Microsoft Dynamics NAV supports the unique business model of haute couture with customization flexibility and lower deploying cost, with capabilityto satisfy future demand growth.
Shiatzy Chen Embraces Global Positioning and Better Efficiency by Adopting ERP System
Client Profile
Founded in early 1978 in Taipei, Shiatzy Chen combines top-notch Western craft and subtle Eastern Originality, leading the fashion world into thousands of years of classic culture through unwavering insistence on quality. Shiatzy Chen’s product range covers elegant women’s apparel, tasteful and free-spirited men’s clothing, leather goods, shoes and accessories. In 2003, the brand added a new line of home accessories, as well as the Oriental festivity series.
In 2008, Shiatzy Chen made its debut in Paris Fashion Week, and has so far launched series of design including “Porcelain”, “the Silk Road”, “Rendition of the Soul”, “Essence of Jade”, “Shadow Play”, “Treasure Kit”, and “Snuff Bottle”, successfully establishing itself as an international brand. Currently Shiatzy Chen has a total of 58 points of sale in Europe and Asia, including 18 directly managed stores and 40 department store counters.
In 2009, Shiatzy Chen decided to implement a new Enterprise Resource Planning system (ERP) and further strengthen its management structure as an international corporate. Their choice is Microsoft Dynamics NAV, also a globally renowned brand. After completing the first phase of Go-live in early 2011, substantial results can be seen both in efficiency and integration.
Issues
- Old enterprise logistics management system developed by contract programmers lacks integration, and needs to be supplemented by a large number of manual operations.
- The special operation mode of Shiatzy Chen made it different from mass production garment industry. Greater system flexibility and customization support is required.
Priority in providing industry-specific support
With a history of more than three decades, Shiatzy Chen, as with many other corporations, inevitably faced many problems derived from an out-dated system. The old system was originally developed by contract programmers and many of its operations were not compatible with international practice. Shiatzy Chen had to consider abolishing the old system or re-integrating it with a newer system.
Having decided on migrating to a new system, Shiatzy Chen immediately started to look for a service provider. With flexibility and functionality in mind, Shiatzy Chen chose a European provider specializing in textile industry. The solution offered by the provider used Microsoft Dynamics NAV as its platform, and thus began Shiatzy Chen’s cooperation with the MCS (Microsoft Consulting Services) team of Microsoft Taiwan.
However, the European service provider went into bankruptcy during the implementation phase. Upon evaluating the risks on continuous support and system compatibility, Shiatzy Chen decided to forgo the European provider but continued to use Microsoft Dynamics NAV as solution for platform development. Knowledge & Strategy Information Co., Ltd became their chosen partner of implementation and customization.
Mr. Jason Fan, Director of Shiatzy Chen, said: “The first thing we excluded was the ERP system of other international brands because they are too big, too costly, too difficult to customize for Shiatzy Chen, and also take too long to implement. In contrast, Microsoft Dynamics NAV can meet our needs much better.”
In the apparel industry, almost all IT solutions are aimed at companies with OEM/ODM business models, whose workflow starts with designing, and then proceeds to analyzing BOM, buying materials, and finally manufacturing products.
But such a model is totally different from how Shiatzy Chen operated. The biggest discrepancy comes in the time point of procuring materials, which in Shiatzy Chen is prior to the design phase. For example, fabric orders placed in autumn/winter 2011 will be used for autumn/winter 2012. Providers will make customized fabrics according to Shiatzy Chen’s specification, and designers will base their work on the texture and color of the materials.
Another challenge lies in managing contract factories. Since professional craftsmen are difficult to recruit, Shiatzy Chen adopts parallel tracks of manufacturing; production may be done either in-house or outsourced. The number of regular contract manufacturers reaches around 90, and their work is project-based. This has resulted in difficulties in progress controlling. Management is far more complex than is usually seen in a factory.
Such complex mode of operation has exceeded system capacity, and thus Shiatzy Chen has defined the ERP system as only supportive. The goal of the first phase implementation is to integrate data, making querying, accessing, and comparing data more efficient and convenient. The integration of operating process, as well as data analysis and applications, will be implemented in the second phase, so that the migration will be gradual and will not cause too great an impact.
