Arnotts drives business expansion with people and process initiatives Arnotts Dublin www.arnotts.ie Industry: Retail Employees: 650 Oracle Products & Services: Oracle Financials Oracle Retail Merchandising System Oracle Retail Warehouse Management System Oracle Retail Invoice Matching Oracle Retail Sales Audit Oracle Retail Store Inventory Management Oracle Retail Data Warehouse Key Benefits: Greater insight in invoice matching has delivered a significant improvement in accuracy Radio Frequency is enabling efficient and rapid item-level stock counts enabling real-time tracking of stock losses across the store Align in-store stock offering with customer demand, in order to drive better in-season and fresh inventory management and allocation Ability to be more creative around promotional and pricing activity, while optimising retail space Grown sales on an absolute basis and doubled gross margin. "We needed a technology provider that understood best practice in retail and could deliver a proven integrated retail footprint with the potential for a quick ROI. This would enable us to aggressively expand our business, whilst at the same time minimise the risk that can often be associated with major infrastructural business change initiatives. Oracle provided the best partnership opportunity for our business with its proven track record in department store retailing. Peter Madden, Group Chief Financial Officer & IT Director, Arnotts Tracing its roots back to 1843, Arnotts is Ireland s oldest and largest independent department store operating from its Henry Street site in Dublin. Today, Arnotts offers a comprehensive selection of merchandise from fashion to furniture, from footwear to sportswear, from kitchenware to electrical goods, from childrenswear to corporate clothing. In order to secure the long-term future of the 300,000 square foot department store and adjoining buildings, and improve the customer shopping experience, Arnotts is redeveloping its Henry Street site into a 1 million square foot city-centre complex. A critical part of Arnotts plans for the new site was the implementation of a new ERP system and best practice solutions to drive efficiencies throughout the business, which also includes the training of its 650 staff to manage the new IT infrastructure and retail processes. The project involving the implementation of Oracle Retail solutions was internally named Project Merlin and won a BT IT Inspiration Award. As part of this IT transformation, Arnotts has implemented an Oracle Retail platform incorporating back office, merchandising, supply chain and stores systems into the business to transform its operational capability, enhance inventory management processes, reduce stock levels in the store and warehouse and improve price management. Arnotts has approached this implementation from a business-led rather than
Arnotts faced a nonnegotiable need to cut 100,000 square feet of onsite storage space, but still make sure the right stock was on the shelves at the right price. We needed an integrated ERP system that allowed us to cut on-site inventory but reduce on-shelf nonavailability of products. Peter Madden Group Chief Financial Officer & IT Director Arnotts IT-led focus and the team has carefully managed the project from start to finish involving all levels of Arnotts staff and tying business objectives closely in with the implementation. Arnotts expects the full rollout of the Oracle Retail solution throughout the entire organisation to be completed by the end of 2007 and to break even on the investment in three to five years. Managing business change Overhauling any business is a complex activity and a department store with thousands of products over 300,000 square feet is no exception. The implementation of a 4.7million Oracle Retail platform is almost complete and Arnotts is quick to confirm that completing this project in little over two years has been accomplished primarily because of its business-led approach to change management rather than taking an IT-led approach. Peter Madden, Group Chief Financial Officer & IT Director explained, If you want business benefits and improved efficiencies, you have to change your business to reflect the process, not the other way round. The Arnotts board has a genuine desire to improve the business. It is not necessarily all about cost cutting, it's about implementing efficiencies and best practice that will take us forward, giving us the capabilities to be more agile in our decision-making. The fundamental business driver at Arnotts was to create a working retail solution that could support the development and expansion of the Henry Street store but also one that would act as a backbone for the business as Arnotts expands to more stores. It needed to co-ordinate management, staff, suppliers, products and processes in order to bring the necessary benefits to the business and its customers. Starting in May 2005, the Project team focused the first year of the project on how the Oracle Retail implementation and the associated best practice would alter the way in which Arnotts staff work. Instead of just using up whatever budget was left at the end of the year, we tried to hook the IT strategy to what drives the business, and to do it in as vanilla a way as possible, said Madden. This not only sped up the deployment but promoted the technology as an enabler closely tied into key business objectives aimed at creating a more efficient organisation, he said.
