Smart IT helps Skechers make a bold play in footwear.
by Monica Mehta, August 2011
As the second-largest lifestyle footwear company in the United States, with revenues of US$2 billion in 2010, Skechers has a record of remarkable growth. Founded in 1992 by shoe industry veteran Robert Greenberg, the company has jumped from revenues of US$1 billion to US$2 billion in just five years. Known as a trendy brand, Skechers sells directly through wholesale and retail channels as well as through licensees.
Since 2010, Skechers’ leadership team has stepped into new territory, growing the company’s lines of technical and athletic footwear. Skechers management also plans to expand internationally, opening new offices in South America and Asia. A foray into competitive new markets has meant creating new lines of business, from design and production to licensing. Now more than ever, it is imperative for Skechers’ executives to get a clear view of enterprise information so they can make the best decisions to support these new strategies.
Skechers management is counting on Oracle solutions to help realize these business goals. The company has standardized its platform on Oracle Database and has upgraded to Oracle’s PeopleSoft Enterprise financial management and supply chain management applications hosted by Oracle On Demand’s cloud services to add new operational efficiencies. Skechers is also implementing Oracle business intelligence (BI) solutions to gain enterprisewide insight. With management capitalizing on these and other solutions from Oracle, Skechers is poised to make a bold step in the footwear industry over the next two years.
“We operate in a fast and ever-changing industry, and we need the right information to make correct decisions as we move forward,” says Skechers Chief Financial Officer and Chief Operating Officer David Weinberg. “We have well over 3,000 employees and well over 300 locations. We need to harness all that data and be able to make sense of the data as it comes in. Moving from a manually based system into data warehousing and business intelligence is making us a lot more agile as we move forward.”
Keeping Pace with the Market
Today’s retail industry is operating at breakneck speed, with the rise of “fast fashion” trends and shorter fashion cycles, and the footwear industry is no exception. Like other fashion sectors, footwear trends hit hard and last for a very short period of time. For a company to be competitive in that environment, managers must anticipate customers’ needs. To do so, they must arm themselves with knowledge.
“You want to know exactly how your current styles are doing, how your product lines are doing, and what your customers are looking for,” says Mainak Sarkar, director of financial systems at Skechers. “The data you need to make decisions has to be very clear and transparent, and available at the tips of your fingers. This requires an up-to-date, responsive technology infrastructure that can provide immediate reports creating up-to-date insights into our customers’ preferences and market trends.”
Skechers operates 280 active stores in the U.S. and 44 internationally. Skechers products are also sold through department stores, specialty stores, athletic retailers, and boutiques as well as catalog and internet retailers. All told, Skechers distributes more than 3,000 styles of footwear through wholesale channels, its Website, and branded retail stores. The Skechers brand is also licensed to third-party companies. With such a complex business infrastructure, data transparency is vital.
However, a major business challenge facing the leadership at Skechers was the lack of visibility and analysis of financial data. This would hinder a move into a competitive new market, as executives would not have the information needed to ascertain whether their daily business decisions were in line with the company’s new strategy and long-term objectives.
“We needed a 360-degree view of our business in order to manage and to grow,” says Sarkar. “That’s what was missing from the data infrastructure. We lacked any kind of capability to analyze the data that would enable our executives to make better decisions on the future needs of the company.”
Management also wanted to remove operational obstacles to reducing excess inventory, in order to make way for new technical athletic shoe lines. Executives also wanted to provide faster IT support to global business units so those units could constantly access and input current information into the system, enabling the business to respond faster to market opportunities.
“We wanted to make our existing business applications stable, up-to-date, and available to users 24 hours a day, seven days a week,” says Sarkar. “We also wanted to reduce the total cost of ownership. Most importantly, we wanted to have that IT infrastructure in place so that we could move to the next phase of our information strategy.”
The Race for Efficiency
Oracle has been an integral part of the IT infrastructure that supported Skechers as the company went from a small lifestyle brand to the #2 American footwear company. A PeopleSoft customer since 1997, Skechers relied on financial and supply chain applications hosted and supported by Skechers’ in-house finance IT department, led by Sarkar. But users suffered every time the system needed to be brought down for an update or a fix. And as Skechers opened more offices all over the world, business units needed technical support at all hours. Sarkar wanted to find a way to keep the system available 24 hours a day, seven days a week, and at the same time to reduce maintenance costs.
Management decided to upgrade to PeopleSoft Enterprise 9.0 financial management and supply chain management applications, implement Oracle Database as a standard data repository, and migrate the administrative hosting and support of the application to Oracle On Demand, judging this to be simpler, faster, and less expensive than other approaches. As a result, system users have benefited from zero downtime, application response time is up by 20 to 25 percent, and staffing costs have been slashed. Users are happy that the system is up at all hours, and more departments can easily be added to the financial process. Now, Sarkar can focus on supporting the company’s growth strategy through new IT initiatives instead of firefighting technical issues.
“We spent too much time and cost trying to figure out what’s wrong with the server, why the application died in the middle of the night, or why somebody’s having trouble accessing it from Europe. We made the decision that it is best to have this application hosted by the people who really know about it, and let them manage it so we can sleep peacefully at night,” says Sarkar. “Now, we are able to set up financial processes in different countries with minimal effort. We are keeping our users happy, and that keeps me happy. Having stable development and testing environments also helps us to ramp up very key projects in less than 40 percent of the time it took before we went live on Oracle On Demand.”
With the help of Oracle Platinum Partner OSI Consulting, the implementation took nine months, and Sarkar says the company went live with “hardly any issues.” PeopleSoft applications have enabled the company to improve the integration of its point-of-sale system with accounts receivable by 200 percent.
