Cue the “Hallelujah Chorus” — technology no longer intimidates chief executive officers as it once did.
They may not be proficient enough to restore a crashed network, but a greater confidence in technology has made retail ceo’s more vocal than ever about systems that will help them plan merchandise assortments on a store-by-store basis. Apparel ceo’s, meanwhile, evangelize about upgraded back-office systems that will permit them to do more for their retail and brand customers.
Chief executives in both camps are almost giddy over information-reporting tools that take data buried in disparate systems and turn it into knowledge about untapped opportunities that can help pump up sales.
“When the topic of technology comes up now, I actually get excited. It’s not something I am afraid of at all,” said Scott Edmonds, president and ceo of Chico’s FAS of Fort Myers, Fla. He talked with WWD last week, when Chico’s reported that its first-half sales surged 31 percent to $670 million, and the company saw its 101st consecutive month of positive comp-store sales growth.
Executives’ increasing reliance on BlackBerrys and personal digital assistants is killing the techno-phobe within. And it’s no longer surprising that ceo’s, such as Raphael Benaroya of United Retail Group of Rochelle Park, N.J., have wireless networks installed in their homes so they can have access to corporate systems from their favorite comfy chairs.
Along with this heightened confidence comes a shift in expectations about technology, which is no longer so heavily weighted toward cost-cutting. While return on investment remains an important metric, ceo’s are looking instead for technology to boost sales and loyalty while keeping pace with growth.
“If you do not have a scalable system that can support your growth requirements, there will come a time when you are forced to slow down your growth until you have implemented and integrated the proper technology infrastructure into your business,” Edmonds said.
Scalable? Technology infrastructure? When did chief executives start talking this way? Mostly after having weathered the storms of technology failure, such as a point-of-sale meltdown at Chico’s or a back-office blowup at Greco Apparel, an Ambler, Pa., apparel manufacturer currently in a growth mode.
Ceo’s at both companies learned from these painful and costly experiences and refined their outlook on technology as a result. When Chico’s outdated and overtaxed point-of-sale systems shut down nationwide five years ago on a busy Saturday, Edmonds became acutely aware of scalability’s importance.
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Likewise, Joseph Greco, president of Greco Apparel, said he learned the hard way that an enterprise resource planning system cannot be slapped into place without first preparing for major corporate culture changes. Susan Ganz, president and ceo of Lion Bros., an Owings Mills, Md., sewn-goods manufacturer, said she learned the same lesson.
Enterprise resource planning systems are massive and complex systems designed to integrate and streamline business activities, such as financials, human resources and production.
Ganz’s and Greco’s experiences with ERP are not unique. “Embarking on an ERP implementation without preparing for the inevitable change it will inflict on your organization is like inserting bamboo shoots under your fingernails and asking, ‘Why does this hurt so much?’ Unfortunately, it’s a common practice,” said Peter de Jager, a change management expert based in Brampton, Ontario. “Most change management problems are self-inflicted.”
First the Pain, Then the Gain
Greco Apparel scrapped an earlier version of an ERP system about a year ago after several years of struggling to make it work. Poor technology-vendor support and a Band-Aid approach to problem-solving doomed the project, Greco said. Undeterred by the first failed attempt, the company is now installing an ERP system from New Generation Computing of Miami and Greco is confident of success this time. Greco said he has greater faith in the technology and a new appreciation for a holistic implementation strategy that takes into account the cultural shifts his workforce will have to make at its U.S. administrative and shipping facilities as well as its plants in the Dominican Republic.
The new system, which includes software for order processing, financials, inventory control and production management, will provide Greco Apparel greater visibility into its own operations because data from all departments is linked. This integration of databases creates what some executives call “a single version of the truth,” so users in different operational areas view identical information. Because the system is Web-based, Greco Apparel clients, such as retailers and uniform apparel companies, will be able to check the status of their orders via the Internet.
There is an urgent need for new technology and processes to support growth of the company, whose sales rose 70 percent in each of the last two years.
“The demands are too great for us to waste much time,” Greco said. “Our clients’ customers are hotels, restaurants and airlines, and when they hire employees who need to have uniforms, they are not going to wait for Greco Apparel to get its database in order.”
Lion Bros. is also installing an ERP system from Epicor of Irvine, Calif. Rollout to facilities in the U.S. and the Far East is under way, said Ganz, who’s been ceo for 15 years. Lion Bros. produces embroidered emblems and other embellishments for the uniform apparel industry as well as for clients such as Nike, Champion, Reebok, Tommy Hilfiger and the Boy Scouts of America.
The ERP initiative has been an eye-opener for Ganz. “One year ago, I didn’t appreciate the challenges of managing through the change process,” she said. “It’s one thing to intellectualize about the business process systems change, but it’s certainly another to work through the realities of the pain.”
The company is adjusting to the phaseout of loose business processes for product development and what Ganz calls “tribal knowledge” — those unwritten rules that are unique to a company. In their place, ERP brings disciplined and standardized business processes that will yield credible data and performance metrics that can be used to improve operations. Like Greco Apparel, Lion Bros. is looking for greater visibility into its own operations, with the longer-term goal of providing clients the same type of intelligence.
For example, Ganz said, Lion works with Nike facilities on three continents. With the new ERP system, Lion expects to be able to provide Nike with a far more comprehensive, global view of the services it provides. Lion also expects the new system will help identify opportunities to improve the services it offers.
