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  • CFO.com | US

Where Retailing Meets ERP Software

How Pacific Sunwear found a specialized ERP system to help it grow into a 1,000-store chain.

As recently as 1994, Pacific Sunwear of California was a largely regional chain with most of its 90 stores on the West Coast. But then the company underwent an aggressive expansion, and today it stands at 650 outlets. Now the firm plans to add 300 more stores during the next three years, and 1,000 locations nationwide by 2004.

The Anaheim-based chain, which also runs stores under the PacSun name, built its reputation by keeping up with what’s hip and cool in teenage sportswear, accessories, and footwear. But the $700-million company has also learned it’s had to stay current with the technology it uses for its supply chain, with some 400 suppliers.

This year, as part of an effort to get a better grip on its supply chain, the firm upgraded its enterprise resource planning system, adding an E-procurement function. It also installed the Web EC E- commerce middleware system from SPS Commerce. Finally, later this year, the firm plans to implement the PkMS, warehouse package management system from Manhattan Associates.

The company’s ERP system, the SVi Retail System, from SVi Solutions (formerly Island Pacific Systems Corp.), “functions as the core of everything we do,” explains Ron Ehlers, the chain’s vice president of information services. The system runs on an IBM iSeries mid-range server, the class of hardware that Big Blue had tagged the AS/400 until last year, and Pacific Sunwear has been using it for merchandising, sales audit, and financials since the mid 1980s.

But the retailer’s rapid growth forced it to take a hard look at its infrastructure.

Last year, a consulting team from Deloitte & Touche reviewed the firm’s operations and recommended that it upgrade its supply chain.

“The key thing we were looking for was to make improvements in the efficiencies of the supply chain,” says Ehlers. Specifically, the firm wanted to integrate all of its electronic data interchange (EDI) transactions: invoices, outgoing purchase orders, and advance shipping notifications (ASNs).

The company uses the EDI format to send its vendors electronic purchase orders. It then receives an ASN and an electronic invoice. By adding SVi’s E-procurement module and the Web EC middleware, the store chain has automated the purchasing process with its suppliers.

“What we’ve done is set up an integration program between our SVi system and their Web electronic commerce platform,” says Ehlers. “We are literally going to get 100 percent of our vendors participating and communicating with us electronically.”

Already there have been tangible cost savings. Frank Schools, Pacific Sunwear’s vice president of finance, says he monitors the SVi system on a weekly basis in order to see where inventory and the gross margin are heading.

Schools says the weekly review is done “so merchants/buyers have complete understanding of the numbers we report. The data is very straightforward, and we can query into the data and take it down to a detailed level, if we want to.”

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