Is There a Problem with Gerry Weber and SAP?

Executive Summary

  • SAP has seen a significant drop in its stock price and bankruptcy.
  • Gerry Weber has also been going through many system changes.
  • Are these financial problems related to their IT changes?

Introduction

Pedro Rodriguez made the following observation about the retailer Gerry Weber.

“Gerry Weber total shares value is slowly approaching the total cost of a SAP project (Around 10 millions) just after 3-4 years of introducing state of the art SAP S/4 HANA into their retail system. Previous company share value was around 1000-500 millions.” 

When we read this we knew that S/4HANA has failed virtually everywhere it has been implemented as we covered in the article S/4HANA Implementation Study.

However, we weren’t sure of Gerry Weber had implemented S/4HANA. Pedro pointed us to this link, which shows Gerry Weber implementing ERP along with retail solutions, including SAP’s retail industry solution which is called FMS (renamed AFS).

What is SAP FMS?

FMS is described by an SAP consulting company that would not care if anything they wrote is true as the following:

“SAP FMS brings together wholesale, retail and fashion specific processes in one back-end system. FMS was released to the market in June 2014.”

As with most industry solutions, there is normally very little development work put into them, and they are primarily a way to market SAP’s ERP system. But FMS works for either ECC or for S/4HANA. Actually, let us moderate that to SAP says that FMS works for ECC or for S/4HANA (although only for ECC on HANA).

This slide is in German, but it shows how SAP replaced (Microsoft Dynamics) in 2015….or at least was planned to. Notice the Tyco Retail Solution and GKSoftware with planned implementations after 2017. 

Problems with RFID and SAP ERP?

The article by Rethink Research called Gerry Weber RFID Overhaul-Points at Cautionary-Tale for IoT in 2016 was curious in that it laid out problems with connecting IoT to their ERP system.

“German fashion retailer Gerry Weber is dismantling its current RFID inventory system after just five years, citing its failure to keep up with business requirements. It is a cautionary tale for any business considering using IoT technology to improve efficiency, but it appears that Gerry Weber can afford to swallow the bitter pill. The crux of the problem is that the retailer cannot integrate its current RFID inventory management system into its new Enterprise Resource Planning (ERP) platform, which was commissioned two years ago from SAP – a German business software specialist. Gerry Weber believes that the time is right to use a standard software implementation, rather than the customized one used to launch the RFID platform in 2009.

For the company, it comes amidst a difficult few quarters in terms of financial results, but it seems that the new system offers a solid return on investment – as part of a pledge to its shareholders to streamline its retail operations following declining earnings. It hopes that the new ERP platform will allow it to incorporate NFC and Bluetooth beacons, as well as footfall analysis for store layout optimization.”

This is curious. Why can’t RFID information be integrated to SAP ERP? Also, what is the new ERP platform?? What does that mean exactly, is Gerry Weber moving to a non-SAP ERP system?

“The decision to implement a new retail ERP system was made two years ago. The current system is no longer keeping up with today’s requirements and the increasing challenges of internationalization,” said CIO Michel Feurich, speaking to German publication RFID im Blick. “It cannot keep up in terms of scalability. Now we want to promote the RFID success story and be more innovative. We have set the course. We are in the middle of a restart.”

Problems with Decisions Made Only Two Years Ago

If a decision made two years in the past is not reliable, Gerry Weber will never be able to manage IT because it requires planning to make appropriate IT investments.

If one looks at IT departments all around the world, nearly all their decisions will be more than 2 years old. Also, why can’t SAP ERP keep up in terms of scalability. Not all data from the RFID needs to be sent to ECC. It can be aggregated to an external database and then only portions sent to SAP ERP.

“But to return to Gerry Weber and its overhaul, an ERP system provides businesses with a complete overview of their business processes, if all goes to plan. They usually comprise a number of separate applications, each managing a component, such as distribution, accounting, production, and the CRM.”

No, CRM is not considered part of ERP systems.

ERP Systems Don’t Pay for Themselves?

“Businesses can run into a lot of unexpected costs if they have to spend a lot of time and resources adapting the ERP to accommodate their existing operations, and the ERP systems are usually sold as part of a lengthy contract. But in the best case scenarios, the efficiencies that can be found and managed through the program more than makes up for the cost of the platform.”

Yes, almost all ERP implementations overrun their budget, and the research of academics can’t find a positive return on ERP implementations which we covered in the book The Real Story Behind ERP. That is in the vast majority of cases the ERP system implementation TCO will not be paid for with any business improvements. ERP does have a guaranteed ROI…but only for the consulting firms and the software vendor.

Conclusion

We cannot find evidence that Gerry Weber has implemented S/4HANA. Although Gerry Weber’s timing of their move to SAP could have made them a potential customer for S/4HANA, and SAP would certainly have tried to move them to S/4HANA. But there is no information available thus far that states they went to S/4HANA.

Here is what comes across in the articles about Gerry Weber.

  • What does appear to be true is that Gerry Weber has clearly implemented a lot of money into SAP solutions.
  • We are very confident that they would have received little benefit from the FMS solution, as it was really just intended to be used to sell Gerry Weber.
  • The comments made by Gerry Weber to Rethink Research are odd and make us wonder what is behind them. Most companies that work in retail have no problem managing their inventory using bar codes. It is unclear why Gerry Weber has to have RFID.
  • Overall, the articles and the information contained within makes us wonder if the Gerry Weber IT department knows what it is doing. They appear to be a weak IT department that is easily preyed upon by both vendors and consulting firms.

Financial Disclosure

Financial Bias Disclosure

This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.

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References

https://www.sap.com/germany/documents/2017/06/d0ff8d52-be7c-0010-82c7-eda71af511fa.html

https://www.applexus.com/why-fashion-businesses-should-migrate-from-AFS-to-FMS

http://tycoretailsolutions.com/Pages/Home.aspx

https://www.handelsblatt.com/today/companies/gerry-weber-older-generation-to-blame-for-insolvency-at-one-of-germanys-largest-fashion-firms-/23919334.html

*https://rethinkresearch.biz/articles/gerry-weber-rfid-overhaul-points-at-cautionary-tale-for-iot/

https://www.worldfootwear.com/news/-gerry-weber-files-for-bankruptcy/3604.html