Languages
Pages
Legal
2012 Learning About Inventory from ERP Implementations
WIS Customer Forum Oct 2012
KPMG LLP
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
2
Why are Retailers Moving to ERP Systems?
‒ Importance of one source of truth for both financial and management reporting
‒ Enhanced receivable/billing process and matching
‒ A unified and single reporting system to analyze the statistics/ numbers/ status etc in real-time, across all the functions / departments
‒ Automatic and coherent work-flow from one department / function to another to ensure smooth transition/ completion of processes
‒ ERP systems are more secure as centralized security policies can be applied to them and all the transactions happening via the ERP systems can be tracked
‒ Single Database is implemented on the back-end to store all the information required by the ERP system and that enables centralized storage / back-up of all enterprise data.
‒ ERP systems make it easier for order tracking, inventory tracking, revenue tracking, sales forecasting and related activities
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
3
ERP Challenges
‒ Cost
‒ IT or Finance Led rather than business
‒ IT resources not sufficient to deploy and maintain
‒ Data Governance
‒ It is hard to customize
‒ Very few companies can effectively use ERP right out of the box
‒ It must be modified to suit their needs, and this process can be both expensive and tedious.
‒ Even when a company does begin changing the system, they are limited in what they can do
‒ Can’t undo your conversion
‒ Disruptions to transaction flows
‒ Interface failures between SAP and other systems
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
4
ERP Challenges
Challenges our clients have faced:
‒ Ensuring you leverage all of the ERP functionality
‒ Importance of accurate process, system and accounting flows
‒ Master data and department hierarchy
‒ There is not “standard definition” of cost in Retail
‒ Organizations often define cost differently for domestic vs. globally sourced product
‒ ERP conversion planning – physical Inventories, accuracy of item files, open PO’s
‒ Chart of account mapping & testing
‒ Perpetual inventory management (negatives, dept rings)
‒ 3 way match and associated issues
‒ Inventory shortage and of inventory adjustments tracking
‒ Importance of receiving accuracy
‒ Bill of material items
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
5
Discussion – Converting to Cost
Challenges our clients have faced:
‒ Communicating the advantages
‒ Challenges of change management
‒ Organizations often focus on financial reporting when converting to cost rather than management reporting
‒ Payables- accuracy & matching issues, import reconciliation, level of matching (summary, line item)
‒ Payables -practice of paying the lower of invoice
‒ Merchants - discipline of master item files accuracy
‒ Merchants – vendor compliance and enforcement
‒ Merchants – new management reporting – margin reporting in particular
‒ Importance of receiving – DC & Store
‒ Store Operations – cycle counts, mark-outs, inventory processes, reporting, POS discipline, finish goods, unidentified inventory, dept rings, RTV
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
6
Financial Considerations
‒ Which method of accounting?
‒ Assess the financial impacts of moving to cost and outline mitigation strategies
‒ Assess any tax impacts related to moving to cost and outline mitigation strategies
‒ Provide a summary of recommendations related to key themes (definition of cost, inventory adjustments, cycle counting, master data management, etc)
‒ Inventory movement tracking and accounting
‒ 3 Way Match
‒ Map and test chart of accounts
‒ Project ROI and cost management
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
7
Process Considerations
‒ Set up cross functional meeting to discuss and map end to end business processes
‒ Identify key stakeholders impacted by the project and will be responsible for implementing and communicating key business process changes
‒ Store Operations – cycle counts, mark-outs, inventory processes, reporting, POS discipline, finish goods, unidentified inventory, dept rings, RTV
‒ Estimate the level of difficulty using three dimensions (time, cost, and resources)
‒ Assess overall organizational readiness for change
‒ Assess roles, responsibilities and job impact
‒ Conversion planning and the potential impacts on the organization
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
8
System Considerations
‒ ERP is often too focused on technology
‒ ERP conversion planning – physical Inventories, accuracy of item files, open PO’
‒ Integration with WMS systems
‒ Has your organization completed transaction testing?
‒ Are automated balancing routines established between systems?
