Farmers looks to save $1m in costs

Farmers hopes to shave more than $1 million from its operating costs through the implementation of SAP retail and warehouse management software.

Services firm Oxygen, which has already implemented SAP Financials for the retailer, will again take the lead on the project. RSAP will handle merchandising functionality, while Consulting Principles will fine-tune the warehouse system.

Farmers finance chief Michael Power said SAP Financials had already given the company greater ability to collect and analyse information and maximise revenue.

"The old system did not have fixed asset modules nor integration into accounts receivable. We weren't able to properly manage the collection of volume rebates and other rebates we negotiate with our suppliers," Power said.

Farmers manages retail and warehousing functions with a disparate mix of internally developed software and packages cobbled together over the past 15 to 20 years, many of which run on an IBM mainframe.

"They are not integrated, they don't talk together, they are not real-time, and there is a significant maintenance cost," Power said.

"Part of the SAP equation is turning the mainframe off."

That will give "seven-figure" savings, which could involve laying off some of the 40 IT staff.

Farmers will run its new system on IBM midrange servers, and continue with the DB/2 database.

Power said having real-time information about what is in stock in warehouses or across Farmers' 59 stores will improve the company's ability to deliver on promises to customers.

"Currently we may think an item is in the warehouse, but then find it was sold earlier that day by another store," he said.

"IT is critical to our business, particularly in situations where the customer base is at the store and operations and stock may be miles away.

"There is no way all our stores can carry a full range of the furniture and appliances we sell, but they need to know what is in the warehouse and what they can promise regarding delivery."

SAP's retail solution allows retailers to track costs down to the individual stock-keeping unit level, and has built in forecasting and planning capability.

Power said once the new systems are running efficiently, Farmers will consider whether to outsource management of them or any other business functions to a company like Oxygen. "The key to outsourcing is to make sure you don't outsource your inefficiencies. That way, you give away your margins and profits," he said.
He said Farmers is also looking for process improvements.