When ordering a couture jacket in a designer store in Hong Kong, even the keenest fashionista might be put off if the store has to telephone the order through to an office in Milan.
Until recently, that low-tech approach was exactly what happened when goods were out of stock at Italian fashion house Valentino. The company’s sprawling and chaotic IT infrastructure made it impossible for its shops in different countries to share information, or for Valentino’s management to get a clear understanding of the business as a whole.
With orders coming in by phone and staff in Milan manually picking and packing stock, it could take 20 days to get new items into shops, explains Luca Vianello, general manager of Valentino Fashion Group. In an industry where fashion collections change every few weeks, the impact on the business’s competitiveness was all too obvious.
The roots of this situation lay in Valentino’s recent history. The company had grown to around 2 billion in annual revenues through a series of acquisitions spanning two decades (including brands such as Marlboro Classics, Missoni, Lebole and Hugo Boss). And a demerger in 2005 was accompanied by a programme of aggressive international expansion that took it into more than 100 countries around the globe.
However, with each of its business units running separate IT systems and databases, it became a strategic imperative for the company to create a single IT infrastructure. That mammoth project, largely completed in early 2008 after a three-year “nightmare”, involved replacing hundreds of applications with a unified ERP platform that would allow Valentino Fashion Group to create centralised HR, administrative, financial and operational processes.
The second major goal was to take control of Valentino’s supply chain, adds group CIO Patrizio Buda. “High fashion is extremely complex,” he says. “There are thousands of mandates in each of our processes, and we handle high-value items that go through many stages. So things do get lost. What we need is a way to allow creative people the time they need, but then get goods into stores as quickly as possible.”
After evaluating two potential suppliers, Valentino chose SAP’s vertical ERP suite Apparel and Footwear Solution (AFS), plus its Financial and Controlling (FI/CO) module, as a platform for its core business applications, including integrated supply chain management, warehouse management and product lifecycle management.
As many other large companies have found, such a transformational change was not without its challenges. The fashion industry is generally five years behind other sectors in the adoption of new technology, observes Buda. “So ERP is cutting edge for us,” he says. “And we were changing something that had been in use for almost 20 years.”
Valentino assigned 90% of in-house IT staff to the project, in addition to spending the bulk of its IT budget (around 5 million per year) on the project. By extending the deployment over a number of years, the company has been able to spread its capital expenditure, but it has still had to bear upfront software costs and some heavyduty customisation, says Buda.
In particular, SAP’s inter-company flow did not support the number of steps required by Valentino, so the company had to add code to the AFS application. Further down the line, Valentino’s IT staff also had to amend the clothing specification in AFS, because the package did not provide enough detail for highfashion menswear and couture clothing. “It’s been hard work and involved a lot of late nights, but it certainly shows that SAP is not rigid, although in some respects the [AFS] software was not completely mature,” says Buda.
With the deployment complete in Europe and the US, Valentino is now able to track orders, merchandise and business processes across the organisation, and is seeing greatly improved forecasting and management reporting.
The SAP software gives management insight into where efficiencies can be made, says Vianello. “We can easily get new sites online, or close warehouse facilities very quickly if they aren’t efficient.”
Valentino has also cut two months from the planning process, adds Buda. “Now, if a store asks when shirts will be available, I can tell them five months before the shirt is even made,” he says. “Items can be in any store around the world within five days of an order being placed.”
The next stage for Valentino is to graft a CRM system onto its SAP platform. For ease of integration, that might be SAP’s CRM package, but whatever software is chosen it will have to demonstrate how it can add the most value to the business. “We’re open to the options,” says Buda. “SAP is not a religion for us.”
Agile ERP Can enterprise resource planning ever become as flexible as modern business requires?
Find more stories in the Business Applications Briefing Room