‒ Who is responsible and are error logs worked daily?
‒ Do business owners have to sign off on all system design changes?
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
9
Reporting Considerations
Complete a reporting impact analysis
‒ Importance of establishing one source of truth for reporting
‒ Assess master data clean-up and maintenance
‒ Document key current operational and financial reporting related to margin, shrink and inventory adjustments
‒ Assess shrink and waste calculations
‒ Assess inventory adjustments, cost adjustments, and other top level adjustments impacting margin, shrink and inventory adjustments
‒ How effective is your reporting related to: Inventory Adjustments
PO, Receipt, Invoice & Payment
ASN Exception Reporting
Vendor Compliance
Non-match reporting (RTV, PO Order Qty, Receipts, Wrong or missing PO)
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
10
Shrink Framework
Shrink
Physical Shrink
Paper Shrink
Stores
In-transit
Distribution Center
Warehouse
Vendor
Systems
Processes
Accounting
Transaction Processing
Interfaces
Conversions
Global Imports
DC, Cross Docks and Stores
Returns
Master Data
Inventory Management
Account Payables
Inventory Accounting
Inventory Control
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
11
Tool What is it and why? Project Benefits
Process Documentation
A facilitated cross functional approach to documenting and identifying key gaps, controls and risks associated with key business processes.
Process, system and account mapping is a critical step in planning and executing a successful new systems implementation. This step will help identify process improvement, and alignment issues prior to implementation. It will also highlight potential areas requiring system modifications or process changes to avoid custom modules when implementing new systems. It also is a important input for the job impact analysis.
Organization and Job Impact
Analysis
A set of tools to identify and manage specific impacts to job roles and responsibilities within the organization associated with the specific change effort.
All too often organizations do not focus enough on the job roles, impacts, and related capability gap questions associated with a change that need to be proactively addressed. Company X benefits by having a disciplined approach to both defining job roles in the future state but also doing a fact-based analysis of what activities will need to start, stop and continue in the new environment.
Tools
Major change expected
Some change expected
Minimal change expected
Not Applicable
Major change expected
Some change expected
Minimal change expected
Not Applicable
Changes in reporting relationships, levels and spans of control
Structure
Changes to processes associated with current role and responsibilities
Process
Changes to current systems being used by impacted roles
Systems
Changes in role and responsibility for performing specific activities
Roles & Responsibilities
Changes in who is accountable for results of specific activities and the process for defining who is involved and approves decisions
Accountability & Decision Making
Changes in the key indicators of success for individuals, groups and overall business
Performance Measures
Changes to skills and competencies required to support new processes & leverage new technology
Skills & Competencies
Changes in behavior require to support new processes & carry out new roles & responsibilities
Behaviors
Changes in the employee mindset required to perform the new process & adopt new role & responsibilities
Mindset
Access to and management of information for managing the business
Information
Changes in reporting relationships, levels and spans of control
Structure
Changes to processes associated with current role and responsibilities
Process
Changes to current systems being used by impacted roles
Systems
Changes in role and responsibility for performing specific activities
Roles & Responsibilities
Changes in who is accountable for results of specific activities and the process for defining who is involved and approves decisions
Accountability & Decision Making
Changes in the key indicators of success for individuals, groups and overall business
Performance Measures
Changes to skills and competencies required to support new processes & leverage new technology
Skills & Competencies
Changes in behavior require to support new processes & carry out new roles & responsibilities
Behaviors
Changes in the employee mindset required to perform the new process & adopt new role & responsibilities
Mindset
Access to and management of information for managing the business
Information
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
12
Tool What is it and why? Project and Company X Benefits
Stakeholder Analysis
A Stakeholder Analysis identifies who the stakeholders are and evaluates their current commitment and what level of commitment is required from them in order for the project to succeed. Stakeholders can be defined as any person / group of individuals, internal or external to the organization who will be impacted by the changes, or who could have an impact on the success of the project.
