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)