The chief information officer of Kopeyka network Sergey Dmitriyev about the strategy

– The most banal question with which it would be desirable to begin and without which, apparently, not to do: what part is assigned to IT technologies in Kopek? � The company which is focused on permanent intensive development should have something like that competitors do not have that. I mean advantages of the strategic plan. In our network marketing, logistics and IT are among such advantages. As for technologies which it is accepted to call information, their application allows us to optimize and improve company management constantly.

Retail is such business where the end result, or effect of performance cannot be reached at the modern level without effective and intelligent application of information technologies. It is necessary to deal with high intensity of sales processes, a huge number of diverse data, and at the same time it is necessary to make every day decisions concerning, for example, pricing, purchase of goods and so on. So, by our experience, IT in retail trade is an obligatory component, a factor without which it is simply impossible to do business a little successfully. Now the greatest benefit is received by that company where IT technologies are applied with maximum efficiency.

– Well and how, the company managed to find an optimal solution? � In this sense we were lucky to be born in time. The company arose when the main changes of an economic formation already took place. "Kopek" appeared in the late nineties, and its founders already initially were guided by a number of best practices including foreign. Prove to itself a trial and error method that management of network retail is a key to success, it was not necessary. So business of the company initially was based with orientation to automated management. So to say, in "a non-automated type" the network never worked. Those who were responsible for the equipment in points of sale for building of logistics, understood clearly that all this needs to be managed. If the good result is necessary, the software solutions, the most optimal on a ratio "efficiency – cost", i.e. the most inexpensive from among the best in the market are required. For us the functionality and quality, on the second – cost were on the first place. Though happens and vice versa: the companies look for the most suitable of the most available at the price. When our retail network grew to certain sizes, we selected, in particular, between products from SAP and Oracle proposing the solution of a top class.

– What influenced the final choice? � You know, the basic principles of management of the retail company the same, as in any other business, irrespective of its belonging to this or that industry. Certainly, in each sphere of economy there are features which should be considered, but if we speak about the management concept the big company, a lot of things match here, be it oil business, production of metal rolling or retail. About 70-80% of the firms which got to the rating of Fortune 500 use products either SAP, or Oracle. So the vector of the choice was defined. Then we looked and whether market leaders have specialized solutions for trade. In this sector both firms among the first – at least on the volume of scientific developments and investments into researches. We had approximately such logic of reasonings while we decided on the choice of an information system. We started SAP implementation in the 2000th year, and in a year the first stage of a system was brought into test operation that is called.

– How did implementation last long? � From August to May, classical nine months.

– How many people were involved from each party? � The technology was such is that the most part of works was executed by our own command. The particularly complex tasks connected with the choice of strategic decisions, testing were undertaken by the company consultant. In Kopek 5 employees, completely busy and also from 8 to 10 people from different functional divisions of network were engaged in this project in implementation. At different stages of system implementation these key users took part in project implementation. However, this direction took them only 10-15% of working time. From the consulting company 4–5 people, well still plus the project manager interacted with us.

– What functionality was put in a system? � If to apply an information system, it is reasonable to do it everywhere where it is only possible. We automate all financial sphere, first of all accounting and also management of merchandising – from procurement process at the supplier before deliveries of goods from RTs to shop. In Kopek the logistics is arranged in such a way that the main providing shops goes through RTs. For maintenance of stock remainders the order of goods is performed, and the created task should be satisfied with the RTs resources absolutely. We practice also cross-docking when the supplier order forms order-based shop, and one pool goods are delivered on a warehouse, from where, passing a stage of intermediate storage, are distributed on shops according to their orders. At last, goods can be delivered in shops directly from the supplier though the order chain all the same goes through the central office.

– And how control of a warehouse is exercised? Whether some specialized software solution is applied? � No, system same. Just in it the corresponding hierarchical structure for each division – shop or a warehouse is created.

