Founded in Germany in 1972, SAP is a giant of the Information Age, a smart collector and investigator of useful data long before it was understood as a vital commercial commodity and data analytics was the new rocket science.
It is now a complex business of huge reach. As Maria Morais, Consumer Industries Cloud Director at SAP explains: “SAP serves 23 industries and has business units for people management, supply-chain management, financial management, customer experience and more”. But fundamentally, SAP is there to help businesses understand movement, from making sure the right stock is in the right place at the right time, to shifts in consumer behaviour.
The behavioural shift of interest right now is increased concern with environmental and social sustainability. “Consumers are putting pressure on businesses to change,” says Morais. “The quest for sustainability didn't come up because someone in an office thought it was a good idea.”
Coverage of sustainability issues and initiatives – and brand behaviour and communications around Environmental and Social Governance – are now subject to whim, fancy and misinformation. It’s hard to see the wood for the trees. As Morais says, the fashion industry has been a particular focus of attention, but there is just as much room for improvement and advance in other areas.
Even more problematic is the interrogation of potential sustainability solutions within a fashion framework. Circular manufacturing – putting end-of-life materials back into the supply chain – is notoriously tricky in the apparel industry (all those fibres to unpick and sort, nylon stitching to unstitch and so on). Morais suggests this ignores the very real potential for circularity in other areas, particularly in packaging, food and consumer packaged goods.
It’s time, Morais says, to talk about “regenerative retail”, manufacturing and retailers using technology – the kind of technology that SAP has pioneered – to create a new virtuous circle; re-routing end-of-life products and packaging for profitable re-sale or re-use.
As Morais says, the retail industry's huge investment in data collection and analytics over the last decade has really been focused on understanding what consumers want, trying to sell them things based on that information, and then getting product to them once they have pulled the trigger. The data trail stretches along the supply chain but ultimately ends at the consumer and the point-of-sale. Morais says we, or rather they, need to lay more digital pipe.
“What we do at SAP is take technology to where the technology is needed,” she says. “Our tagline is making businesses run better. We believe in technology for good. And what we're really looking for here is connection. We have spent the last ten years digitalising the customer experience, so it becomes optimised for customers who expect brands to understand them as individuals and not as target segments. Now need we need to be product centric.”
Of course, supply-chain transparency and traceability has increased in a number of sectors, including fashion and beauty, and often making use of Blockchain technology. There has, as yet, been little effort to track a product’s consumer and post-consumer journey. It is, though, starting to happen – and at an accelerated pace. It even has an acronym: EPR – Extended Producer Responsibility.
SAP has a two-pronged approach. “There is technology now available to make re-commerce much easier, making sure end-of-life products go back into the system rather than into landfill. And the same is true for recycling,” says Morais.
The problem is that re-commerce and recycling haven't been looped in. “The fact that these business aren't digitalised is really a problem,” says Morais. “Many products are so complex and include so many different materials, no single entity could recycle everything. So the entire ecosystem needs to be digitised.”
Recycling facilities exist; recycling technologies exist. What is missing are the digital connections between materials, supply and demand. The key to fulfilling the promise of recycling and re-purposing is using digital technology and data to establish value chains. “Recyclers have a huge opportunity to become marketplaces.”
Great technology and a unique selling proposition are not enough anymore, customers expect purpose beyond profit. There are many areas where it is hard to see a value chain for end-of-life material ever being put together. And until the cost of recycled material is below that of raw material, there will be massive inertia amongst manufacturers. Post point-of-sale transparency and consumer pressure will help drive sustainability initiatives, but good behaviour will have to be enforced by regulations. And that is starting to happen, too.
Of course SAP’s data smarts help in other ways. More precise alignment of supply and demand is crucial to the battle against waste. As is smarter logistics, fulfilment and inventory management. The broken relationship between the e-commerce and bricks-and-mortar parts of the same businesses will have to be mended.
The same fundamental point applies though. Data and digital connectivity – the Blockchain, Internet of Things and advanced analytics technologies – can and should be used for better ends.
For more information visit sap.com/uk/retail
This article was originally published by WIRED UK