Monthly settlement time shortened by 30 days. Immediate response to searching and query.
Formerly the IT environment of Shiatzy Chen includes an enterprise logistics management system developed by contract programmers, and a flow controlling system that deals with document transfer and signing approval. But the latter can only handle the first half of work flow, meaning the signing approval of design, pattern making and sample making, but cannot support manufacturing and accounting needs in the later stage.
Microsoft Dynamics NAV replaced the two existing systems after going live, and now as much as 90 percent of the business operations, such as procurement, BOM and customs clearance, are run on Microsoft Dynamics NAV. Director Fan said, “After the first phase, we’ve enjoyed simplified data processing and exchange, and have seen an improvement in efficiency.”
For example, by using the materials module, the time needed for monthly account settlement is shortened from 45 days to15 days. In the past, settlement processing took much time because accounting records and procurement records lack consistency. Extra efforts were needed in manually splitting and comparing records. But now numbers and accounts can be managed in one go at the beginning of each month based on the sales and inventory flows of the previous month.
Moreover, in the past, IT departments must help users to obtain data or customized reports. But now users can export data independently and produce reports using Microsoft Office tools. Even the response time of mass data retrieval was reduced from 2-5 minutes in the old system to a matter of seconds now.
The integration of the ERP system also replaced the past practice of creating accounts manually within an independent finance system. Now each module can create and post accounts directly. As for administrative operations, significant improvements have also taken place. In the past, data such as dates of material input, defect rate, net quantity after inspection were littered throughout different systems. Users had to make inter-system query or ask the IT department to do the query. Now these statistics are all available on a single interface.
The most important materials module is also significantly strengthened. Formerly the delivery of next month could not be entered until the inventory had been taken. Now upon entering orders, the correct level of inventory will be immediately reflected. Another improvement is the automatic integration of BOM and amortization of production list loss. In the past, these steps were done off-line in an Excel file, but now the new system will automatically amortize the loss and return the remaining materials to the inventory.
Manufacturing management operations, such as manual accounting, document transfer and signing approval records, keying in repetitive data, partial manual filling of data, are now handled by the manufacturing management module of ERP. Information is instantaneously accounted and integrated, improving efficiency to an unprecedented level. For example, when outsourcing jobs according to the project stage, data used to be entered manually repetitively, and there was no error-proof mechanism for the entry of product codes and quantities. But now the ERP system is able to achieve error-proof results by combining data copying with drop-down list selections.
Moving toward process integration in the second phase, with third-phase BI application in sight
The go-live of the second stage is scheduled in February 2012, which will help achieve three major goals: 1) to integrate the POS system of stores and counters and the ERP system of factories and offices. 2) To initiate the go-live in the Chinese mainland area and 3) to propel Business Process Reengineering (BPR).
BPR is closely related to Key Performance Indicators (KPI), and it is hoped that the ERP system will serve as the platform for presenting these indicators. Take material discharging for example. Currently material discharging and requisition are all registered manually. Due to the complexity of items and the various quantities that may be requested, the procurement department generally has no way to know what has been used and who has used how much. The inventory level cannot be reflected correctly, either. It is hoped that the ERP system will be able to keep a correct log of such information in the future.
In the long run, the goal of the third phase is to implement a BI system that will provide decision making support and analysis for business operators and high level executives. Currently, the POS system is already bundled with a BI analysis tool, and the Taipei headquarters is able to access sales statistics of every sales point. But the cost information stored in the ERP system is still not integrated. It is hoped that in the future, by combining sales and cost information, operators will have a more comprehensive view of the business when making decisions. For example, they will know which product is returning less than satisfactory profit and which product has a low inventory level.
It is worth mentioning that Shiatzy Chen is highly appreciative of the contribution of Knowledge & Strategy Information Co., Ltd, and plans to continue with the co-operation in the second phase go-live. As Director Fan has commented, “Many of the standardized functions and flows in an ERP package cannot be applied directly to certain traditional industries. Since each industry has their unique operations and expertise, the task of implementing an ERP system is even more daunting. Therefore the service quality of a partner is even more important than the software. It is necessary to take into account a partner’s resourcefulness, expertise, service quality and whether they can provide dependable follow-up after technology transfer. These factors are the solid basis of a successful ERP deployment.”