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SAP Learns The Ropes Of Fashion/Outfitting

Written By: Predrag Jakovljevic
Published On: July 31 2002

SAP Learns The Ropes Of Fashion/Outfitting
P.J. Jakovljevic - July 31, 2002

Event Summary

The fact that no one, including the market leader, can sleep on its laurels in a demanding but forgiving market, has been possibly the best illustrated in case of SAP AG (NYSE: SAP), the leading provider of business software solutions. As reported in press at the beginning of July, SAP has resumed its aggressive marketing of its SAP AFS (Apparel & Footwear Solutions), specialized applications for apparel and footwear makers, after a 15 months painstaking effort to stabilize and upgrade the software, which initially was a major sore spot and embarrassment for SAP and a source of discomfort and disgruntlement of its early users.

SAP AFS release 1.0 was introduced in 1997, apparently in hindsight quite hastily, with the aim to capture an apparent opportunity in the underserved market niche, to an initial group of customers with high expectations. However, in short order, a consistent pattern appeared software implementations were put on hold because of numerous bugs, CIOs cried foul in the trade press about failed implementations, system integration partners froze their implementations, and hints of lawsuits amounted. So severe were the problems at first few guinea pigs' companies, including The Warnaco Group Inc., NY and Sara Lee Corporation's hosiery unit in Winston-Salem, NC, dropped AFS projects in 1999.

Consequently, in mid-1999, the product was removed from the market and sent back to Germany for R&D rethinking and repairs, resulting in the release of AFS 2.5 in 2000 offered to only a limited number of customers. Initially SAP would pull consultants from its wider consumer products group to deal with AFS installations. However, with the advent of AFS 2.5, a newly formed AFS team with over 50 seasoned consultants on board was formed. This team worked directly with users to help expedite software fixes being done at SAP's German HQ's development labs.

SAP has apparently come a long way toward fixing what had been a bug-ridden and prematurely released sub-optimal set of applications, because, since AFS 3.0 shipped in January, SAP has again been hunting for volume sales in earnest. Reportedly, SAP has signed on 11 new customers since 3.0 was released, increasing the number of AFS named customers to about 70 (with about 200 AFS sites worldwide). The new customers include Levi Strauss & Co. in San Francisco, CA, The Basketball Marketing Co. in Paoli, PA, and Crystal Group of Companies, a garment maker in Hong Kong. Also, SAP announced in June that Nike Inc. in Beaverton, OR, has completed a deployment of AFS 2.5 for 5,000 end users in its North American operations, the largest installation of the software thus far. Meanwhile, early adopters such as Reebok International Ltd. and Wolverine World Wide Inc. continue to roll out AFS throughout their operations.

Market Impact

This might be an object lesson in how important and, at the same time, how painstaking the process of delivering vertically focused applications is. Those who can deliver solutions that satisfy the exacting, stringent requirements of some vertical markets are in the driving seat to capture that market segment. However, the market will also conversely punish those that take the feat too lightheartedly. This is especially true in the Small-to-Medium Enterprises (SME) market segment, where there is much less leeway for time and money consuming implementations that also require massive software patchwork.

The blessing in disguise for SAP, however, was that it has not been much harmed during this lengthy period of resolving AFS glitches, because apparel and footwear makers have meanwhile had a few other choices. Other vendors with strong products in this market niche, like Intentia's Movex Fashion and Datatex' TIM (Textile Integrated Management) are still creating a uniform global brand recognition outside Europe, while former JBA International's System21 Style has lost much of its identity due to its new parent, Geac's own troubles of late, and while J.D. Edwards' products capabilities have not been sufficient to take advantage of SAP's tarnished image in this particular situation.

The AFS example, may on the other hand illustrate how serious and meticulous SAP can be when it sets its sight to some promising endeavor. Look for a similar success story, although not necessarily very soon, in SAP's attempt to crack the small and medium enterprises and to shed its complexity perception (see SAP Tries Another, Bifurcated Tack At A Small Guy). In fact, part of SAP AFS' initial failure could have also been attributed to the fact that its apparel customers were enterprises that were quite smaller than typical SAP customers at that time, and that the lesson of catering to SMEs has been learned as well. Another interesting fact to notice is a somewhat similar genesis of SAP CRM product, which, at the release 3.1 is finally showing full-fledged CRM product characteristics (see SAP Keeps Traction On Some Tires Of Its Omni-Wheel-Drive).