A Stakeholder Analysis helps Company X and the program team by identifying and understanding who are the most powerful/influential stakeholders and where the change team needs to spend time managing stakeholders to achieve effective support for the project. Achieving this insight early on in the project enables active stakeholder management to achieve sustainable commitment
Leadership Action Plans
A series of plans for key stakeholders and leaders to help drive change management efforts for the initiative. Leadership action plans provide a blueprint of key activities necessary from leadership to executive change activities and communications associated with the transformation.
Leaders' values and behaviors are aligned with the business vision and there are actionable plans for those leaders to spearhead the change.
Deliverables - Benefits
HIGHLOWSupport Demonstrated
HIGHLOWSupport Demonstrated
HIGH
Involve as NeededKeep Informed
(Communication Network)
Engage and Involve (Risk) Champions
Ab
ilit
y t
o In
flu
en
ce S
uccess
Ab
ilit
y t
o In
flu
en
ce S
uccess
Current state Desired state
Leader #5
Leader #13
Leader #1 Leader #2
Leader #10Leader #3
Leader #12
Leader #11
Leader $7
Reg’l HRD
Leader #6
Leader #9
LAP
Leader #8
Leader #4
Return
CRM Leader:
Achievement Criteria Timing
Review the Integrated Change Management Strategy and the Communication Strategy and the Short-Term Communication Plan
May – June
Work with Management Team to establish a guiding coalition (or other appropriate forum) and to identify a membership that has a broad, diverse perspective to direct and guide the transformation process
June
Participate in a meeting to develop the Guiding Coalition’s roadmap of activities with criteria and measures for success. Provide a corporate perspective, as well as provide the Sales and Marketing viewpoint to the transformational change
June
Participate in CDI/CDRT Leadership work session to help identify appropriate roles and responsibilities for Corporate and CDRT in order to begin bridging the gap between the two organizations
June
Work with Change Team to develop compelling CRM messages on: o Business drivers for change o CRM vision o Expectations and accountability for leaders in the new customer-centric
environment (“What’s in it for me”)
June – July
Conduct small group meetings to engage Corporate and Race Track leadership (i.e., Department Heads, managers, and supervisors) so they understand the business case for change, the CRM vision and principles, and their roles in leading employees through the transformation process
June – August as needed
Conduct one-on-one sessions to coach and guide down-the-line leadership on new customer-facing values and behaviors
June – August as needed
Travel to Arlington Park Race Track and other Race Tracks as needed to communicate vision and objectives, exhibiting leadership support of CRM initiative
June – August
Participate in monthly Executive Steering Committee meeting for CRM initiative
June – September
Provide guidance, strategic direction, and accountability for Event Planning, Customer Intelligence, and Transformational Change initiatives
June and ongoing
Leadership Summary
Leaders Mapping
PurchasingName
Functional AreaLeader
PurchasingName
Functional AreaLeader
– Immediately & continuously
– During CRPs
– Walk around to solicit and address any questions
– Identify support and back up for Project Lead
– Ensure the right resources are involved and supported; backfill where appropriate
– Involve as many as possible in the CRPs
Engage the Organization
– Immediately & continuously
– Conduct frequent and consistent Leadership staff meetings and include a section on project updates – ask Leaders to cascade information throughout their respective groups
– Attend all Steering Committee meetings and provide updates to your Leadership Team
– Walk around to solicit and address any questions; ASK for opinions, use them when appropriate, or explain why not
– Leverage your Change Agent & Communications Network
– Celebrate functional project successes and milestones
– Attend monthly project update sessions with your organization
Communicate
– Immediately & continuously
– Continue to emphasize the benefits and gains
– Show enthusiasm and support for the project
– Help the organization understand why this is strategic and aligns to the success/vision of Severstal
Business Case
TimingActionLeading Practice
– Immediately & continuously
– During CRPs
– Walk around to solicit and address any questions
– Identify support and back up for Project Lead
– Ensure the right resources are involved and supported; backfill where appropriate
– Involve as many as possible in the CRPs
Engage the Organization
– Immediately & continuously