– As a rule, the personnel of the company very reluctantly pass to a new system. If it is SAP which is famous for the inconvenient interface and complexity in mastering. Did you face similar problems? Sabotage of employees was reached by case? � Well, actually people are always dissatisfied with what they did not get used to. When we still implemented GESTORI Pro, a system was unfamiliar to the vast majority of workers too. Someone from personnel had experience with products of 1C, Info-Bukhgalter, etc. Of course, any new system seems problem. We assumed that users can have certain psychological barriers, but everything was: I will not remember sabotage cases.

– How many investments were made by Kopek in a system from SAP? � So to say, the project which was outlined by specific purposes and time frames had the budget of $750 thousand. I would select three main items of expenditure – the cost of licenses, cost of the equipment for a data processing center and expenses on consulting. For a moment, when we started the first stage of the project, turnover of the company made about $125 million, and the network contained 25 shops.

– Prior to project implementation with SAP? � The company kept accounting using the Platinum system which got to us by inheritance from former business. For accounting of merchandising GESTORI was selected and implemented.

– How did you organize integration of ERP and external applications which are responsible for management of retail sales? � All operations on merchandising are executed by means of SAP R/3. There are POS terminals in shops. Also there is a certain intermediate technology link which we call the system of automated management of retail sales (its role executes GESTORI). Using it we manage point-of-sale terminals, we configure process of retail sales. For example, all information on the change in price or new barcodes is entered by the relevant employees into SAP R/3 and further is broadcast in GESTORI which already using the technologies "brings" this information to each POS terminal. A feedback is information on sales. The data arriving at the moment more than from 800 point-of-sale terminals accumulate in GESTORI, are verified on special algorithms and then in summary form transferred to the ERP system. Each separate check is stored in the centralized database of checks of GESTORI and on POS terminals, and folded information on sales (shop/date/goods) is stored in the environment of SAP.

– Whether in the course of SAP implementation of R/3 it was necessary cardinally to change something in a management structure the company? � When we formulated project tasks, one of tasks was to start a system already on the available business processes. We tried to avoid mistakes which other companies made at the beginning of the 90th. We already built the centralized control circuit with the principle of distribution of functions for each structural level of the company. Under it still automation by means of GESTORI was based. Therefore when we passed to SAP, business processes had not to be changed – it was rather simple to realize them in coordinates of other system.

In general, in my opinion, change for some reason of an information system should not be followed by change of business processes. Otherwise, why then to change a system? At first bring order to business processes, perhaps, you gain bigger effect if you manage to optimize company management.

In our case of all this it was not necessary to do. Changes were insignificant. It is caused by the fact that different vendors differently approach the embodiment of these or those particulars, parts of information systems. In two-three cases it was necessary to correct something in business processes. But changes did not concern strategy in general and did not change the general order of decision making. The routine, technical moments were adjusted.

– Now Kopek invests money in new and quite expensive POS equipment from NCR though its shops treat an economy class format. Proceeding from what reasons did you decide not to save? � We use many years the equipment of the same brand. There is a lot of buyers, and they need to be serviced very quickly. We build on it the business. It is obvious that it is more reasonable to purchase the equipment which total cost of ownership would be as low as possible. Everything that we set in points of sale now, suits us in terms of technological effectiveness and performance and is justified economically. We tested new scanners with the built-in scales, stability of reading of a barcode at them is 25% higher. I do not say that we update the park of the POS equipment entirely now. Just in the opening shops we put all new in cash modules. Planned replacement of the terminals and scanners which served the, conditions of their operation very tough is in addition conducted. By our calculations, the equipment of a top class is more profitable.

– How much does the software and the equipment for each supermarket cost? What share do these costs occupy in a total amount of investments into each new shop? � Relative digits are like that. If to speak about investments into fixed assets, then IT providing makes from 3 to 5% in a cost structure of the company for opening and equipping of trade enterprises. It is necessary to consider that we have a centralized control circuit. If we open 15 shops, changes are entered also into the system at the central office without what it is impossible to provide scaling of network. Therefore I would not begin to separate investments into specific shop from investments into the central IT-system.

– How sales management in each supermarket of network is built? � Structure such is that in shop only four persons of the leading level: the manager, the merchandiser, the shift supervisor and the assistant on security. All managerial functions are also assigned to these employees. At the enterprise only two computers and one login in an information system. With those technologies which we apply it is enough to keep full account of goods. Communication with the central office is provided on data transmission channel which can be organized by a different method, both on copper pair, and on optical fiber.

