In pursuit of high performance

Global performance apparel, footwear and accessories brand, Under Armour, has used SAP solutions including SAP Business Planning and Consolidations and SAP Social Media Analytics to uncover and act on real-time customer insights. Freya Purnell reports.

Under Armour was founded in 1996 when CEO and founder Kevin Plank, then a member of the University of Maryland football team, created a compression tech T-shirt to overcome the problems his teammates were having with traditional T-shirts being too bulky, restrictive and holding perspiration.

Under Armour has built on this heritage by leveraging sports and athletics to expand and grow its business, working with athletes from the collegiate level to the professional ranks in American football, baseball and soccer.

Headquartered in Baltimore, Maryland, Under Armour has over 200 retail stores, and partners with its largest retail partners, such as Foot Locker and Rebel Sport, on store-level planning. The company has around 5500 employees – or as it calls them, teammates.

“The reason we say teammates is that there is really no hierarchy. The intent is to make sure that everyone is empowered to drive change across the entire organisation,” says David Roberts Jnr, director, corporate financial planning and analysis, Under Armour (USA), and the global owner of the company’s Enterprise Performance Management solutions.

“We also believe that with that mantra you have greater innovation, and people will be more willing to introduce new ideas and concepts and try them out. Your greatest researchers exist within your ranks, not outside of your company.

Since its launch in 1996, the company’s product range has grown to over three million SKUs for each season, and forecasts three seasons in a rolling 19-month period.

“It means there is an awful lot of data that goes into our forecasting processing, which means there is a huge need for something from an infrastructure perspective that can really help us house that information without taking away from performance,” Roberts Jnr says.

“The great thing about having that level of detail in our plan is that we can see if there are any risks within our forecast. If you are going to have a heavy concentration of new distribution as well as new product, they are a larger risk, and you need to be ready to pull the lever if and when it doesn’t execute according to the plan.”

Implementing SAP BPC for better decision-making

Under Armour’s ‘four pillars of greatness’ – build a great product, build a great team, do a great job servicing the customers, and tell a great story – are used to guide every decision within the company,  as well as analyse the company’s performance.

To begin the company’s financial transformation, Under Armour implemented SAP Business Planning and Consolidation, back in 2008, in a four-month process.

More recently, the company’s BPC instance was migrated to the HANA Enteprise Cloud, providing real-time capabilities and freeing up IT resources for other activities.

Under Armour started with a simple structure in BPC – five models which would help them produce the three key financial statements (income statement, balance sheet and cash flow).

These are:

 

1. Sales forecast

With sales planning and forecasting performed in BPC, demand planning is undertaken in SAP Advanced Planning and Optimisation.

“The demand planners will build a statistical forecast from a SKU up to a region, while simultaneously the sales planners are building that forecast from a customer down to SKU,” Roberts Jnr says.

“Ultimately the goal was that we wanted to introduce transparency and how the numbers were built, and push accountability to the people responsible for those numbers. That’s what we are going to run through MRP, and what we are going to place purchase orders at the factories for. It’s a huge improvement over what we have had before.”

2. Salary plan

“The great thing about having our sales plan in BPC means we know the seasonality of our business. When we look at the need for temporary and seasonal hires in our distribution centre, for example, the model is automatically suggesting what the support levels should be,” says Roberts Jnr.

“We also have the ability for each department centre managers to use a very simple template to look at how many teammates they currently have in their cost centre, the associated financial impact of those team-mates and if they choose to hire a new employee.”

The company also uses SuccessFactors. When a new teammate is hired, once the new requisition is approved, the requisition number is created inside SuccessFactors with the approved salary amount.

“Ultimately know we have a seamless reconciliation between the system that is going to issue the offer letter and where the budget was approved,” says Roberts Jnr.

3. Capital expense planning

Capex requests are submitted via BPC and queued for review at a monthly steering committee meeting.

“BPC will model for us the impact of each request from a cash standpoint and liquidity, so we really understand the impact of every approval before we make the decision,” says Roberts Jnr.

If a request is approved, it immediately creates an internal order within the ERP system for the budgeted amount of the capex with all relevant information, so transactions against that order can be tracked in real time.

