CASE STUDY Luxottica Retail
expenses and rent-free periods), and critical dates (such as rent reviews and rent increases). The business was also encountering difficulties managing its expanding portfolio. After evaluating a number of property management solutions, Luxottica found SAP’s Flexible Real Estate Management solution matched its existing functionality and offered much better integration to financials than the available alternatives. The company also found concerns over useability could be addressed with a strategy around Portal, SAP NetWeaver Business Intelligence and custom Web Dynpro. Finally, the choice made sense as Luxottica already had an existing investment in SAP with its ERP application and NetWeaver Business Warehouse component. “Beyond visibility, project management was a governance issue, an audit issue,” says Mark Shaw-Taylor, vice president of acquisitions, real estate and vision services, Luxottica Retail. “There is a host of compliance issues associated with managing the installation of a new store.” “We had to equal the functionality of the best-of-breed applications out there, and we did,” says Vaughan. “That made SAP Flexible Real Estate Management the obvious choice for Luxottica – given the integration aspects and the opportunity to leverage the core business software.”
Implementation Courtesy of the ASAP Focus methodology that Harms Consulting applied to the project, which is employed to prepare an organisation’s system, data, and people to successfully run new SAP solutions, Luxottica initiated the project in December 2008 and converted to the new system in April 2009. Using this methodology also helped Luxottica minimise any apprehensions staff may have had about the new SAP software programs, and illustrated how the solutions would alleviate, not exacerbate, the issue of limited availability of business resources. The five-month roll-out included the implementation of SAP Flexible Real Estate, Portfolio and Lease Management, Rental Accounting, Procurements for store fit-out projects, Licensee Management using real estate contracts, Reporting in NetWeaver BI 7.0 and NetWeaver Portal integration. The SAP upgrade was integrated with an Oracle database, IBM P595 hardware and an AIX operating system.
Results As Luxottica’s manual procedures were replaced by automated solutions, the company found its overall business processes improved accordingly. “Previously, when we did our rent payment, there would inevitably be questions from the cost centre managers,” Hess says. “It used to take us weeks to get them answers, but now I can respond within one day.” The implementation of SAP solutions gave Luxottica a complete view of its portfolio, and a dramatic reduction
18 Inside SAP magazine
in time taken to produce reports. It also facilitated simple visibility of critical dates and store fit-out costs, an efficient and accurate monthly rent roll, the ability to accrue rental increases expenses much more accurately, better management of licensees and a reduction in operational risk. “Every month, someone would have to work with spreadsheets for various financial tasks – for example, to make real estate payments,” Vaughan says. “That’s all changed. The company now uses the SAP software to maintain the lease contracts and manage all financial data.” The SAP implementation also allowed revision of other processes such as project procurement and management reporting, lease administration and asset capitalisation of fit-out projects. “Having eliminated spreadsheets and manual tasks like data entry, everything flows through exactly as planned – if the contracts are maintained correctly,” Vaughan adds. “We went live with all 900+ stores in one big bang. We had a rent roll of about $7 million per month, and when we did the first reconciliation after the implementation, we were out less than $100, which was quite remarkable and far better than the results we were getting with our previous manual procedures,” says Hess. “SAP Flexible Real Estate Management has helped us immeasurably. We can now control our rent expenditures and meet our project management requirements for the proper and timely control of fit-out costs.” Luxottica considers the highlights of the SAP upgrade to be the establishment of a robust real estate system with trusted integrity, accurate, timely and targeted reporting delivered via SAP NetWeaver BI and the ability to address usability issues through Portal-based access, Excel template-based quotation and purchase order uploads, Web Dynpro ABAP Purchase Order Wizards and push reporting (email broadcasting). So how has the SAP implementation translated to tangible results? “The first benefit I noticed was in the reporting area,” Hess says. “I can now produce reports in one hour, versus the four days it previously required. So my efficiency has improved commensurately.” The company also believes its newfound visibility into real estate-related transactions has given it greater negotiating power with its landlords. “We’ve probably minimised rent increases,” Hess adds. “In the past we would have accepted rent increases of 70-80 per cent, based on the information available to us. Now, with the financial reporting coming out of SAP Flexible Real Estate Management, we can project costs six months out and determine what we can actually afford at each particular site.” Additionally, with $24 million per annum in capital expenditure, Luxottica believes the ability to monitor supplier performance as well as procurement activities allows it to make smarter decisions and subsequently reduce costs.