First is the fact that, as a capitalist society,
Second is the geography of the country. Covering 6.5 million square miles (much of which is snow-covered wasteland) and spanning 11 time zones,
An ongoing SAP implementation by Technosila, one of the country’s leading consumer electronics retailers, demonstrates how
Founded in 1993, Technosila today has over 250 stores in 197 cities, from
For the first ten years of its existence, the company used paper processes to manage its distribution network; any IT that was in place was self-built. But these processes and systems began to buckle around the early part of this decade.
One reason was that the company was expanding into ever-more remote locations, demanding more sophisticated logistics planning. “In somewhere like
In 2003, Technosila had hired Tyukavkin as IT director from its archrival Eldorado. His first move was to build a data warehouse from scratch using in-house developers.
Having built the analytical capability to find out where the weak points and bottlenecks in Technosila’s distribution network lay, Tyukavkin’s second move was to replace the manual finance and distribution processes with vendor-built business applications.
SAP and Oracle were the two main contenders, and for a time the latter was the forerunner. “The Oracle solution was a bit better [for us] in terms of functionality,” Tyukavkin recalls. “But when we considered the total cost of ownership, we decided on SAP.” The local availability of SAP-trained engineers and consultancy firms helped to make the German company a more economically viable proposition, he adds.
Combining SAP application functionality with its own data store, Technosila was able to introduce some important procedural improvements, mostly in the area of transport management.
For example, one expensive inefficiency in Technosila’s existing distribution network was the fact that the allocation of shipments to transport vehicles took no account of the size of the products shipped. With those vehicles often making trans-Siberian journeys, this blind spot cost serious money. Today, the logistics system plans shipments by volume and allocates transport accordingly.
Unused to software implementation of this scale, Tyukavkin’s superiors had some pretty unrealistic expectations. “They starting asking to see the return on investment after one month,” he recalls. “In fact, we had to wait more than a year.”
But for Tyukavkin, it will be the next phase of his IT strategy – the introduction of automation – that will have the real revolutionary impact on the business. There are still many processes that require human involvement that could be automated, driving cost down even further. “Automation is not just the next phase of the strategy, it is what will bring the real benefits,” he says.
Technosila’s process refurbishment began not a moment too soon. Shortly after it started in December 2005, the consumer electronic retail market crossed a critical threshold, with buying psychology changing dramatically. “After February 2006, sales dropped for all retailers in the market,” explains Tyukavkin.
“What happened was that it went from a seller’s market to a buyer’s market almost over night. Beforehand, people would buy whatever we would stock as long as it was cheap; now they know what brands and which models they want; they want variety and choice.”
That watershed moment drove Technosila to hire management consultancy Accenture to forge a new strategy for the new market conditions. The strategy they decided upon was – put simply – to ape
The long distances involved in distributing stock across
Tyukavkin explains that the move to services is underpinned by operational efficiencies. “It’s no good offering all these services if the products aren’t in the stores,” he says. “Plus, in order to be able to afford to provide services, we must cut costs elsewhere.”
The global economic crisis has put the brakes on the SAP project, with some elements postponed to the second half of this year. But it has not rattled Technosila, which looks to its role model for leadership.
“BestBuy’s stock price is down,” reflects Tyukavkin, “but it predicts growth after its competitors go bust.” In November 2008, one of BestBuy’s main competitors,
As this reveals,