Companies Skittish About SAP's Retail Application

FRAMINGHAM (04/24/2000) - Jo-Ann Stores Inc., a $1.4 billion chain of fabric and craft stores, has started running its back-office operations on a retail version of SAP R/3 - making it just the sixth U.S. user to go live with the software.

Les Duncan, CIO at Jo-Ann Stores, said the Hudson, Ohio-based chain turned on SAP Retail in March and is now using the product to process 2 million sales transactions from its more than 1,000 stores each day.

But the $30 million project wasn't a simple matter. Jo-Ann Stores originally hoped to start using the retail applications last August, but Duncan said the schedule had to be changed because of performance problems with the software and the onset of the holiday season.

He added that the retailer also had to do custom development, with help from SAP, "to fill some big gaps" in the software's ability to keep track of seasonal products and manage pricing and promotions.

Jo-Ann Stores isn't the only user that's still finding functional holes in SAP Retail, which became available in the U.S. three years ago.

John Atkins, vice president of information technology at Tractor Supply Co. in Nashville, said the 280-store farming supplies chain has had to enlist SAP's help to design a series of work-arounds since it began using an earlier SAP Retail release a year ago.

"Things are smoothing out, and we're beginning to see the light at the end of the tunnel," Atkins said. But he added that Tractor Supply is holding off on an upgrade until it sees more users successfully going live with the current version of the retail software.

Dave Boulanger, an analyst at AMR Research Inc. in Boston, said SAP has stabilized SAP Retail's performance and signed up some "marquee accounts" such as The Home Depot Inc. in Atlanta and OfficeMax Inc. in Shaker Heights, Ohio.

But from a functional perspective, SAP is still trying to catch up to retail-oriented application vendors such as Minneapolis-based Retek Inc., Boulanger said. Key features like merchandise planning are still "fairly young" in SAP Retail, he noted.

In Jo-Ann Stores' case, Duncan said he had expected startup problems as one of the first users to install SAP Retail. But the project still came in on budget, he said, and the company is now running most of its corporate-level retail operations on the software.

Sales data is uploaded from each store at night and transferred into the SAP system, which then handles tasks ranging from scheduling inventory replenishment to issuing purchase orders for new products. Only warehouse management and sales audits are still performed by other systems, Duncan said.

Jo-Ann Stores, which got consulting help from Burlington, Massachusetts-based Siemens Business Services LLC, replaced a half-dozen homegrown mainframe applications with the new system. Expected benefits include better inventory accuracy and the elimination of manual processes for checking invoices and counting products at stores, Duncan said.

He added that the earlier performance problems have been resolved by SAP - a fix that Jo-Ann Stores made sure was in place by running tests in which full daily loads of sales transactions were processed by the new software. That process was completed in February, prior to going live.

Widespread Use

Other users that are now running SAP Retail in the U.S. include PetSmart Inc. in Phoenix and Reebok International Ltd. in Stoughton, Massachusetts.

SAP executives weren't available to comment in detail on SAP Retail. But the German vendor said more than 200 companies worldwide have bought the applications.

An SAP spokeswoman added that the seasonal-allocation capabilities developed by Jo-Ann Stores have been built into the latest version of SAP Retail. Other work done for Jo-Ann Stores will be included in future releases, she said.

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