European Retailers Divided Over ERP Versus Best of Breed

The decision to base your enterprise Information Technology (IT) backbone on an Enterprise Resource Planning (ERP) system or piece together a best-of-breed strategy has never been an easy decision in any industry. At least there are a number of possible package permutations in most industries. But the ERP vendor community has long ignored the Retail industry (although depending on the scope of your definition of ERP, vendors such as SAP, Retek, Aldata, and JDA do at least try to satisfy part of the need). However, one could have been forgiven for assuming that the only vendor in the space was SAP, given the number of mentions that the company received from the 150 retailers and consumer product manufacturers gathered at a recent retail event in Lisbon, Portugal. Whether ERP or best of breed is a better option is still hotly debated among retailers. Here are some of the advantages of each, retailers report.

ERP provides:
 • Integrated and consistent processes throughout the value chain
 • Many of the processes that are the culmination of industry best practice
 • Consistent data-model for the entire enterprise
 • Easier estimation of overall project cost through primary relationship

Best-of-breed provides:
 • Selection of functionally richest system for each business area
 • Resilience against single vendor failure or demise
 • Greater flexibility in terms of substitution of individual elements
 • Faster response from vendor to adaptation needs
 • More specialised vendors

In ERP’s corner--Coca-Cola
Speaking on behalf of the ERP approach was manufacturer and retailer Coca-Cola HBC, the Greek bottling company that holds the franchise of the brand in 26 countries. It made a strategic decision to implement wall-to-wall SAP, and anyone wishing to procure any other functionality has to prove why it cannot use SAP, so strong is its commitment. It is in the early stages of deployment, with only a Swiss pilot live, but the implementation plan is aggressive, aiming to implement six countries in the next year, each within 24 weeks.

Coca Cola’s give the following advice:
 • Start with a template--Coca-Cola built a template of the various process areas to be implemented. Whilst this took seven months, it let the project team test business flows on paper and collect anomalies from the various countries to test through the model. Coca-Cola is convinced that this saved it time and money because it now has a template that can be replicated in each country, reducing variances and allowing for faster adoption. It has also let the company deliver the system with a very small project team.

 • Select consultants carefully--Interview consultants individually--the name of the consultant is much more important than the name of the consulting company. Coca-Cola HBC actually uses Plaut for much of its activity, and specifically uses expertise from Bulgaria, having found the consultants there to be highly trained, fast-learning, and a fifth of the cost of consultants based in most countries, including the UK.

And for best of breed--Tesco
Speaking for best of breed was the IT strategy director for the UK’s largest food retailer, Tesco. Tesco uses a Retek application as one of its systems, but it has myriad other package-based products, too. Its chosen route was not taken through any desire to steer away from one end-to-end system. Quite the contrary--Tesco would have selected an ERP suite vendor if one had delivered at least 80% of the functionality needed. It didn’t find such a vendor, saying that even if it had chosen SAP, it would not have satisfied Point-of-Sale (POS) requirements, which prevents the claim of end-to-end coverage. But Tesco isn’t dogmatic and it accepts that a smart approach for many would be to employ ERP as a core and then add systems around it in order to reduce integration issues.

Casino gambles on an ERP-supplemented best-of-breed strategy
This view was not shared by French retailer Casino, also speaking on behalf of a best-of-breed approach. Casino uses JDA and Aldata, but the company holds out that this is not an ERP approach because no packaged system is central. In fact, the most widely used functionality was developed in-house. Casino maintains that the best-of-breed approach provides much more flexibility, especially since business requirements change often. Best of breed lets parts of the system be extracted and replaced without major reconstruction of the other parts. With integration issues diminishing because of Enterprise Application Integration (EAI) technology advances, the company can’t see why anyone would not take this granular approach.

Wal-Mart builds what it can’t buy
It is a view also shared by Wal-Mart. Wal-Mart has opted for a very centralised development approach. Instead of buying systems, it prefers to build its own, and it has the monetary power to develop ahead of the rest of its competition. Wal-Mart’s main guidance to the group was that the company competes on business process expertise. Its IT personnel are considered merchants first, technologists second. Each thinks globally, and its strategy requires that a function be acted before it is designed. This prevents technology for technology’s sake. Wal-Mart also prioritises on "elimination before automation”; in other words, don’t automate bad process.

ERP keeps Coop humming
Switzerland’s second largest retailer, Coop, disagreed with Wal-Mart’s homegrown approach. Coop chose to implement SAP on a Sun Microsystems platform over an Oracle database. It likens SAP to a Swiss Army knife, with many useful and compact features. The best-of-breed approach, it says, is more like a tradesman’s toolbox--very heavy and leaving two questions unanswered: will the right tool be in the box when I need it, and will it still be sharp? It’s a good analogy, although experience suggests that these same questions could be leveled at ERP just as easily. It really depends on your point of view. Coop also voiced some caution regarding ERP that involves a number of vendors. When problems occur, time is often lost when interdependent partners pass the problem between them in order to apportion blame and/or cost, without actually resolving the issue.

Your needs dictate your path
The reality is that the decision of ERP versus best of breed in Retail does not have right and wrong answers. Many companies opt for an ERP route in order to stimulate a step change in either organisational structure or process, whereas the best-of-breed approach can be easier where diverse legacy systems will prevail after the change.

AMR originally published this article on April 14, 2003