Peering across the abyss: Clothing and shoe companies cross the ERP chasm: Page 2

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Fresh from the semiconductor industry three years ago, Gary Acromite was hired by Wolverine World Wide as chief information officer in 1995. He thought the footwear industry would be a snap. "I thought, Gee, this'll be easy," says Acromite. Far from it. Each day, apparel and footwear makers keep track of thousands of stock-keeping units, or SKUs, that have shelf lives measured in months and even weeks. Furthermore, market conditions are among the toughest in any industry. Against the fickle winds of fashion, companies contend with a complex supply chain that depends on myriad small and technologically unsophisticated overseas production facilities.

Wolverine World Wide CIO Gary Acromite says that some of the AFS modules weren't ready for use as of January 1999.
To avoid getting stomped by flat sales and inefficient processes, the industry needed to shoehorn itself into a new, more efficient way of doing business. To Peter Burrows, that relief would come in the form of a global software partner. "We wanted what other industries have," says Burrows, chief technology officer for Reebok. Burrows approached SAP officials three years ago and suggested they create a tailored version of R/3 for the apparel and footwear industry.

SAP has been wildly successful doing the same sort of thing in 17 industry niches. Since dominating the manufacturing sector, it has methodically drummed up new customers for R/3 in sectors such as oil and gas or aerospace and defense. SAP's clout is so powerful that the mere mention of its planned entrance in a market triggers a flurry of activity. "As soon as SAP announced it would do insurance-claims processing in 2001, we had three or four clients call and ask, 'Should we be early adopters?'" says Vinnie Mirchandani, vice president in business applications for the Gartner Group, the market research firm based in Stamford, Conn.

But SAP's foray into the apparel and footwear industry was different. First, the idea originated from Burrows rather than from SAP's finely tuned marketing machine. Second, SAP was daunted by the patched-together state of the clothing and shoe industry, according to Burrows. "It appeared messy and hard to deal with, and the company said, 'Why should we be in it?'" he recalls. A spokesperson for SAP said no one at the company was available to discuss AFS. To encourage SAP, Burrows agreed to collaborate with VF Corp. to underwrite the software's development. VF, headquartered in Greensboro, N.C., is the largest apparel company in the U.S., with $5.2 billion in sales of such brands as Vanity Fair, Lee, and Wrangler. The two companies would be the charter members of the AFS consortium.

By May 1996, Reebok and VF were ready to submit their merged requirements to SAP. But a third investor was needed to help offset the cost. Burrows says he convinced SAP America to cover the costs until another partner could be found. Ultimately, the final third was provided by Sara Lee Hosiery, already an R/3 customer, and systems integrator Kurt Salmon Associates of Atlanta, which joined the consortium as associate members.

Three's a crowd

Industry consortia are a key element in SAP's entrance into new markets. The company's modus operandi includes partnering with a handful of large organizations and then adding more early customers as the software matures.

The AFS consortium operated according to a strict set of rules: Only Reebok and VF Corp. could add functionality to AFS. The other companies could only make suggestions for accomplishing processes. Burrows admits that he fought hard to ensure that Reebok earned a competitive edge from its investment in the development of AFS. "We tried to structure it so the other guys couldn't get in. We asked, 'Why should we let you in?'" After all, he adds, "we put up all the risk." Burrows declines to say how much Reebok invested. AFS participants at the lower membership level report paying upwards of $125,000 to join.

Sara Lee Hosiery sent an elite team of IT professionals to Germany to work with AFS programmers there. But the pantyhose business is less subject to the whims of fashion than Reebok's or VF's lines of apparel. Sara Lee's knitting machines frequently churn out one product for an entire year. Repetitive manufacturing, a feature of the AFS production planning module that would oversee the steady production runs, was key to Sara Lee's implementation.

Only when the Sara Lee staff began to ask questions about the missing feature were they told it had been deleted, says Randy Hyack, director of IT and SAP project manager for Sara Lee Hosiery. After recalling the staff to Winston-Salem, N.C., Sara Lee Hosiery replotted its AFS strategy: It would shelve AFS until the product was more stable and the functionality it needed could be written in. "We spent a lot of resources on the AFS project that could have been applied to other projects," says Hyack.

Sickles and rakes

Some executives who attended the teleconferenced AFS consortium meetings were satisfied with the sessions, but others expected more support and direction. Meanwhile, the consortium members were increasingly under the gun as 1998 passed: Sales were soft and the stock values of many AFS customers plummeted, including Authentic Fitness, Florsheim, Justin Industries, Reebok, Superior Uniform, Wolverine World Wide, and Warnaco.

Nerves became frayed. "SAP didn't pay enough attention to the 25 of us who participated," says one member who did not want to be identified by name. "We were executives from around the world, and they turned us into a hostile band of farmers with sickles and rakes."

Some participants say they aren't quite sure what became of the consortium and didn't perceive much benefit in it anyway. "It died of its own weight," says Brent Pulsipher, chief information officer for Tropical Sportswear International in Tampa, Fla., another AFS early adopter. "We were supposed to have a conference call every month, and we only had two. It was too much of a question-and-answer session."

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