Pick 'n Pay switches from building its own IT systems to acquiring full mySAP ERP solution

In a strategic move aimed at enhancing operations and cutting information technology (IT) costs, national retailer Pick 'n Pay will discontinue developing its own IT systems in favour of buying the full mySAP enterprise resource planning (ERP) solution - including a retail-specific package - from global software giant SAP.

Like most retailers in the absence of ERP software that catered for the diverse needs of the retail industry, Pick 'n Pay has been developing its own systems for the past two decades.

But, says Pick 'n Pay CEO, Sean Summers: "It stands to good reason, now that an international base of retail applications has been created, to best practice off the global experience of a company like SAP.

"Also, no individual business can continue to evolve and develop its own systems on an ongoing basis as effectively as an outside party whose only business is the evolution of such systems.

"It also follows from a commercial perspective that in-house development will be more expensive than external sourcing.

"And, it has become apparent that IT in itself is no longer a sustainable competitive advantage. It's become a utility, like lights, water and telecommunications."

Summers says: "Having investigated in-depth all possible options, we came to the conclusion that was SAP at the forefront of all relevant technology evolutions. And its global footprint, its client base in general and its retail client base in particular gave it a distinct advantage."

Tony Nugent, director of IT consultant UCS Solutions, which assisted Pick 'n Pay in a year-long evaluation of the business case for buying rather than building an ERP solution, adds that SAP "is also a good strategic choice because of the company's massive research and development spend and general corporate stability. SAP's in it for the long-term - and that's very reassuring for its customers."

The implementation, managed by UCS as SAP's primary consulting partner, will encompass the whole Pick 'n Pay group. A pilot implementation phase of 18 months, starting this month (April 2005), will get the Western Cape up and running on the full suite of functionality - from financials, human resources, payroll and warehouse management, to business warehouse, business intelligence and retail. Another 18 months will be needed to complete the roll-out to 4 000 users across the country.

Nugent says the implementation is relatively short because very little customisation of the mySAP ERP solution will be necessary. "One of SAP's great advantages is that its functional fit is very good. So, we and implementation partners such as IBM and SAP can very rapidly get a good integrated transactional system in place, giving Pick 'n Pay detailed, reliable information at an article level per store per day. Thereafter, Pick 'n Pay can focus on using the system for business optimisation."

Summers says the biggest challenge and cost associated with the implementation will be to ensure employees understand and embrace the operational changes the system will trigger.

"That's why the most significant part of our implementation focus will be on planning and managing the implementation itself. An IT system is like a car. You know it works. Getting the best out of it depends on how you drive it. So, training and education on our new business processes as driven by the SAP system will be a huge component of our implementation."

SAP Africa business development manager, Steve Berry, says Pick 'n Pay has the advantage of having implemented SAP for its Australian group, Franklins. "Though it was a much smaller project, the lessons learned about how crucial change management is to successful ERP implementation will stand this implementation in very good stead."