Technology is an important enabler of supply chains and SCMluxe requirements encompasses the standard requirements of technology with the addition of those components that are peculiar to the luxury goods sector. Let us look at what factors/features of an ERP system or supply chain solution that one must look at while evaluating and selecting a ERP system for SCMluxe
· Technical backbone and integration capabilities
o Look for system integration capabilities with supply chain partners. For eg: does it seamlessly integrate and support your suppliers (leather manufacturers, diamond polishers or downstream partners like retailers etc) systems. Is the planned integration going to be difficult and expensive – in which case will supply chain partners bear part of costs?
o Prefer technologies which work on web rather than client architecture based systems. The future will be cloud based systems which will enable seamless integration of systems across the internet with mobility solutions (eg: your sales persons can order from the customer’s premises) that are independent of hard connections between systems. These have lower upfront investments and can run on a “pay as you use” model (think SalesForce.com)
· Prioritize requirements
o Typically a laundry list of requirements are doled out by all stakeholders during the requirement gathering phase – some of them critical, a lot of them wishful thinking and some pure fantasy. Prepare a document which will prioritize these requirements into (a) critical requirements where costs are not a criteria (b) enabling requirements which will drastically improve processes but will require some investments which need to be debated (c) requirements that offer competitive advantages for which cost-benefit analysis need to be done (d) ground breakers which will provide quantum benefits but implementation and availability of these tools are fuzzy
o Plan investments according to this priority plan
o Ensure relevant modules are included – for luxury goods companies, modules on brand management will be very vital
· Ask for References and Demo
o Speak to organizations which have implemented the product and ask for a demo. Importantly ask your process managers to use the demo version and comment on its user friendliness – this will bring in the “user buy in” which is critical for speedy and effective implementation
o Get customized reports as required from system and analyse how easy/difficult it is to do so vis a vis your legacy system (eg: dashboards of sales/inventory analysis/ brand value etc)
· Evaluation and selection of implementation partner
o Ensure that partner has experience in not only implementing the chosen solution but also has experience in the luxury industry
o Ask for some domain consultants in your business. Interview them so as to bring in industry perspective (typically implementation partners will hire experts for a short term period – say SAP experts with experience in implementing for a luxury fashion house
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| Ensure the SCM solution is integrated across the value chain |
· Customise to your industry
o Ensure that modules are customized to the requirements of your industry. A good example would be that consignment stock and invoicing alongwith CAD/CAM for designing is vital for the jewellery industry – make sure this is built in or designed to take into account your organizations requirements
· Implementation partner
o Will it be done by the OEM or a stand alone service firm. Whichever case be sure to have all customization requirements, maintenance costs etc clearly spelt out in the agreement. One normally finds out much later that the AMC (annual maintenance costs) are much higher than budgeted for, especially when the OEM charges for the product and the OEM partner charges separately for AMC and regular customization required
· Confidentiality agreements
o Make sure to sign iron clad confidentiality agreements before you get to actual implementation. A lot of very highly confidential and sensitive data will be available to the OEM and implementation partner and its careful control is vital
· Implementation methodology
o Big bang or phased implementation? Check with your implementation partner and ask for a detailed implementation plan, with deliverables, effort estimate, resources provided, rates etc all specified in black and white. Most importantly don’t forget to agree on timelines for each activity and plan to deal with any extensions or overruns in timelines (from budget/cost and resourcing perspective)
o Remember to include key SLA (Service Level Agreements) in the contract
· Models of Cost/Profit Sharing
o Costs include:
§ One time product costs – typically low
§ One time implementation fee – depends on scale of implementation
§ Annual license fees charged by OEM (15-20% of AMC)
§ AMC fees for maintenance and documented customizations (15-20%)
§ Additional fees for any services – helpdesk/hotline services for instance
o Any gain sharing model that the partner can provide – say a % of the savings generated will be shared by the vendor and the organization
o The exact modalities the unit of pricing especially if it’s a “pay as you go” model built on price per transaction – here the unit that is the transaction or bandwith (for infrastructure) has to be very clearly defined to prevent rude shocks later when the invoice finally arrives at the end of the month
o Keep term of contract fairly short – 2- 3 years. This will prevent unnecessary risks in longer time contracts, risks of vendor slacking in the second year and the ability to re-negotiate earlier on
Any further points that must be noted when implementing an ERP solution - in particular to SCMluxe? Write in and we'll update this list.
Meanwhile thanks to http://www.knowscm.blogspot.com/ for the inputs to this post
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