Section 10.2. Store-specific pricing

10.2. Store-specific pricing

As SAP continues to extend the functionality of its packaged applications using enterprise services and composite applications (its xApps), opportunities to create xApps using ESA principles have already emerged. One lightweight xApp created in just days for SAP's customers in the retail industry uses guided procedures, a handful of simple interfaces, and analytic tools to make a key feature of their Enterprise Resources Planning (ERP) systems available to managers at the individual store level.

These managers were all but barred from accessing the sales, pricing, and margins datato name just three of more than 100 fields and parametersresiding in their company's ERP system. The complexity of that application, coupled with the potential for confusion and misuse if hundreds of middle managers were granted access to an industrial-strength application they were ill-equipped to use, had kept control over pricing consolidated in the hands of category managers at corporate headquarters.

However, the store managers were also the ones closest to the front lines of the businessthe ones responsible for monitoring the prices of their immediate competitors and the effect of price changes on their own business. This led to tension between store managers who understood local conditions and needed the flexibility to respond, and category managers who possessed ultimate responsibility and access to analytical tools but were unable to focus on a store-by-store basis. In many cases today, the store managers simply override prices listed in the point-of-sale system, which has the unfortunate side effect of creating inconsistent price information in relevant process steps and obscuring the reasons for local markdowns.

The xApp that SAP has created sought to resolve this tension by using enterprise services to create a solution, which would offer store managers the analytical tools they needed to examine competitors' prices, and would do so within a simple interface that could pass their findings to a category manager for ultimate approval. As illustrated in Figure 10-2, the process begins with a store manager selecting items for comparison within the xApp, which then generates an Adobe form that is passed to a junior store employee who is responsible for gathering the relevant price data from competitors (window shopping, in other words), and then entering that data in the form. At that point, the guided procedure processes within the application pass the form back to the store manager, who is then able to analyze the competitive pressure against his current prices and margins, calculate new prices, and measure their impact on margins.

Figure 10-2. Handling store-specific consumer prices

Store-specific prices are passed once again, this time to the category manager at headquarters, who is able to run her own analysis of the new prices and their estimated margins, and then accept or reject the store manager's request, at which point the guided procedures pass the final ruling back to the store manager.

The entire process used enterprise services derived from ERP core components (ECC-ISR) and SAP BW analytical tools to create tailored features at the appropriate level of sophistication for users at each step. These include simple services for reading master data, reading the relevant inventory of articles, reading relevant vendors, reading relevant competitors, and one for creating new, store-specific consumer prices. The ERP backend then integrates any new prices with dependant processes, seamlessly incorporating data about items priced manually.