Double-Phase Implementation

Pointing to this reality, Retek's Angove says Gap's supply-chain implementation involves two phases. The primary phase is a total "replatforming" of Gap's core infrastructure, which will take 18 to 36 months to implement. The secondary phase will roll out faster and is designed to bring noticeable, faster and smaller improvements.

"They are finding it really difficult at the moment to deliver financial results to the Street," Angove notes. "While they are doing this core replatforming of their infrastructure, they still need to find a way to have technology deliver results. That's where quick-hit wins from our supply-chain solutions...can start to deliver results in terms of inventory reduction and cost-of-goods-sold reductions."

Retek's analysis showed Gap was carrying too much inventory and that the excess was in the wrong locations. As a result of carrying the inventory, margins were suffering. And it took about nine months to move goods from concept to stores, Angove notes.

Retek's initial product focus, therefore, involves increasing the accuracy of existing customer forecasts, automating the replenishment and allocation formulas and providing an improved planning engine for the company.

"The Gap has an incredibly complex business," Angove says. "It manages about 700,000 style colors across 4,000 stores. So already the amount of data you are dealing with is extremely large."

However, Angove notes the real complexity occurs around Gap's concept of "fashion freshness"--the desire to freshen up product flows for customers every six weeks. This makes accurate planning especially crucial.

"They have to get the product in right at the start of the six-week selling window, and they've got to transition and sell out of it right at the end of the six weeks as they bring in the next floor set," Angove says. "That's extremely difficult to do." He adds that Retek's replenishment forecasting system is designed to help retailers make the allocation in their initial product purchase more accurate in terms of where the inventory is placed.

Meanwhile, the first element of Gap's core restructuring effort, involving Retek's merchandise-planning module, is expected to go live by year's end. Other core elements involve areas such as inventory control, purchase ordering, price management and vendor management.

"It is all the core of their infrastructure that represents the backbone of their business from the transaction perspective," Angove says. "[It's] the traditional ERP components with the exception of HR and finance." He notes that the existing system was built internally when Gap had only one brand, traded in one geographic region and only utilized stores. The business generated between $2 billion and $3 billion annually. Today, Gap's sales are at around $14 billion annually; there are three major brands, the geographic reach has greatly expanded, and there are multiple sales channels to balance the stores, catalog and Web.

One of the great challenges for retailers today is to create a compatible customer experience throughout all those channels, locations and brands, Harris contends. That needs to be delivered against the backdrop of quickening time-to-market demands and increased global competition.

"Consumers are expecting more in terms of experience and in terms of their options," he says. "We run a very successful online business, but we need to make sure that to our customers, it [all] looks the same, whether they are in a store, online or looking in a catalog. We need to make sure that their relationship to us looks and feels the same, and that we deliver a consistent experience."

Technology investment can deliver the efficiencies large retailers such as Gap need to make this vision a reality. However, Harris also figures it will become more critical to forge alliances with solution-provider partners to help implement that more challenging IT strategy. At the same time, the role of the internal IT organization will continue to evolve into identifying and leveraging opportunities for internal business partners.

Part 5: Technology Investment As a Competitive Weapon

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