#S4HANA 1709 use case series: 4a – Industry to Core: Fashion and Vertical Business (biz view)

Welcome back to our well-known use case series. It is designed to offer a closer look at business value acceleration – driven by the design principles of SAP S/4HANA. The technology-induced implications of the digital economy are huge, though the technology itself is only a catalyst to achieve a fundamentally different business outcome.

The selected use cases, related to SAP S/4HANA Release 1709 are designed to emphasize and visualize the value behind this technological shift, that can be activated by you.

After looking at advanced variant configuration (use case 3a business, 3b technical) of SAP S/4HANA 1709, we will focus on Industry to core, specifically the fashion and vertical business capabilities, in this blog.

The fashion market is one of the most important consumer goods markets. In the last few years, the industry has experienced an almost steady growth. But will this positive trend continue also in the future?

We see that consumers are getting older as a consequence of the demographic development; the consumer business is getting more and more vertical and the online trade continues to grow. Already today, the fashion market is one of the highest online shares compared with other industries. Therefore, the fashion industry is particularly subject to a comprehensive structural change.

Let us have a closer look at these changes and the consequences for the fashion industry focusing on two scenarios – the vertical business and consumer expectations.

Vertical business model

Analysts are expecting a significant growth of the vertical business and mono-labels in the next couple of years. An increasing number of multinational fashion companies enter the market and expand the range of products offered. Brand manufacturers increasingly rely on their own retail activities, online and offline. Cross-channel retailing primarily benefits from large vertical dealerships as well as manufacturing brands, which are widely distributed, as they, for example, offer sufficient access points for Click & Collect services. The Internet Pure players also increasingly rely on their own brands.

The digital economy also enables a more direct link between consumers and manufacturers, and manufacturers are starting to take advantage of this reality.

Add to that, in the fashion market competition for the consumers’ favor is immense. Even large companies must prove themselves incessantly, to be innovative and to develop continuously attractive concepts for customers. Mass personalization and functional clothing will become commodity. Consequently, fashion products and services need to be adaptive. Automated manufacturing will enable “Fashion on demand” and the traditional fashion value chain transforms into business networks.

Cross-channel integration

For instance, consumer expectations about shopping have changed dramatically in the last few years. Many consumers now take for granted that shopping should be a seamless experience, allowing them to carry out transactions wherever they happen to be, in a store or online. Consumers want the option of ordering a product online, and then picking it up at the store or getting it delivered to their homes. This has created intense pressure not only for fashion retailers to make the shopping experience seamless, and to give consumers new levels of convenience and choice. It also creates enormous cost pressure because of the need to upgrade logistics and handle online transactions.

We see from market research, the imperative for traditional fashion retailers is to create a cross-channel offering, one in which their customers have the same experience online as well as in their stores. Customers can move between the two channels without friction. Not only the online and offline channels need to be organizationally combined, but the online and offline operations need also to be well integrated.

If a fashion retailer’s channels are to be truly integrated, they must be linked to a single IT platform with a dedicated cross-channel integration layer. The idea of having an intelligent Enterprise is to provide visibility and a seamless experience across all channels, so that, for instance, customers checking the fashion retailer’s website can determine the availability online and, of course also the quantity available of an item in the store. Traditional retailers have still batch systems in place. The fact that the last item of something has been sold won’t necessarily be evident instantly to online shoppers. Customers could show up at the store and discover they’d wasted a trip. There are only few faster ways to get customers frustrated.

The following list contains the global trends and challenges that will influence how the fashion industry does operate the future vertical business:

• No standard or mass customer anymore. Everyone needs to be addressed individually
• We are in the age of uncertainty; discount culture led to consolidation of global fashion market
• Fashion reached end of cost cutting downturn. Business transformation into a customer centric enterprise is key to survive
• Omnichannel management revolutionizes customer dialogue. Fashion companies need to collect customer insights across every touch point in order to develop, source and market fashion items
• Leading fashion companies do more than just apparel
• More styles, more often led to less creativity and higher turnover among creative directors
• Mass personalization and functional clothing will become commodity. Consequently, fashion products and service need to be adaptive
• Automated manufacturing will enable “Fashion on demand” and the traditional fashion value chain transforms into business networks
• Product recommendations are good – predictive suggestions are better

SAP addresses these challenges with the new SAP S/4HANA 1709 release. SAP S/4HANA offers functionality to solve upcoming market needs and provides significant extensions of functionality and scope for retailers and vertical companies.

Industry to core and the support of the fashion and vertical business models are main objectives for the SAP S/4HANA for fashion and vertical business.

Innovation highlights for fashion and vertical businesses, available with the latest SAP S/4HANA release, include:

• SAP S/4HANA for fashion and vertical business
  • Functional Enhancements
    • Master Data
    • Demand and Supply Planning
    • Procurement, Inventory and Logistics
      • Procure to Pay
        • Logistics Distribution
        • Return Logistics
        • Vendor Consignment
        • Subcontracting (w/o Supply Assignment)
      • Sales and Distribution
        • Order to Cash
        • Customer Returns
        • Purchase to Order (w/o Supply Assignment)
        • Third-Party Order (w/o Supply Assignment)
        • Consignment Processing
      • Stock Protection (using advanced ATP with Product Allocation)
      • Supply assignment
        • Is a S/4 HANA core solution available to every customer
        • Supply Assignment and Back Order Processing (BOP) are merged into one common solution based on advanced ATP
        • FIORI based app to execute, view the results and compare between simulations
        • Insight to action –Supply Assignment Workbench to check exceptions and acting on it
      • Demand and Supply Segmentation
    • Responsive User Design
      • New Fiori apps for the store manager and store associate and new roles
      • Fiori Object pages for Product/Article, Site, Allocation
      • Further visual harmonization (Fiori Theme classical GUI)

The digital framework for the fashion and vertical business

• Delivers THE real-time fashion platform and creates smarter, faster fashion on a common data & forecast foundation
• Empowers employees and redefines customer engagement & commerce while providing contextual and personal experience across all touch-points throughout the customer journey
• Creates efficiencies, insights, & new revenue models via business networks & IoT to reinvent commerce with business partners, connected consumers & connected devices
• Builds leading fashion functionality and transforms business processes with complete & real-time understanding of customers, inventory, and sales
• Simplifies IT landscape & business processes to unlock business innovation

Pic 1: The Digital Framework for the fashion industry enables fashion companies to transform business models, re-engineer business processes, and re-imagine work

Pic 2: The look-up retail / fashion application for store managers and associates provides in a responsive user design real-time access to products information to answer instantly any customer question

Value Drivers

SAP S/4HANA Fashion enables fashion companies to transfer business models, reengineer business processes and reimagine their work, so they can intelligently match their demand and supply, act as an integrated unit and unlock business innovation.

If you are interested in more fashion retail input, stay tuned for the technical view blog on fashion retail.

All blog posts of this series can be found here.

For more information on SAP S/4HANA, check out the following links:

SAP S/4HANA release info: www.sap.com/s4hana

And follow us via @SAP and #S4HANA or myself via @BeSchulze