INTERACTIVE SESSION ORGANIZATIONS Carter's Redesigns Its Business Processes Carter's has built a big business dressing little ones HANA (also known as SAP S/4HANA) software for and you probably wore some of its products when this purpose and worked with Deloitte Consultants you were growing up. This company is the largest for assistance with systems integration and imple- U.S. branded marketer of apparel exclusively for ba- mentation. SAP S/4HANA is a business software bies and young children, and includes the OshKosh suite based on SAP's proprietary HANA ultra-high- B'gosh brand. Carter's merchandise is sold online, speed data management and computing platform, in over 1,000 company stores in the United States and is designed to support all day-to-day processes of and Canada, and in 18,000 department and specialty an enterprise. The new software solution had to in- stores. The company has annual revenue exceeding teract well with other related systems beyond finan- $3 billion and is based in Atlanta, Georgia. Carter's cials such as order management systems and point financial systems handle hundreds of thousands of of sale systems. SAP S/4HANA offers integration to transactions each day. multiple data sources from many different SAP and Until recently, the systems Carter's used to pro- non-SAP applications, financial and otherwise. cess these transactions were heavily manual and Business process redesign was as crucial to paper-based and could no longer keep pace with the the success of the project as new technology. company's growth or the increasingly digital busi- Implementing SAP software provided Carter's with ness environment. For many years that company the opportunity to transform older and inefficient had relied on more than 20 legacy financial systems, processes into modern processes reflecting best some of which were homegrown and antiquated. If practices for its line of business and its industry. the systems did not integrate with each other as they Carter's had to benchmark its financial processes should, Carter's used manual processes to keep ev- against these best practices, many of which were erything working together. This created bottlenecks incorporated in the SAP software. Thorough bench- that slowed down processing and also increased marking required questioning the rationale behind the chances of human error. For example, manag- every core financial process. For each process based ing chargebacks required a great deal of manual on existing technology, the implementation had data entry and tracking down spreadsheets, emails, to ask whether it could be redesigned on a new folders, and faxes from various systems in order to technology platform to be more efficient. Carter's reconcile a specific chargeback to the appropriate also examined whether the process would be bet- ledger. (A chargeback is the return of funds used to ter served by remaining on a legacy system rather make a purchase to the buyer if the buyer disputes than migrating to SAP S/4HANA. Carter's decided the purchase.) to keep a process on its existing system unless mi- Carter's management wanted to transform the grating to SAP S/4HANA provided clear benefits. role of the finance function from preoccupation with For the systems that ran core financial processes, transaction processing to focusing more on analyzing SAP S/4HANA was superior. financial data and guiding decision making. To ac- In July 2016, Carter's went live with complish this goal, the company needed process im- SAP S/4HANA Finance with the procure-to-pay, provements in both the business's finance processes invoice-to-cash, fixed assets, and record-to-report and technology. This meant streamlining and simpli- processes supported by the new system. Moving fying financial processes so the finance department the procure-to-pay process to SAP S/4HANA in- had more time for analysis and reporting work. In creased efficiency by eliminating manual data 2015, Carter's launched a "Vision to Value" initiative entry and increasing the visibility of a transaction to achieve this goal. as it flowed through the system. (Procure-to-pay is In addition to replacing outdated systems with the process of buying goods and includes the ini- more up-to-date technology, including a centralized tial decision to make the purchase, the process of enterprise resource planning (ERP) system, the proj- selecting the goods, and the transaction to pay for ect provided an opportunity to modernize financial the goods purchased.) Instead of requiring various processes. Carter's selected SAP Business Suite 4 SAP phone calls, emails, and paper copies of supporting documentation, the software guides the process. the system has created significant time savings and The SAP Invoice Management application enables a efficiencies in billing and collections. All the informa- centralized invoicing process by scanning, reading, tion is in the SAP system, so whoever is approving and filing invoices via optical character recognition the chargeback can see all the history in one place. In (OCR), which kicks off an invoice workflow through addition to chargeback history, once a chargeback is a preset list of coders and approvers all the way to approved, the system sends a specific chargeback to invoice payment. Once invoice information has been a specific general ledger. The system has also made entered, it can be accessed automatically anywhere processes for fixed assets more efficient by eliminat- along the process life cycle, and users can view all ing manual routing and spreadsheet dependence. information related to the invoice transaction on a single screen. For example, when approving an in- voice, the system makes it possible for Carter's staff to see the invoice data flowing to accounts payable to Sources: "Transforming a Retail Brand Leader with SAP S/4HANA start the payment process. Finance," events.sap.com, accessed February 24, 2018; Ken Mur- phy, "A Next-Generation Finance Platform at Carter's," SAP Insider System-generated tracking of chargebacks and an Profiles, December 19, 2016; and www.corporate.carters.com, ac- improved capability to monitor chargeback status in cessed February 26, 2018. CASE STUDY QUESTIONS 1. How did Carter's previous business processes af- fect its business performance? 2. What management, organization, and technology factors contributed to Carter's problems with its business processes? 3. Diagram Carter's old and redesigned business process for paying an invoice. 4. Describe the role of technology in Carter's business process changes. 5. How did Carter's redesigned business processes change the way the company worked? What was their business impact? Explain