“We are able to process a large amount of data every single day in a couple of hours, and the time it took to close our books went from 10 days to 7 days,” says Sarkar. “In terms of daily accounting, we are able to post our daily retail sales on time—that used to take two or three days to complete. We are now able to reconcile cash for 280 stores with more than 45 banks on time.”
Mark Bravo, senior vice president of finance at Skechers, says as Skechers expands into new countries, the first thing executives do when they open a new office is call Oracle, and Oracle staff sends along the country-specific requirements. “Even before we have an accountant hired, we’re ready to do business and accounting in that country, because Oracle is there for us worldwide as we grow,” says Bravo. “We don’t need to set up another IT department in that business unit—we give them the application URL, and off they go.”
Weinberg affirms the benefits of Oracle On Demand: “Being in the cloud computing world has made us a lot more fleet-footed in being able to incorporate new business units, domestically as well as abroad,” he says.
Kick-Starting Business Insight
Having addressed operational inefficiencies and removed a number of obstacles to growth, Skechers management focused on finding a BI tool that would allow executives to gain better business insight. Oracle Business Intelligence Enterprise Edition was chosen as the best BI solution for the company’s new Oracle Database–standardized platform.
“We are able to utilize and streamline Oracle Database not only with our financial applications but also with our business intelligence tool. It helps us to have a single vendor to manage all these applications,” says Sarkar.
After a three-month implementation period, Skechers went live with Oracle Business Intelligence Enterprise Edition in early May 2011. Users can now log in to the Web-based application and call up dashboards that provide detailed financial data on customers, countries, and licensees. Users can analyze data in the general ledger, on the balance sheets, and on their profit-and-loss statements.
“Oracle Business Intelligence Enterprise Edition is helping us to see data in a way that we were never before able to do,” says Sarkar. “Previously, we relied on manually created spreadsheets, which gave us a very incomplete picture. Now we can just log in to the dashboard and get immediate complete information. We are able to slice and dice our data and see where we are versus where we want to be.”
The data, clearly presented in interactive dashboards, displays profit margins and sales percentages by customer, country, style, color, and product line in each of Skechers’ suboffices in seven countries throughout Europe and enables users to compare the information. Sarkar says Skechers executives are excited to see this data in one place. “Based on what they see, they can pick up the phone and communicate with country managers, and they have clear data to troubleshoot and lay out new strategies,” he says.
Speaking from the perspective of one of those executives, Weinberg calls the dashboards “amazing,” and says the BI tool has encouraged the introduction of key performance indicators (KPIs) to track the progress of the business against specific goals. Bravo says the BI tool is already helping him define areas for cost-cutting, freeing up those funds for other uses.
“As we built KPIs into the BI tool, we realized there were categories we could focus on to contain costs, which would free up dollars for growth,” says Bravo. “Oracle Business Intelligence Enterprise Edition has allowed us to drill down through information a lot quicker than we were used to—and we’ve rolled it out so fast that I think people were taken aback with how quickly we did it, and how easy it was for us to do it.”
In at least one instance, the business intelligence tool is leading directly to the creation of new sources of revenue. Skechers licenses its name to third-party companies for use on products such as sunglasses, children’s clothing, and musical instruments. Previously, Skechers executives had no system to manage and analyze the performance of these accounts. With Oracle Business Intelligence Enterprise Edition, a dashboard alerts them of all the pending contracts and payments, and minimum levels of income that should be expected from licensees. Weinberg says since installing Oracle Business Intelligence Enterprise Edition, the licensing department has been motivated to seek out more business.
“Our licensing department has gone from the Stone Age to the modern age by using Oracle Business Intelligence Enterprise Edition as its tool to determine how well our licensee fees are doing,” says Weinberg. “The dashboard is so helpful that they’re excited to sign up more licensees, because now we have visibility into the business.”
Skechers also implemented Oracle’s regulatory compliance auditing tool, Oracle governance, risk, and compliance (GRC) applications. These solutions, implemented in just three months, have already helped Skechers in managing its internal audit across all of its domestic and international business units, including joint ventures.
“Oracle’s GRC applications allow us to implement a standard set of business policies and controls across the global enterprise. The solution also gives us the ability to identify any issues and opportunities to improve our operations,” says Ashwat Panchal, director of internal audit at Skechers. GRC applications are also integrated with Skechers’ other Oracle solutions, resulting in streamlined data that can flow through the different applications.
The Next Steps
Skechers’ new IT footprint gives business leadership full transparency into the fast-paced operations that the company’s growth is demanding. Skechers management is looking forward to creating new Oracle Business Intelligence Enterprise Edition dashboards that can crunch more numbers in the business. The company also plans to roll out PeopleSoft functionality, including accounts receivable, billing, and inventory solutions, to all 18 countries.
“As we buy more of Oracle’s applications, we’re finding the value in the pieces that we have, and integrating that to what we already have,” says Weinberg. “Obviously as we grow it’s better to have one system, as opposed to a number of systems that we have to continuously refer to for information.”
With new lifestyle and athletic products launching throughout 2011 and 2012, Skechers is poised to make tracks in the world of global footwear. Working with Oracle will allow the company to concentrate on its core competencies and its future business goals.
“Our recent Oracle projects have added value by allowing our technology and applications to be more strategically aligned with the overall company objective and growth,” says Sarkar. “Oracle is the market leader; it’s innovative; and it’s a company that’s going to be there for a long, long time. We know Oracle’s focus is to deliver the technology and applications we need—currently and in the future.”