– Conduct frequent and consistent Leadership staff meetings and include a section on project updates – ask Leaders to cascade information throughout their respective groups
– Attend all Steering Committee meetings and provide updates to your Leadership Team
– Walk around to solicit and address any questions; ASK for opinions, use them when appropriate, or explain why not
– Leverage your Change Agent & Communications Network
– Celebrate functional project successes and milestones
– Attend monthly project update sessions with your organization
Communicate
– Immediately & continuously
– Continue to emphasize the benefits and gains
– Show enthusiasm and support for the project
– Help the organization understand why this is strategic and aligns to the success/vision of Severstal
Business Case
TimingActionLeading Practice
Leadership Action Plan
HIGHLOWSupport Demonstrated
HIGHLOWSupport Demonstrated
HIGH
Involve as NeededKeep Informed
(Communication Network)
Engage and Involve (Risk) Champions
Ab
ilit
y t
o In
flu
en
ce S
uccess
Ab
ilit
y t
o In
flu
en
ce S
uccess
Current state Desired state
Leader #5
Leader #13
Leader #1 Leader #2
Leader #10Leader #3
Leader #12
Leader #11
Leader $7
Reg’l HRD
Leader #6
Leader #9
LAP
Leader #8
Leader #4
Return
CRM Leader:
Achievement Criteria Timing
Review the Integrated Change Management Strategy and the Communication Strategy and the Short-Term Communication Plan
May – June
Work with Management Team to establish a guiding coalition (or other appropriate forum) and to identify a membership that has a broad, diverse perspective to direct and guide the transformation process
June
Participate in a meeting to develop the Guiding Coalition’s roadmap of activities with criteria and measures for success. Provide a corporate perspective, as well as provide the Sales and Marketing viewpoint to the transformational change
June
Participate in CDI/CDRT Leadership work session to help identify appropriate roles and responsibilities for Corporate and CDRT in order to begin bridging the gap between the two organizations
June
Work with Change Team to develop compelling CRM messages on: o Business drivers for change o CRM vision o Expectations and accountability for leaders in the new customer-centric
environment (“What’s in it for me”)
June – July
Conduct small group meetings to engage Corporate and Race Track leadership (i.e., Department Heads, managers, and supervisors) so they understand the business case for change, the CRM vision and principles, and their roles in leading employees through the transformation process
June – August as needed
Conduct one-on-one sessions to coach and guide down-the-line leadership on new customer-facing values and behaviors
June – August as needed
Travel to Arlington Park Race Track and other Race Tracks as needed to communicate vision and objectives, exhibiting leadership support of CRM initiative
June – August
Participate in monthly Executive Steering Committee meeting for CRM initiative
June – September
Provide guidance, strategic direction, and accountability for Event Planning, Customer Intelligence, and Transformational Change initiatives
June and ongoing
Leadership SummaryLeadership Summary
Leaders Mapping
PurchasingName
Functional AreaLeader
PurchasingName
Functional AreaLeader
– Immediately & continuously
– During CRPs
– Walk around to solicit and address any questions
– Identify support and back up for Project Lead
– Ensure the right resources are involved and supported; backfill where appropriate
– Involve as many as possible in the CRPs
Engage the Organization
– Immediately & continuously
– Conduct frequent and consistent Leadership staff meetings and include a section on project updates – ask Leaders to cascade information throughout their respective groups
– Attend all Steering Committee meetings and provide updates to your Leadership Team
– Walk around to solicit and address any questions; ASK for opinions, use them when appropriate, or explain why not
– Leverage your Change Agent & Communications Network
– Celebrate functional project successes and milestones
– Attend monthly project update sessions with your organization
Communicate
– Immediately & continuously
– Continue to emphasize the benefits and gains
– Show enthusiasm and support for the project
– Help the organization understand why this is strategic and aligns to the success/vision of Severstal
Business Case
TimingActionLeading Practice
– Immediately & continuously
– During CRPs
– Walk around to solicit and address any questions
– Identify support and back up for Project Lead
– Ensure the right resources are involved and supported; backfill where appropriate
– Involve as many as possible in the CRPs
Engage the Organization
– Immediately & continuously
– Conduct frequent and consistent Leadership staff meetings and include a section on project updates – ask Leaders to cascade information throughout their respective groups
