By overhauling its legacy enterprise resource planning (ERP) system, this retailer saves $300,000 annually in outsourcing costs.
Before the days of sophisticated enterprise resource planning systems, organizations were forced to rely on disparate computer systems and data to carry out daily business functions. For instance, a company's financials were on a separate computer system than the human resources system, making it complicated to process certain functions (e.g. payroll).
Red Door Spa Holdings owns and operates more than 50 full-service salons and day spas and employs 4,000 people. Red Door Spa Holdings, the parent company to Red Door Spas and Mario Tricoci Hair Salons and Day Spas, embarked on an aggressive growth plan, opening five to eight spas per year. The rapid growth rate created havoc for the retailer's legacy ERP system. "We were unable to report data [e.g. daily sales totals, new employee information] in a timely fashion because there were too many manual processes that went into creating reports," explains Paul Kaczmarek, CIO at Red Door Spa Holdings. Therefore, in 2005, the retailer did a complete review of its business systems and implemented a three-phase project to overhaul every software and hardware program that helped run the business. The first two phases of the project were dedicated to overhauling the legacy system. The third phase was dedicated to overhauling the POS and electronic scheduling systems. Kaczmarek created a comprehensive RFP for the retailer's legacy ERP system, and he sent it to seven vendors. Based on feedback like solution cost, Kaczmarek's selection team eliminated four vendors, and they requested detailed demonstrations from the remaining three. All three vendors were instructed to demonstrate how their solutions would document product life cycle (i.e. how to set up a new SKU, how to get that SKU into the ERP system, how that SKU is purchased, how it gets to the warehouse, and how it is distributed to salons and spas). Based on the demonstration, the retailer chose SAP for Retail, SAP's solution that supports demand management, merchandise management and planning, store operations, finance, and human resource functions.
Take A Phased Approach To Meet Installation Deadlines
Kaczmarek's internal IT staff and SAP consultants installed the ERP system in the Phoenix headquarters. "The ERP software is installed in our data center in Phoenix," says Kaczmarek. "The spas are connected to our host system. Each location connects to the ERP system through an internal data network." Each individual spa uses the solution to meet its needs by accessing real-time information from SAP's server. Implementation was completed in two phases. Phase one began in July 2006. The retailer broke down the ERP implementation into the biggest needs at the time, which were bringing human resources and payroll in-house.
On The Web: Read about the PLCB's ERP overhaul at ismretail.com/jp/7403.
The goal was to go live on January 1, 2007, and the retailer met that goal. Phase two involved implementing everything else — all the financial, supply chain, and retail systems needed to run the company. This phase began in February 2007, and it was live in August 2007. SAP consultants helped create a training manual and standard operating procedures for the entire company to use, and Kaczmarek's team conducted end user (i.e. general managers) training remotely through a WebEx-type environment. SAP for Retail is fully integrated with the retailer's new POS and electronic scheduling systems. The vendor installed interfaces that integrate these two systems and the ERP system that eliminated the old manual input methods.
Since implementing the vendor's solution, the retailer has saved $300,000 annually in outsourcing costs and decreased payroll department employees 50%. Inventory accuracy has increased to over 99% in the distribution center and has improved at the spa level as well.
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