Over the last couple of years, Arnotts has changed about 90% of its technical and applications footprint. Not only has the Oracle platform incorporating Oracle Retail merchandising, planning and stores solutions been introduced alongside Oracle Financials but additional HR, Chip and Pin and restaurant systems have also been implemented as part of Project Merlin. In addition, Arnotts created a change management team that has worked hard to keep its people educated in the process changes via team leaders and sheep dips where all 650 staff were briefed on the latest developments and how it will affect their roles. This team has also developed all training material and responded to any issues the staff had. Revealing the results The Oracle Retail solution, which is fully integrated with Oracle Financials, provides management with detailed, item-level reports promoting a more accurate assessment of the business performance and helps turn information into profitable business decisions. For instance, Arnotts is now achieving efficient and rapid item-level stock counts using radio frequency technology, enabling real-time tracking of stock losses across the store. The Oracle Retail system allows Arnotts to align in-store stock offering with customer demand, in order to drive better in-season and fresh inventory management and allocation throughout the store. This is enabling Arnotts to be more creative around promotional and pricing activity, while optimising its use of retail space. As departments have gone-live on the solution, Arnotts has identified long-standing operational efficiencies with its suppliers. Madden explained, One of the biggest challenges had been that the store was essentially a store room. There were too many products and customers could not find items. In addition, Arnotts is infamous for its twice yearly sales but due to the lack of clear control over which items were marked down, Arnotts was suffering considerable margin loss at these times. He continued, We identified that some of our previous issues with over-stocking were due to products being over-delivered by suppliers. We have since met with our worst suppliers and worked with them to improve the situation. For instance, greater insight in invoice matching has already delivered a significant improvement in accuracy.
Buying decisions are now made on data, rather than instinct, as was previously the case. Buyers could not identify the success of key products from sales information and management had little visibility to what was selling best. Buyers were responsible for buying, as well as visual merchandising. Since the deployment of the Oracle Retail solutions, buyers are taking more time to make product selections and this, in turn, has promoted the rise of store operations managers who can focus purely on the daily running of the store and visual merchandising. Ger Ryan, Head of Homebuying at Arnotts confirms, Now planning is better, sales are improving and Arnotts is forecasting sales and seasonality more accurately. Because the company is aware which brands are most popular, it is able to give them a higher profile on the shop floor. Previously, everything was judged on six month cycles, looking at sales and gross margins. Since the system went live, results have been impressive. We have grown sales on an absolute basis and doubled gross margin because we are delivering better on the space. We are doing everything better with less product. Why Oracle? Madden explained, Arnotts needed a technology provider that understood best practice in retail and could deliver a proven integrated retail footprint with the potential for a quick ROI. This would enable us to aggressively expand our business, whist at the same time minimise the risk that can often be associated with major infrastructural business change initiatives. Oracle provided the best partnership opportunity for our business with its proven track record in department store retailing. In addition to the implementation of the Oracle Retail merchandising, supply chain and stores solutions, the Arnotts implementation was a significant milestone for Oracle Fusion Middleware software. Oracle Financials were integrated with Oracle Retail using Oracle BPEL Process Manager, which provided the necessary flexibility to build the integration with minimal changes to the core Financial and Retail systems. Utilising Oracle s technical expertise and acting as an intelligent courier of messages between the two systems, Oracle BPEL Process Manager ensures information from different parts of Arnotts business is seamlessly updated and accessible by both
the Oracle Financial and Oracle Retail solutions, while ensuring data integrity is maintained. Madden concludes, Having a relationship with a company, that s like having a marriage both sides have to work on the relationship to make it successful. We perceive that we re not implementing Oracle, we re implementing our business strategy in partnership with Oracle.