Technology in Retail: The ERP Initiative at Spencer's Retail Limited


Anirban Dutta
Student of PGP-Finance [Class of 2007-09]
Alliance Business School

Technology in Retail: The ERP Initiative at Spencer's Retail Ltd.

Over the years, during the turn of twentieth century as the consumer demand increased and the retailers geared up to meet this increase world over, technology evolved rapidly to support this growth. The hardware and software tools that have now become almost essential for retailing can be classified into 3 broad categories:

Customer Interfacing Systems

  • Bar Coding and Scanners
  • Point of Sale (POS) systems use scanners and bar coding to identify an item, use pre-stored data to calculate the cost and generate the total bill for a client.

  • Payment
  • Payment through credit cards has become quite widespread and this enables a fast and easy payment process. Electronic cheque conversion, a recent development in this area, processes a cheque electronically by transmitting transaction information to the retailer and consumer's bank.

  • Internet
  • Internet is also rapidly evolving as a customer interface, removing the need of a customer physically visiting the store.

Operation Support Systems

  • ERP System
  • Various Enterprise Resource Planning (ERP) vendors have developed retail-specific systems which help in integrating all the functions from warehousing to distribution, front and back office store systems and merchandising. An integrated supply chain helps the retailer in maintaining his stocks, getting his supplies on time, preventing stock-outs and thus reducing his costs, while servicing the customer better.

  • CRM Systems
  • The rise of loyalty programs, mail order and the Internet has provided retailers with real access to consumer data. Data warehousing and mining technologies offers retailers the tools they need to make sense of their consumer data and apply it to business.

  • Advanced Planning and Scheduling Systems
  • APS systems can provide improved control across the supply chain, all the way from raw material suppliers, right through to the retail shelf. They enable consolidation of activities such as long term budgeting, monthly forecasting, weekly factory scheduling and daily distribution scheduling into one overall planning process using a single set of data.

Strategic Decision Support Systems

  • Store Site Location
  • Demographics and buying patterns of residents of an area can be used to compare various possible sites for opening new stores. Today, software packages are helping retailers not only in their locational decisions but in decisions regarding store sizing and floor-spaces as well.

  • Visual Merchandising
  • The decision on how to place and stack items in a store is no more taken on the gut feel of the store manager. A larger number of visual merchandising tools are available to him to evaluate the impact of his stacking options

Based in Kolkata, India, Spencer's Retail is one of the country's fastest-growing retail companies with approximately 2 million square feet of retail space and more than 400 stores in 65 cities. Their products include food, apparel, electronics, lifestyle products, music, and books. Spencer's Retail is a division of RPG Enterprise, a business group with more than 20 companies in industries such as power, technology, retail, and entertainment. Established in 1979, RPG Enterprises has annual revenue of $3.25 billion.

To manage this kind of growth, it was necessary to move out of legacy systems, as they didn't provide the scalability that was needed. Plus, some of its stores are currently working on as many as four different legacy systems, managing which was very difficult. It needed a solution to manage everything under one umbrella. So it engaged a team of experts to evaluate various solutions in the market. Spencer's found that SAP came closest to fulfilling its needs. Project Shakti has been operating for the last two years out of Chennai and it has already gone live in seven States Andhra Pradesh (Vizag since 17 November 2006), Haryana (Gurgaon, since March 08, 2007), Maharashtra, Gujarat, West Bengal, Jharkhand, and Karnataka (Bangalore, since 1 July 2008). Spencer's Retail has rolled out its SAP solution to approximately 207 stores and expects to complete deployment to more than 350 stores by October 2008. While 53% stores run on SAP, 28% stores run on Oracle and 18% stores run on FoxPro.They are using the latest MySAP ERP IS Retail ECC 6.0 for their operations in Books & Beyond, and are gradually migrating the rest to SAP.

At RPG, the businesses are divided into three entities (Spencer's, Music World and Books & Beyond). Spencer's business is basically procurement of articles from respective distribution centres (DC) and selling to customers. The DCs in turn would be procuring articles based on the site's need from different vendors. The business processes covered under this are purchase, sales, inventory controlling along with financial accounting. The challenges faced during the implementation are managing the different pricing procedures which change very rapidly, managing the promotions; automation of the POS information, high volume of information to be processed, GMROI (Gross Margin Return on Investment) etc.

They have followed SAP Methodology during the course of this implementation. The Project leader from SAP India gathered the necessary KPI's, Dimensions and reports from the functional consultants. Based on these inputs he prepared a Data Model and the Blue Print. Taking this Blue print as input the team at RPG was responsible in preparing the technical specs and also realize/develop the objects.

With ERP, high-availability is a challenge as the network over which the data travels from, say, a datacenter to the store is not within its control and belongs to an external agency. Spencer's ERP datacenter is based out of Kolkata along with the business warehousing servers. For data processing, they have 'staging servers'. These are intermediary servers to store data temporarily before moving it to the SAP Production server. Eventually, all stores and warehouses across all locations will be integrated with its datacenter and shall be working on a real-time basis, except for the PoS billing system. At the end of each working day, the data is sent to the parent datacenter for processing and analytics.

In its legacy systems, they have deployed solutions like SAS and SAPZone. They use them to do bill-value and time analysis. They are also using MySAP Business Warehousing BW 7.0 for analytics. While their aggregated sales data goes to the SAP production server, the non-aggregated data goes to the business warehousing server for analytics at Kolkata. The latter helps them analyze customer buying patterns. The former data helps them manage inventory, stock keeping, etc. While some basic infrastructure is in place already, they are gradually implementing business intelligence into their system in due course.

An important pillar of retail business is ERP, which has three elements People, Process and Technology. The People part is most difficult to manage as it needs to recruit, train and motivate people constantly, generate awareness and do change management. This makes the task more challenging, as it needs to manage deployments in such a dynamic environment keeping pace with the company's exponential growth plans.

Anirban Dutta
Student of PGP-Finance [Class of 2007-09]
Alliance Business School

Source: E-mail August 17, 2008




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