Currently, managers spend a lot of time gathering information. “By the time they get information that’s relevant to a decision, it’s often too late to do something about an issue,” she said. That will change. “Our goal,” she said, “is to be able to have information to help us in our decision-making processes.”
Ganz’s remarks paralleled those of Jeff Gordman, president and ceo of Gordmans, an Omaha apparel and home furnishings retailer due to open its 52nd store next week. The privately held company, which will have 55 stores by November, expects annual sales to top $350 million this year.
Intelligence as a Weapon
“The whole notion of integrating information technology as a strategic weapon within the context of our overall business strategy has been the main epiphany,” Gordman said. He is the primary catalyst for what he describes as a new executive information system being implemented at the company.
The tool, built on a solution from JDA Software of Scottsdale, Ariz., will be rolled out to the entire organization. Users will be able to analyze business metrics relevant to their responsibilities right down to the stockkeeping unit level. For example, the system will flag “exceptions,” those types of business activities that deviate from established parameters — either outperforming or underperforming, for example. Armed with that knowledge, users can proactively correct a problem or seize a new opportunity.
“This industry is a data-rich industry,” Gordman said. “There are all kinds of data, but the issue is how to convert lots of data into powerful decision-making information tools so you can move the business forward.”
Gordman said the executive information system is “without a doubt” his top technology priority today. Existing paper-based reporting systems are useful, “but they don’t really bring to light in an intelligent way how to identify exceptions. So we are trying to develop a set of exception [-based reporting] tools — online dynamic tools to facilitate much more efficient decision-making so that we are focused on the significant opportunities to drive sales.”
Ceo’s are clearly focused on technology’s opportunity to build sales and profits and not just cut costs. In fact, four out of five ceo’s are emphasizing revenue growth as the way to bolster financial performance, according to a survey of 456 global ceo’s conducted by IBM Consulting Services Strategy & Change practice. Cost-cutting comes in second, and executives in Japan and Europe are far more concerned about costs than their counterparts in the U.S.
Said Chico’s Edmonds, “I strongly believe those ceo’s who are in a growth industry should be more focused on growing sales than cost-cutting. There is nothing kinder to your SG&A line than strong top-line growth, as long as you are controlling cost — not necessarily cutting cost. That is the real caveat there.”
Gordman said he’s developed a renewed appreciation for technology’s ability to drive top-line sales over the past year. And that’s led to an initiative that’s “near and dear to my heart: the whole idea of intelligent merchandise allocation across locations.”
Savvy Assortment Planning by Store
Gordmans is using solutions from JDA Software for product planning and assortment at the chain level. The next step will be to plan merchandise assortments at the store level so that the mix better matches consumer demand at a specific location.
With location-planning software, Gordmans will tailor merchandise assortment according to each store’s unique demand drivers such as the local competitive landscape and the demographic profiles of customers who live nearby. Those variables can influence whether one store outperforms in the home fashions category, but at the same time underperforms in the apparel category. Understanding demand — by product and location — during the planning process will enable Gordmans to refine assortments according to the idiosyncratic strengths and weaknesses of each store, he said.
“The number-one critical success factor for our company and any retailer is the merchandise. We can have the best technology, beautiful stores, a great finance department and phenomenal logistics, but if we aren’t able to deliver merchandise assortments that resonate with our guests, then nothing else really matters,” Gordman said.
At San Diego-based Charlotte Russe Holding, president and ceo Mark Hoffman is also focused on tailoring merchandise assortments at the store level as a way to build sales. The $539 million company, which also operates Rampage stores, upgraded its merchandise management software with a suite of solutions from JDA.
“I am jazzed about the yet-to-come opportunities of those systems,” he said. “I believe we’ll have a very measurable, direct impact on advanced planning and balancing of inventory, and timing, on a store-by-store level to the very lowest level of sku, color, size, etc. I am convinced that the impact on sales is indeed achievable.”
The Customer Connection
Among retail ceo’s, technology that touches the customer and enhances the shopping experience remains a priority.
As an example, Gordman pointed to the wireless handheld computers that Gordmans store associates are now being issued. Using devices from Symbol Technologies of Holtsville, N.Y., and applications from Agilysis of Mayfield Heights, Ohio, employees will be able to process markdowns, merchandise transfers and speed customer checkout with line-busting right on the sales floor. The system goes live next month.
“Those are initiatives that improve business processes and, by definition, it frees up our associates to have more time to be focused on the shopping experience,” Gordman said.
Marv Imus, president of grocery store Paw Paw Shopping Center in Paw Paw, Mich., sees potential in using cell phones to reach out to the customer.
“I believe the cell phone, with its faster processors, high-resolution cameras and mass acceptance, will become more important for retailers,” he said. “I think we will be connecting our systems to the consumers’ [phones] for information, payment and promotion. Think about sending a loyal consumer a picture of a new pair of shoes that is in the magazines but not in stores yet — and being able to finish the sale wherever the customer is.”
Imus is a longtime outspoken proponent of technology and its value in supporting business objectives and serving customers. “But it’s not really the technology or system that is important,” he said. “It’s the actual application by the user. If the user has a system, implements it but does not increase a personal feel to the customer, it will become cold.
“I love the technology available to us now,” he added, “but I have to make sure that the more I use technology, the more I must increase personal service.”