Oracle Modern Cloud Solutions for Retail
Retail Finance In The Digital Age
How Modern Cloud Solutions Deliver Agility And Business Transformation
Retail is facing a data-driven revolution. Big data and sophisticated analytics, capable of predicting the impact of something as small as an item price change or as big as a potential merger, have become essential tools for running a modern-day retail organization.
Some of the most profound shifts stemming from this retail re-set are occurring in retail finance departments. Chief Financial Officers (CFOs) and the organizations they lead are transitioning from tactical and support roles into the position of strategic advisors.
“When you’re a CFO, you’re the forecasting person, the one who is going to tell us what tomorrow will be like,” said Phil Rist, EVP, Strategic Initiatives, Prosper Insight & Analytics. “The challenge for the retail CFO is that the business has changed dramatically, but the techniques have not. Last year isn’t like this year — last year, Whole Foods wasn’t owned by Amazon.”
To meet these challenges, retail finance professionals are seeking more agile technology solutions capable of responding to fast changes in market conditions. Many are turning to cloud-based ERP solutions as a key element of their own departments’ digital transformation. In addition to the speed and reliability that finance professionals need, these technologies can provide relevant insights in near real time, as well as:
“The challenge for the retail CFO is that the business has changed dramatically, but the techniques have not. Last year isn’t like this year — last year, Whole Foods wasn’t owned by Amazon.”
– Phil Rist, EVP, Strategic Initiatives, Prosper Insight & Analytics
1
Create efficiencies that lower IT costs
2
Promote “one version of the truth” while empowering end users
3
Enable more seamless global expansion and new market entry
4
Enhance data security
5
Improve the user experience via optimized real-time communications
CFOs charged with facilitating the overall business transformation that’s demanded in the “Era of I”1 face challenges in three broad areas:
- A Greater Need For Speed
- Shifting Focus on Business Outcomes Vs. Traditional Financial KPIs
- Increased Responsibility For Managing Cyber Threats
1. “The Era I Enterprise: Ready For Anything,” 2016 Oracle survey of 300 North American C-level executives across multiple industries to understand Era I, The Age of the Individual.
A Greater Need For Speed
CFOs are keenly aware that the data they provide must be both accurate and fast. “A CFO who can accurately report on the financial position of his or her organization with great detail and insight — and on a timely basis — is empowered both immediately and in the future,” wrote Chris Schmidt in CFO magazine. “For most CFOs, unfortunately, assembling a financial snapshot that contains ‘great detail and insight’ can be a slog.”
A 2017 CFO Research survey2 of 157 senior finance executives revealed that:
11%
“strongly agree” that their finance function uses technology to support new business innovation initiatives
12%
“strongly agree” that their current technology is flexible and agile enough to support business strategy and business model changes over the next two years
Only 14%
report their finance functions are in an “optimized” technological state
63%
describe their finance function’s technology as “inefficient,” “silo-constrained,” or “not linked to decision-making”
2. The Road To Finance Transformation, CFO Magazine, August 2017
These CFOs see newer technologies as critical to achieving the velocity they need. Two-thirds (66%) of survey respondents believe the value realized from implementing a cloud strategy exceeds the costs of meeting its challenges, and 62% say the benefits of big data strategies exceed the costs of such implementations.
Shifting Focus On Business Outcomes Vs. Traditional Financial KPIs
The new roles and responsibilities being taken on by retail CFOs mean they are being judged in terms of business outcomes as well as traditional financial industry standards. In addition to dealing with month-end closings and tax preparation, CFOs may be examining strategic questions such as:
Can we save money by sourcing the same product from one supplier instead of two? And is there a downside risk if the manufacturer’s supply chain is interrupted and we can’t get the product when we need it?
How is our risk being managed throughout the supply chain overall?
If suppliers offer us a discount for quick payment (e.g. five days versus a traditional 30-day payment window), is our cash position liquid enough to take advantage of this offer?
To answer these and other questions, today’s CFOs need access to a wide range of data formats and analysis. “If you’re dealing with the end consumer market and you’re the financial person, you need inputs about where she’s going and where she’s shopping,” said Rist. Understanding what motivates customers, and the new choices they have in a crowded retail marketplace, may be unfamiliar territory for finance professionals, but they will need to learn the terrain quickly.
“For CFOs to improve their ability to give good guidance, they will need new data, new tools and new skills,” Rist continued. “If that customer is being wooed by someone else, so that she is spending more of her time and money with them, that has to be looked at. That’s not a role the financial guys have been comfortable playing, since it’s traditionally been the role of marketing. But the marketing guys don’t have to pay the bills or answer to Wall Street.”
Increased Responsibility For Managing Cyber Threats
Using and managing data from multiple sources also increases the risk of breaches and other harmful cyber security events. As finance departments become more data-driven, some of the responsibility for protecting data from hackers, thieves and unfriendly state actors falls to them.
Unfortunately, this is an area where retail and CPG enterprises have not kept up with other industries. CEOs from these organizations, surveyed by PwC in 2017, lag in their organizations’ activities addressing breaches of data and ethics, as well as cybersecurity breaches affecting business information or critical systems.
