Eye on growth: Apparel-maker refashions it system

Leading Thai fashion house LME designs and distributes its apparel and accessories in some eight-nine countries, including the Philippines, Malaysia, Indonesia, China, Dubai, and South Africa, and at most Thai department stores. In preparing for fiercer competition from international brands and to tap opportunities from the Asean Economic Community, which will come into effect in 2015, the company is overhauling its information technology system with assistance from the world’s leading enterprise software firm SAP and software implementer Prism Informatics. The Nation’s Pichaya Changsorn speaks to Boonchai Kongpakpaisarn, chief executive of LME; its senior executive vice president Voravan Kongpakpaisarn; assistant vice president for IT Opas Sanonok; Thomas Conrad Zack, managing director of SAP (Thailand), and Padoonkiat Apichaidejudom, executive director of Prism Informatics (Thailand) in an exclusive interview. Here are excerpts from the interview.

--Could you give us an overview of LME’s business?
Boonchai: My father set up the textile business 69 years ago in Chinatown, selling fabrics. We still have this business at present. Later, we formed a manufacturing joint venture with a Japanese partner, which was quite a modern facility, 42 years ago. After graduating from the US, I came back to work with my father for five years. The business at that time was pretty much like a “tailor shop”.  Since I came from the US, I knew that would be no more. Thus we began the jeans business, which was quite successful. My wife’s family had one member graduating from a fashion school. We also started the ladies wear business and later expanded to men’s wear and others.
By the 1997 economic crisis, we had somewhat slowed down. Learning a lesson, we decided to concentrate on our core businesses. We also knew Thailand could no longer rely on labour-intensive industries. Hence we invested in designs and merchandising. Our first aim was to become a world-class company in fashion. We succeeded at that time. We were essentially an ODM (original design manufacturer) which designed and merchandised fashion goods for Japanese and US brands.  We had some of our own production facilities but not many.
After gaining some strengths, we developed our own brands. Our vision is not to build “a high-rise” but to establish “a few pyramids”.  After being invaded by all the big brands, we have found the necessity to develop ourselves as an international company. In order to achieve that goal, everything has to be supportive – the human resources and information technology systems. Now, everything has to be [accessible] at the fingertips. We have a few hundred points of sales in Thailand and in other Southeast Asian countries.
This is particularly important for the fashion business, which has to deal with emotions. We are not merely selling apparel. Customers buy something to be “happy”. This means we must have the information and data to know what are the customers’ needs and being able to translate that customer intimacy into the products. Today, [the speed of gathering and analysing data] is of critical importance  because a piece of shirt selling at Bt1,500 today could next week go down to just Bt800, if customers  don’t like it. We need both quantitative and qualitative [information].
We have upgraded IT from a section into a department. We brought in Khun Opas Sanonok and appointed him assistant vice president to take charge of IT and build a big IT team. We have been growing so fast and we found a lot of problems with our legacy IT system. It [the old IT system] hurt our businesses.

--What made you choose SAP?
Boonchai: We took 9-12 months to pick the new IT system because this time, we didn’t want to be hurt again. We feel our old IT platform might be good for other kinds of businesses but the fashion industry has become so complicated. SAP is said to be “not so friendly to use.” But like a telephone, we don’t necessarily have to use all the functions. On the other hand, if you say it’s user-friendly, I would be hesitant.  Because nothing comes easy in this world.
Zack: One customer asked me long time ago: “Why is your software so complicated?” I replied: “You don’t have a simple business, do you? You have a complicated business. 
Boonchai: We’re dealing with people’s moods and feeling. We hired a design and merchandising adviser from the US, who told us a customer takes merely eight seconds to make a decision before they pass our store. Another important thing is that Thailand is not like the US or Japan where people all dress the same way. In Bangkok, Kalasin, Roi-ed, or Cha-am, people are not dressing similarly because of differences in their social, cultures, and incomes. Even in Bangkok, customers in Sukhumvit and Bangkae, there are differences. We have to pick different sizes, colours, sizes and sales girls for each location. At Central Chidlom, for instance, our salespeople call their customers “Than” [sir] but at upcountry stores, customers will feel strange if we call them “Than.” We have to call them brothers, sisters, or uncles, etc.

--What brands are you handling?
Boonchai: It includes Espada, EP, ESP, f. fashion, LTD, Rock Express, Fox. In July, we will launch Von Dutch and start to market lingerie under f.fashion brand. We’re the “Paradise of the Middle Class.” We’re offering lifestyle products at moderate prices at higher quality. All are our own brands except f.fashion, Fox and Von Dutch which are imported brands. We have a total of 1,200 staff.

--What went wrong with your previous software vendor and how was SAP successful?
Boonchai: They couldn’t serve our very complicated businesses. They could not understand what was the retail business, what were the assortments. They used to deal with a standalone store. We were hurt by that.
Voravan: We were happy with our legacy software system in the past when we were doing a kind of customised garment business, but the business later changed and expanded.
Boonchai: Since we’re a key account customer of Central Retail, I used to ask Khun Tos Chirathivat: “How do you do?”  and he told me: “Brother, the most important thing is IT, I spent my first few years very much on [improving] the IT system.”

--What is the SAP solution that LME will  adopt?
Padoonkiat: SAP has 25 industry-specific solutions and fashion is one of them. It is a complete retailing solution that spans from   planning, merchandising and planning, forecasting, purchasing, distribution, goods receipt, invoice, pricing, point-of-sale, to analytics. The next step will cover customer-relationship management and mobility solution. The challenge is to manage the complex distribution system and set the information back to analyse the businesses, and the speed, as well as the taxation issues. The legacy software system, as well as most other software packages, don’t have the consignment solution which deals with Thailand’s unique taxation regime. We plan to go live with the SAP Retail software system at LME on October 1.
Opas: Human resources play a crucial role to the success of this project. We set up a “room” just for training our own people for one year. The impact will be on all business areas. We have found only SAP has a lot of customers in retail business. We had tried to contact another tier-1 vendor but they didn’t even submit a proposal.
Zack: We have a dominant role in business applications. We’re twice as big as our nearest competitor.

--What are the main benefits LME expects from implementing the new software system?
Opas: For the front-end, we can speed up sales transactions. Secondly, we expect an improvement in operations and efficiency. Lastly, it concerns back office, including improving accounting and business intelligence for management and operations.

--How long will it take to recoup investment on this software?
Boonchai: It’s an investment where we don’t look when we will get the returns. Instead, we look at how much it can assist our business to grow. I used to joke that it’s like a marriage. It takes a lot of effort, it’s a long-term commitment, but it’s worthwhile.
Zack: Some 5 to 10 years ago, people used to impress that, we had only the bug systems for big companies. In fact, we are serving well the mid-size market [players who] want to grow.
In Thailand, the mid-size market is growing the fastest. We’ve found a lot of firms that struggled with their old legacy systems. And this product will be our main product for the next eight years when it will be upgraded. This is a big commitment from us.
Thailand had been the fastest-growing market in Asia-Pacific for SAP in 2010. Last year, despite the floods, it was one of the top-three fastest-growing markets in Asia Pacific for SAP, thanks to the growth of the mid-market.

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