SAP has indeed made significant strides to meet the vast majority of apparel manufacturers' requirements. The fashion industry remains abundant with enterprises' challenges to remain competitive in this fast-moving, volatile environment by gaining control over inventories and costs and enhancing efficiency and slim margins. Some of more specific business, marketing and operational challenges include complex, multi-national supply chains, global sourcing issues, direct shipments, multi-site operations, low margins, volatile sales patterns, accurate forecasting, seasonal demand fluctuation, ever increasing customer requirements, proliferation of design variations and product characteristics, a savvy demand enticement, rapid style turnovers, shifting periods of make-to-stock (MTS) and make-to-order (MTO), an immense number of stock keeping units (SKU), complex scheduling and logistics of cutting, sewing, subcontracting/outsourcing and transportation.

On the other hand, these enterprises have traditionally been reluctant to make information technology (IT) investments. While many have implemented pieces of technology to fulfill a specific need (e.g., computer-aided design (CAD) systems and cutting optimization systems, or automated numerical control (NC) machinery for repetitive operations), their decisions are usually based on a business rationale of rapid payback through operational cost savings. In other words, most IT investments have been directed towards automation, not information, and consequently, many midsize and even larger fashion companies still operate with no integrated forecasting, planning, purchasing or scheduling systems.

They possibly have a basic accounting software package, or a warehouse management system (WMS) to provide advance-shipping notices (ASN) to customers, mainly because their influential customers-large retailers demand it. Some may even have invested in EDI (Electronic Data Interchange), again to satisfy a big-brother customer's requirement. Furthermore, of those companies that have implemented some enterprise applications, many are proprietary or in-house legacy systems that have evolved over the years, and now face obsolescence.

Timely Opportunity

The above facts present a huge opportunity for SAP, Intentia and other apparel-oriented solutions given that, to remain competitive, fashion companies are increasingly turning to collaborative enterprise management systems to simplify these complexities and improve their business processes. SAP and Intentia, given their strong geographical presence and broad functionality footprint, offer fashion enterprises the ability to manage the broad range of collaborative business processes across the supply chain including sales/distribution, order fulfillment, financials/accounting, business intelligence (BI), CRM, and e-procurement. Both products are available in well over twenty languages and can handle country-specific requirements relative to currencies, taxes, depreciation, and payment methods.

The products are also reaching parity in terms of many industry-specific features that are designed to accommodate fashion industry operational complexity like: user definable multi-dimensional matrix supporting customer, purchase, manufacturing and distribution orders and incorporating multiple user defined attributes or variants (such as color, waist size, pattern, fabric, customized logo, or inseam length), and automatic generation of SKU designator from style attributes that speeds the creation of master data needed throughout the enterprise.

Still, SAP might have overtaken Intentia in terms of customer base (Intentia has over 160 sites worldwide) and given that its AFS support group has for last 18 months been based in Bangalore, India and Boston, MA, in addition to Germany. SAP claims to have the largest, most international, and certainly the largest US customer base. On the other hand, Movex Fashion already offers integration with the Web-based Product Data Management (WebPDM) module of Gerber Technology's GERBERsuite for sewn products manufacturers, whereas some notable functionality is still going to come with future releases of SAP AFS (e.g., market and design trend surveys, fashion collection design, product & brand lifecycle management, block/cycle scheduling, container & vehicle management, vendor managed inventory (VMI), radio frequency identification (RFID) scanning, etc.). Yet, SAP has proven time and again that still water runs deep' and that it will eventually get anywhere it sees fit. Given the fact that SAP has many of the largest Apparel and Footwear companies as customers, the investments into future functionality for this industry are going to be significant, and SAP is releasing new functions continually

User Recommendations

The importance of a thorough, well-structured enterprise software selection process can never be over emphasized. Fashion organizations currently initiating a software selection are therefore advised to thoroughly research the major incumbent players in this niche, and base their decisions only on existing functionality that the vendors are able to demonstrate during scripted business scenarios' sessions. While SAP AFS might not necessarily have all the functions you may require now, it is apparent that the company remains committed to the industry, with the ability to execute on its AFS vision. The following are more general features you should look for in the system:

  • A standard-based, yet flexible, interoperable software solution that is scaleable and configurable to your business without the need for costly modification or customization. Also, a system should feature multi-platform support, multinational support, and be easy to learn and use.

  • The ability to support financial, manufacturing and distribution operations across the entire global supply chain, from suppliers at one end, through the production process, to distributors and retailers at the other end.

  • A Web-based system, with a full support for XML and EDI transactions.

  • The vendor's locally based support network in your geographic region.

  • In addition to the above-mentioned fashion-specific functionality, another valuable feature is continual net-change MRP (Material Requirements Planning) at the item level, which enables planners to monitor dynamic materials information in real-time rather than waiting for daily or weekly batch updates.

As the apparel & footwear industry may still have many intricacies not readily supported by off-the-shelf products, one may still consider the rationale for developing a homegrown solution (see Build versus Buy - A Long Term Decision). Some useful apparel industry pertinent selection and user experiences can also be found in Datatex and Dan River Apparel Fabrics - Ten Years and Counting)

 
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