To what extent is your organization addressing the following issues today?3
Breaches of data and ethics
53%
37%
39%
Cybersecurity breaches affecting business information or critical systems
52%
39%
36%
| Global CEOs | Retail CEOs | CPG CEOs |
3. PwC 20th CEO Survey, 2017
To bridge these gaps, finance departments are seeing the value in working more closely with IT departments, which have traditionally played the primary role in guarding against cyber threats. Effective risk management is tied to advanced technology tools, wrote Chris Schmidt in CFO: “Nearly three quarters (73%) of survey respondents say they think leading-edge technology can reduce the number of CFO pain points — and for senior finance executives, risk equals pain.”4
4. The Road To Finance Transformation, CFO Magazine, August 2017
Implementing The Tools For Success
For CFOs to have maximum impact on business outcomes, finance departments must be able to present their insights in formats that can be easily understood by non-finance professionals. More agile, scalable solutions, such as cloud-based ERP technologies, provide measurable benefits for a number of key use cases.
I. Lowering IT Costs And Streamlining Back-Office Functionalities
Modern cloud-based ERP solutions provide multiple opportunities for savings, particularly Cap-Ex dollars, when compared to traditional on-premise systems:
Hardware/servers: As much as 30% of the cost of an on-premise or hosted system goes to procuring hardware and related systems. Additional costs include staff time required for operating system patches, hardware maintenance, backup activities and disaster recovery services. These costs are all included within a cloud ERP subscription.
Software: With software delivered as a subscription service, CFOs don’t need to guess up front about how many licenses they will need. By eliminating shelfware for unused software and surplus to-be-named user licenses, retail companies only pay for what they need at a given time.
Upgrade Costs and Disruptions Minimized: Upgrades typically happen every three to five years, but they can stretch to 10 years or more and can be extremely costly. Cloud ERP systems include frequent, seamless updates provided by the vendor, enabling organizations to consume innovation faster and gain a competitive edge. The update costs are already incorporated into the total monthly subscription.
II. Promoting ‘One Version Of The Truth’ While Empowering End Users
Cloud solutions from a single vendor utilize a common database built with a single schema and a standard data dictionary. With pre-integrated applications, all associated data is shared as needed and updated in real time. The data elements for a name are the same across all parts of the solution, and when it is changed or updated (e.g. an employee gets married), all connected components receive the new information.
Cloud systems also typically include reporting and analytics. By avoiding data exports for spreadsheets, the risk of promulgating errors with external solutions is lowered. The presented information is real time, not a snapshot from earlier when the export occurred.
Additionally, cloud solutions provide end users with tools to create their own outputs, versus having to ask IT departments for help with custom reports, data extraction and display requirements. In comprehensive cloud systems, these tools are uniform across applications, allowing users to learn them once and use them across multiple applications.
III. Enabling More Seamless Global Expansion And New Market Entry
Because cloud solutions are comprehensive on-demand applications designed to scale rapidly, they are ready to go when retail organizations are adding new locations, languages and people. In comparison, on-premise solutions require retailers to plan for more physical capacity, more users and the possibility of adding languages and local codes for tax laws, regulatory reporting and other country- or region-specific requirements. On-premise software also requires additional products or packages to be downloaded, installed and tested, all of which adds costs and time.
IV. Enhancing Data Security
While data safeguards are generally up to date when an on-premise system is deployed, issues can arise as time goes on. Missing a patch or postponing a recommended (or urgent) fix for an on-premise system, whether at the software, hardware, infrastructure or data level, can lead to significant problems. Data breaches and credit card theft can result in lost customer confidence, decreased sales and even expensive legal action.
With cloud systems for ERP, security and related safeguards are part of the service, with dedicated professionals who monitor and react accordingly, operating under charters to be proactive in this area. Additionally, use of unified tools with a unified data schema, delivering not just finance functions but a wide range of reporting and management capabilities, means that both data inputs and outputs are connected to a single, solid structure. This provides greater security compared to running multiple systems from multiple vendors.
V. Improve User Experience Via Optimized Real-Time Communications
Cloud applications are designed to deliver information across multiple platforms, including smartphones and tablets, in real time. Dashboards and reporting tools can be used by people throughout an organization to respond more quickly than before.
Knowing that the data they are seeing is real-time and unadulterated, along with the significantly reduced probability of formula error, speeds decision-making and increases user confidence. By comparison, exporting data to spreadsheets disconnects the information from its source, making it a “snapshot” rather than a real-time view.
Retail Success Story:
Supervalu Deploys Cloud Solution To Improve HR And Finance Reporting
Supervalu, one of the largest grocery wholesalers and retailers in the U.S., chose Oracle Cloud as a technology platform to deliver business management and data analytics capabilities to its customers. The solution enables Supervalu to provide an integrated portfolio of enterprise-grade cloud services to enhance the performance of both its human resources and finance functions. Supervalu implemented Oracle ERP Cloud and Oracle HCM Cloud, part of a suite of Oracle Cloud applications integrated with social, mobile and analytic capabilities, resulting in improved process integration and more complete and impactful reporting.
“The Oracle Cloud provides us with a more robust infrastructure and a comprehensive solution that we believe will help us drive increased efficiencies, speed decision-making, and enhance the overall customer experience,” said Randy Burdick, EVP and CIO of Supervalu.5
5. Supervalu Uses Oracle Cloud To Provide Expanded Service Offerings To Its Customers, August 2016
Conclusion
Today’s forward-thinking retail industry CFOs are taking on strategic and advisory roles at the top levels of corporate organizations, tasked with calculating the risks and rewards of all types of business decisions. CFOs recognize that they need more advanced, agile technology solutions to play these new roles. Modern cloud-based ERP solutions can provide finance departments with benefits including:
- Lower IT costs
- Greater confidence about what constitutes “one version of the truth”
- The ability to enter new markets more quickly and cost-effectively
- Lower data security risks
- Better user experiences, with real-time data delivered to smart devices throughout the retail enterprise.