Retailer Co-op has been running a retail business transformation programme powered by SAP’s Retail ECC (enterprise core components) suite on Hana software to improve stock visibility and forecasting across its stores. It has now migrated all its SAP systems onto the SAP Rise cloud as a stepping stone to migrating off ECC and onto S/4Hana on Rise.
While it does operate some larger stores, Co-op is predominantly a convenience retailer. Describing SAP’s role in the business, Ian Cox, director of technology for SAP, and colleague products and platforms at Co-op, says: “It’s all about fast-moving goods. Our locations are predominantly in residential areas and we sell a lot of fresh goods and chilled food.”
He says the business operates on a quick turnaround, adapting to factors that impact buying trends such as the weather or the recent Euros championship: “When the weather’s good and England is doing well in the Euros [The UEFA European Football Championship], we do very well, as people walk around the corner and buy their BBQ stuff. For us, it’s about getting products in quickly, and getting them onto the shelf quickly.”
Co-op has been a long-term SAP customer. It previously ran its own private Microsoft Azure cloud but, according to Cox, external factors like high-profile supply chain issues, high fuel prices and driver shortages drove the decision-making process to focus on embedding the enterprise resource planning (ERP) system into the business. He says the setup of its enterprise systems was holding the company back.
“We had a lot of bespoke legacy systems for order management and trading,” says Cox. “And when we were looking at business performance, SAP was quite an easy thing to point at and say that it is not doing what we thought it should do.”
He adds that Co-op decided to reinvest in its relationship with SAP and internal efforts to embed the software into the business.
“Our CEO could see that having SAP closer to us was to our benefit. Sometimes I think people believe it’s best to keep them at arm’s length because they’re just going to want to sell us stuff, but we found that sometimes it’s to your benefit because SAP really helped us embed the software into the business,” he says.
Co-op also began talking to SAP about the benefits of deploying Rise. The retailer now runs SAP ECC on Hana, which includes a forecast and replenishment (F&R) module. Cox describes the F&R module as a core engine which powers customer replenishment daily, adding: “We run a batch job every night, which literally starts as the shops close, and start to collect sales data.”
The data from all stores is then processed to provide Co-op with data on stock positions across all its stores and depots. Given it is a fresh foods business, Cox says the F&R module helps Co-op reduce waste as the retailer can use the forecast to decide on a store-by-store basis, how much of each product needs to be replenished.
The improvement to forecasting is among the key technology investments, which has involved transforming its existing IT environment, and future-proofing its business against disruption to global supply chains and changing consumer expectations.
Customisation
The retail business transformation ended at the back end of 2021. The transformation was focused on core trading, supply chain and the commercial elements of the Co-op retail business based on ECC running the Hana database. Cox is particularly proud that Co-op only needed around 30 or so enhancements to ECC in terms of configuration changes. This is a relatively low figure for the level of customisation in a typical large enterprise SAP system.
The retailer is now embarking on an SAP S/4 Hana greenfield implementation for its finance transformation. When asked how he approaches the question of customisation of this system, Cox says: “You always run into the conversation, where someone will say that it doesn’t really do what we do today and we’re very unique. Everyone thinks that they’re unique.
“Ultimately, we’re no different to any other big retailer or the finance organisation within a retailer. It just comes down to good collaborative work across tech and across the business. It’s about involving the business up front in the design sessions and workshops where we work out process mapping and take them on the journey for the end-to-end process.”
In his experience, executive sponsorship is key. For Cox, the message needs to come from the top. “Unless you have that, it’s very, very difficult, because you get pushback from within the business,” he says. “Our CFO is sponsoring the finance transformation and she’s heavily involved.”
Cox believes that it is helpful to have third-party recommendations when working through change management. He says: “We had quite a few reference calls with retailers and other organisations. Co-op Sweden and Co-op Switzerland are two good examples that have gone through very similar retail transformations. System integrators can also help with the conversation.”
The route to S/4Hana on Rise
In April, Co-op completed a 12-month programme to move all its SAP systems into the SAP Rise cloud. Explaining the migration, Cox says: “We’ve done a lift and shift, and literally migrated everything from production into Rise. This is almost like a stepping stone approach.”
Now in Rise, Cox says the company is looking at how to migrate away from ECC and into S/4Hana. Co-op has started using SAP’s Business Technology Platform to integrate the various finance systems across the business.
The transformation of finance onto S4/Hana is due to go live in October. Next year, Cox says, Co-op is also planning to deploy S/4Hana across its 2,400 UK stores.
The implementation of the SAP system at Co-op illustrates an approach that others facing the 2027 end-of-support deadline for ECC can take as they migrate onto S/4 Hana. While it is clearly beneficial to avoid customisation, Cox’s approach of speaking to customer references doing similar transformations, and limiting customisations to a small and manageable number, looks like a plan IT leaders can build on in their own projects.