– Attend all Steering Committee meetings and provide updates to your Leadership Team
– Walk around to solicit and address any questions; ASK for opinions, use them when appropriate, or explain why not
– Leverage your Change Agent & Communications Network
– Celebrate functional project successes and milestones
– Attend monthly project update sessions with your organization
Communicate
– Immediately & continuously
– Continue to emphasize the benefits and gains
– Show enthusiasm and support for the project
– Help the organization understand why this is strategic and aligns to the success/vision of Severstal
Business Case
TimingActionLeading Practice
Leadership Action Plan
PurchasingName
Functional AreaLeader
PurchasingName
Functional AreaLeader
– Immediately & continuously
– During CRPs
– Walk around to solicit and address any questions
– Identify support and back up for Project Lead
– Ensure the right resources are involved and supported; backfill where appropriate
– Involve as many as possible in the CRPs
Engage the Organization
– Immediately & continuously
– Conduct frequent and consistent Leadership staff meetings and include a section on project updates – ask Leaders to cascade information throughout their respective groups
– Attend all Steering Committee meetings and provide updates to your Leadership Team
– Walk around to solicit and address any questions; ASK for opinions, use them when appropriate, or explain why not
– Leverage your Change Agent & Communications Network
– Celebrate functional project successes and milestones
– Attend monthly project update sessions with your organization
Communicate
– Immediately & continuously
– Continue to emphasize the benefits and gains
– Show enthusiasm and support for the project
– Help the organization understand why this is strategic and aligns to the success/vision of Severstal
Business Case
TimingActionLeading Practice
– Immediately & continuously
– During CRPs
– Walk around to solicit and address any questions
– Identify support and back up for Project Lead
– Ensure the right resources are involved and supported; backfill where appropriate
– Involve as many as possible in the CRPs
Engage the Organization
– Immediately & continuously
– Conduct frequent and consistent Leadership staff meetings and include a section on project updates – ask Leaders to cascade information throughout their respective groups
– Attend all Steering Committee meetings and provide updates to your Leadership Team
– Walk around to solicit and address any questions; ASK for opinions, use them when appropriate, or explain why not
– Leverage your Change Agent & Communications Network
– Celebrate functional project successes and milestones
– Attend monthly project update sessions with your organization
Communicate
– Immediately & continuously
– Continue to emphasize the benefits and gains
– Show enthusiasm and support for the project
– Help the organization understand why this is strategic and aligns to the success/vision of Severstal
Business Case
TimingActionLeading Practice
Leadership Action Plan
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
13
Tool What is it and why? Project and Company X Benefits
Change Risk Analysis
Practical approach and statistical diagnostics to help identify, quantify, qualify, prioritize, and mitigate the organization change readiness and risk factors in implementing the change. The CRA articulates the specific recommended actions required to proactively manage the change effort and provides key input to downstream change management deliverables by identifying the situational enablers and barriers.
This diagnostic will shed light on organizational capacity for change and will allow Company X to develop the right solution while also creating a roadmap to move the Banners and impacted individuals through the Change to drive sustainability. The key benefit here is to understand what unique risks Company X is facing and how to deal with them.
Executive Summary
A summary of our finding, observations and recommendations related to project topics including – financial impacts, tax implications, Inventory valuation methods, roll-out approach, store operations impacts, etc.
Practical approach and advice related to key issues and challenges that other retailers have faced when converting to cost and in implementing key retail systems. This approach will assist in evaluating the benefits, cost and difficulty related to operational, financial and system changes and process improvements.
Deliverables - Benefits
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
14
Contact Information
Al Voels
Retail Practice Leader
KPMG Canada
Telephone: (206) 979-7654
Email: [email protected]
© 2012 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
.
Top Related