State of the art valuation for Fashion Retailers
Moving to the latest valuation methods often is a complete shift in reporting of the companies trading goods. A successful transition to the SAP valuation for fashion retailers has been implemented at one of the leading fashion companies for women clothing.
The customer implementation took place at a leading international fashion label which designs, produces and sells fashion for women in retail stores. Embedded in a full ERP implementation the core part of the logistic and finance integration has been to shift to a new valuation method.
The starting point has been a valuation of the trading stock that is based on a periodically recalculation of stock in order to report the stock at the legally required dates. The valuation with the stock ledger in SAP Retail is quite different and therefore a powerful tool to steer the company success:
The cost inventory method will be supported in SAP. This method will be used for the management of stocks on a quantity and value basis. The price will be the basis for the posting of the stock accounts in financial accounting. Most of the benefits arise from the principle of perpetual valuation. Therefore every goods movement and relevant inventory events automatically update the inventory units and values. In addition the inventory is managed at the location/item level using a base unit of measure. The whole inventory is managed solely on a cost basis with an option to choose between two price control methods. It actually means that the inventory values are based upon what you actually paid for the item. That also includes the fact that the cost value of inventory is independent of retail price changes. The cost of goods sold and ending inventory are calculated using the cost per unit multiplied by units. This leads to a company situation where the current value of inventory is known at all times. It does not need to be calculated at the end of the period.
How did the customer benefit?
When the current value of inventory is known at all times – in real-time – you are in the driver’s seat with full control of the companies valuation and the possibility of direct reaction. All business processes like e.g. procurement operations with goods receipts, invoice management or valuation changes will be instantly visible. This perfectly updated foundation in the retail ledger could then be used in multiple ways: Planning, stock monitoring, retail fashion reporting to name just a few. In addition a full real-time transition of all values will be automatically accounted in SAP Financials. Therefore all financial reporting benefits could be consumed, too.
This very successful project safeguarded the customer into a new world of reporting possibilities. Working with the state of the art valuation solution opens the door for strategic future investments of the companies IT. Using groundbreaking SAP innovations could further enhance the use of this solution: SAP HANA enabling instant insight and immediate impact, the Cloud Deployment and Mobile solutions to reach new users, accelerate processes and provide direct reporting tools.