launched the applications one region at a time in Pick n Pay stores spread geographically throughout South Africa. Only after the target region was running successfully did the team move on to the next geographical area.

Pick n Pay is now installing the software in its last set of stores, which will bring the total to more than 600 outlets by the end of 2010.

“With our legacy applications, we had no audit trails of any kind, so we couldn’t readily see who approved changes or authorized a payment.”

Bronwen Rohland, Director of Supply Chain, Sustainability, Information Services, and e-Tailing, Pick n Pay

Improved Performance

The early adopter stores are already seeing benefits from the solution. Among the biggest benefits is the improved stock accuracy Pick n Pay now sees in its ability to keep the best-selling products in stock to maintain the products in profitable quantities. To do this, Pick n Pay realized the importance and necessity of  executing and rapidly rolling out planograms, the retail-industry analyses that summarize product demand by category and determine how much to carry for both shelf and safety stocks. “We can manage our inventory better because we now have a view of what the shop layout should be and how much stock holding we should have on the shelf,” Rohland explains.

She adds that optimizations like these are key to competing today in South Africa’s tough economy, where shoppers search among different retailers for the best deals. If a desired item is out of stock at a Pick n Pay outlet, a customer may go to a competitor and never return. 

Tighter inventory management is also changing Pick n Pay’s relationships with suppliers. The company shares its demand information with supply chain partners so they can better manage their own resources.

The new solution also helps Pick n Pay avoid botched orders. “We’re able to see all the issues up front instead of waiting to be out of stock on something or waiting to find out the wrong items were delivered to a store,” Rohland says. “We’re able to manage supplier performance down to store level or unit level. Before, we never had the ability to see what orders we placed with suppliers and how well they performed.”

Accurate performance metrics also assist with restock inventories, which in turn reduce inventory carrying costs. “Where we are using SAP Forecasting and Replenishment, we have managed to reduce inventory by six days,” she says. “This continues to be a key focus area for Pick n Pay.”

The detailed reporting available from the SAP system also lets Pick n Pay create audit trails for the first time to track changes in product pricing, salaries, or incentives for staff members. “With our legacy applications, we had no audit trails of any kind, so we couldn’t readily see who approved changes or authorized a payment,” she says. 

A Platform to Build On

Rohland is pleased with the progress so far, but she says there’s still more work to do. For example, instead of having 70% of its orders going directly from stores to suppliers, Pick n Pay is now looking to take advantage of the volume-buying benefits possible with a centralized supply chain model. Rohland’s team is busy converting the company’s distribution centers to accommodate centralized purchasing and distribution. “When that happens, we can shorten lead times even more, and we’ll get sharper prices and reduce our stock holdings,” she says.

The new technology foundation will also help Pick n Pay with its project to open additional stores inside and outside of South Africa. Gone are the days when coding warriors had to travel to each database to hard-wire changes for new business initiatives. The company recently completed an expansion blitz with four new stores in Swaziland’s capital city of Mbabane. “We put the Pick n Pay signs up and cut over from the old application to the SAP solution in a weekend,” Rohland says. “That’s the type of speed to market we’re talking about.” 

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