4. Financial forecast

Any approved capex will also feed into this model, so that the impact on the balance sheet and cashflow can be shown.

5. Strategic plans

As the Under Armour team updates its rolling 18-month forecast on a weekly basis, it also updates its five-year strategic plan. This means new plans such as launching in a new region or opening more stores can be assessed by looking at the impact on the company’s consolidated financial statements.

“All of this is being done by way of using this flexible solution,” says Roberts Jnr.

Results from using SAP BPC

SAP BPC met four key objectives for Under Armour.

“It was scalable – it keeps up with a company that’s growing at 40 to 50 per cent year-over-year. It’s flexible – we change our minds on how we want to view the business almost on a daily basis, and it allows us to keep pace with those perspectives,” Roberts Jnr says.

The useability of the solution has also been a positive.

“If I am giving someone the solution where the front-end is Microsoft Excel – they have 99 per cent of the skill-set that they need in order to use it on day one without a great deal of training. Most importantly, it is giving us the opportunity to have ownability within the business. Finance owns it, Finance runs the security through the modelling within that information,” he says.

Before introducing this functionality, Under Armour’s forecast accuracy had a variance of 18 per cent. This has since improved to between 1 and 2 per cent variance.

“We are also seeing that it’s improved our relationship from a service perspective with out customers, making sure we are buying the right product and getting it at the right time,” Roberts Jnr says.

Because of the simplicity of the solution, Under Armour has expanded the use of BPC for several more use cases, including production planning, house margin or contractual margin planning, and supply network planning. This information feeds into the vendor scorecard. With 97 per cent of Under Armour’s product sourced externally, this contains vital information for managing those supplier relationships and maintaining appropriate supply timeframes, product and pricing.

Customer and product profitability analysis is also conducted in BPC, as is consolidations.

When negotiating contracts, to preserve margin, Under Armour performs bill of material level cross analysis to understand the impact of pricing differences for bill of material component levels across the entire process.

“We know that apparel and footwear are both going to contain some form of cotton, so we pull the commodity future from a Bloomberg terminal service into BPC to understand if cotton goes up, here is the impact it has on the margin, and we are able to react in real-time,” Roberts Jnr says.

“We build optimisations based on the potential for the factories to slip in the timing that they get product into our distribution centre, and the impact on the deadline for getting product to the customer.”

Using social media analytics for optimisation

Under Armour has also looked to other SAP technologies leveraging real-time capabilities, to help optimise pricing and strategic planning, including SAP Social Media Analytics.

“It gives us a very pure and unbridled sense of what people really believe about our product and what they think,” Roberts Jnr says. “For example, when we launched basketball shoes for the very first time, there were a lot of people posting on Facebook and Twitter that they had to buy the shoes a half size larger. We were able to post that on our website and let customers know, but at the same time, give the feedback to our product line managers so that as they build out the next line, they took that into consideration.”

Social media analytics can also provide insights into sentimentality, and how Under Armour can improve positive sentiment in relation to brand awareness – which translates directly to dollars spent.

“It helps us decide the type of marketing campaigns we want to run. We can look at social media analytics for information around where people are going to shop, so we are making sure we are going through the right chains and distribution channels in order to get our product out,” Roberts Jnr says.

Making analytics accessible

With a strong focus on real-time financial analytics and reporting, ensuring the solution is sufficiently simple and performs well is crucial.

“When we talk about analytics at Under Armour, everybody goes to one place,” says Roberts Jnr. “From a skill set perspective for BPC, we are really using Microsoft Excel which means that we have the ability to give people access to the system and they could run with this from day one.”

Analytics are accessed via a Sharepoint site, with a dashboard for C-level executives displaying key metrics from different business areas, tying back to Under Armour’s ‘four pillars of greatness’, Roberts Jnr says.

“When I talk about doing a great job or telling a great story, I have the ability and flexibility to view the business based on different perspectives. Maybe I want to look at how does my business perform from a wholesale perspective versus direct to consumer, and within direct to consumer, show me my retail business versus my e-commerce business. All of this is real-time and at the fingertips of our executive team and in a way that is easily consumable.”

David Roberts Jnr was a keynote speaker at the SAUG National Summit 2014.

 

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