FINDING THE RIGHT ERP

Enterprise resource planning has started to see widespread implementation in many industries such as oil, telecommunications, energy, and even the automotive industry -- but the supermarket industry is merely scratching the ERP surface.By making real-time visibility of vital business data available to all necessary parties within a company, ERP could result in better decision-making ability as well

Enterprise resource planning has started to see widespread implementation in many industries such as oil, telecommunications, energy, and even the automotive industry -- but the supermarket industry is merely scratching the ERP surface.

By making real-time visibility of vital business data available to all necessary parties within a company, ERP could result in better decision-making ability as well as improved management of retailers' internal supply chains, according to industry experts.

Supermarket retailers, though, are having a tough time finding solutions that fit their business model and allow for effective systems integration.

The answer, some say, could be a "hybrid" approach of ERP combined with best-of-breed solutions.

"What's interesting [is that] we see very little interest [in an ERP solution] from the supermarket industry," said Christy Bass, managing partner of technology for Andersen Consulting, Dallas.

"You wonder who is going to step up and move first. I'm aware of one very large supermarket chain that is close to making [the move to] an ERP solution," she added, noting that it would be about six months before the supermarket industry witnessed another attempt at a large-scale ERP implementation.

"If this chain did move forward, it's going to wake their peers," Bass added, noting that it may incite other retailers to play catch-up.

According to Drew Riegler, a partner at PricewaterhouseCoopers, New York, ERP is in the plans at some retailers.

"I think it [ERP] is already happening [in the supermarket industry]," he said. "I think there are a number of large opportunities in the pipeline right now," Riegler said, adding that some significant deals could be announced in the next six to nine months.

One retailer, Genuardi's Family Markets, Norristown, Pa., is looking at ERP solutions for its core business systems.

Genuardi's is currently using enterprise solutions from J.D. Edwards, Denver, for human resources, payroll, financials and accounts payable.

The retailer is also in the process of implementing a work order management solution, which should help improve cost control and accountability and accessibility to information, according to a source familiar with the situation.

According to industry observers, many enterprise implementations could result in a combination of ERP software and a best-of-breed approach.

Gerry Yeo, a partner with Deloitte Consulting, part of Deloitte Touche Tohmatsu, New York, noted that "point solutions," also known as best-of-breed solutions, would still be required to address systems that cannot be addressed through ERP.

"Another fallacy [of ERP] is that it is going to cover a company's architectural foot print," he told SN.

"I think there is going to be more of an interest in doing ERP for the core financial and merchandising systems, [but] there will certainly be point solutions," Yeo added.

By focusing on one portion of the business, such as turns, reduction of waste or inventory, ERP can be cost-justified, Bass said.

Currently, ERP may not be taking root in the food industry, but there could be big gains for those who embrace the ERP process, according to Riegler.

The data integration that inevitably results from ERP eliminates redundant processes, Riegler said, adding that better integration of data means retailers can better read where their business has been and where it's going.

The technology also allows retailers to take advantage of e-commerce opportunities, enabling their systems to be e-commerce ready, according to Yeo and Riegler.

The timorous pace of retailers to make the move to ERP is, at least in part, due to the customization required for a retail ERP solution. This customization includes a system that can handle a high volume of product, high stockkeeping unit count and inventory management as well as item level forecasting and replenishment.

While these are difficulties facing all retailers looking to implement an ERP system, the task is particularly difficult at smaller retailers with limited resources.

Binghamton Giant Markets, Johnson City, N.Y., said that it cannot consider an ERP solution when it has trouble finding such systems as data warehousing and warehouse management that can be plugged into its operations.

"We're not really big enough [for ERP]," said Jim Whittaker, director of management information systems for the 12-store retailer, adding that the Binghamton chain is opting for a data-warehousing system.

"We go to these [trade] shows and there is definitely a market for an enterprise solution that can be scaled back. We have yet to find a company that can provide an integrated solution that's affordable," he added, noting the cost of ERP could not be absorbed across 12 stores.

Binghamton said it is taking a best-of-breed approach to integrating its disparate systems.

"We're putting one system in place at a time," Whittaker said, adding that they include human resources, payroll and accounting systems.

"The only way we can do it [upgrade systems] is to develop software ourselves, with a software company [outside the United States]," he added. Binghamton is also piloting a check-management system that ties in check approval to all 12 stores.

But for Binghamton Giant Markets, data warehousing seems to be the next part of the integration process -- not ERP.

"We are in the process of working with NCR on a data-warehousing concept, but we're having a tough time drawing information from the stores -- platforms keep changing," Whittaker said.

He added that because some of the retailer's systems are Unix and some are Windows NT, Binghamton has had a tough time tying everything together.

"Our goal is to run the whole company off a single data base," he said.

"What we have to take a look at is which [system] impacts the operations the most? Our philosophy is that the retail drives everything else, so we look at what benefits the store first before how it affects the back end," Whittaker said.

"I think that this [ERP] is going to be more of a bottom up evolution," Riegler told SN. "Vendors are going to establish a track record -- not at the top end of the market but at the bottom end," he added.