– Do you apply wireless technologies? � We have two distribution centers under control of the WMS module. And as peripheral equipment radio-frequency data collection terminals are used. So all operations on goods acceptance, a complete set of orders and shipment are executed using radio terminals, wearable or mounted on loaders.

– And what you will tell about RFID? � Practical interest in similar technology can arise when it stops being too expensive and will purchase mass character. We have about 450 suppliers. When they begin to apply radio tags on the goods, we will pass to RFID. So far before it is far.

– But here the Russian retailers slowly begin to use electronic document management. � "Kopek" participates in work of the technology committee "ECR Russia" and prepares for implementation of the first project together with one of suppliers. Here it is necessary to consider that retail does not receive a sure gain from EDI. It is impossible to tell that upon transition to electronic document management we in something save as supplier orders are already documented in a system, and process of the order is most automated. Having once created the order, the manager generates the whole chain of documentary processes, including goods acceptance. Taking the order, the employee in shop needs only to enter if necessary any optional data, for example, the deviations concerning weight goods.

– In what your interest when you cooperate with ECR? � Sense of work of the organizations like ECR that the supplier saves on paperless document flow. If he is ready to share this economy, EDI becomes justified and for the retailer. Eventually, the implementable technology allows to receive cheaper goods. The essence of our pilot project is that retail supplier is excluded from a chain a wholesale company which acted as the intermediary so far. At the expense of it we tries to obtain an essential discount at the price.

– The range of goods delivered in shops through own RTs of network is how big? � It is practically all range, more than 80%, except for products with an expiration date of 36 hours and less. It is delivered by suppliers or producers directly.

– You were finally convinced that it is the most profitable to work through the RTs? � Yes, we precisely know how much own logistics costs to us and how many ask for the services provided on outsourcing. Our scheme is almost cheaper than the organization of the goods delivery in shops twice.

– Whether the structure of the budget selected by the company for IT changes? � The cost structure especially did not change. Main articles in the investment budget – a data processing center, the control and cash equipment and acquisition of software licenses. In total they give about 80-90% of the investment budget. The structure of operating costs includes wage fund of staff of division of information technologies, maintenance and repair of the equipment of IT and also communication services approximately in equal shares.

– Did you pay back investments into IT, those $750 thousand? � A payback period of investments, including investments into information technologies as component of investments, at us never exceeded three years.

– How do you manage sales in the geographically distributed network structure? � We separated all network into divisions. Now so far only one division - Moscow, the Moscow region and several regions adjoining Moscow area works. The Voronezh and Nizhny Novgorod divisions are already created. A part of functions on trade management will be delegated from the central office to divisions. But a system remains centralized so to us all the same where there will be an office or shop.

What is given to Kopek of IT technology

* Cycle duration "order delivery" from the beginning of formation of the order in a supermarket before delivery it from RTs does not exceed 12 hours at the nomenclature about 2500 names;

* Existence of the comprehensive information about relationship with the supplier: orders, deliveries, the prices, returns, etc. regardless of a point of delivery to networks of supermarkets;

* an Opportunity to make on the centralized scheme and direct deliveries in supermarkets of separate types of goods (does not exceed the cycle "order delivery" 18 hours);

* Pricing becomes simpler: the price is quoted once on one goods, and this transaction is done at the central office till 20 o'clock. The next morning at 9 o'clock price labels already stand in all supermarkets;

* Economy of the highly qualified personnel occupied in marketing, logistics and accounting due to high automation of basic processes and separation of personnel into analysts and operators.

The centralized IC allows to reduce operating costs as staff costs of IT services are reduced. Administration and maintenance is performed from the central office.

Retail of economy class

In 2005 the number of shops of Kopeyka network was increased almost twice, from 68 to 118 outlets working not only in Moscow, but also in many areas of the Central region. The total volume of sales of the company in Moscow and regions was $646.4 million that for 52% exceeds an indicator of 2004. Besides, Kopeyka together with BEL Development brought the new warehouse Vidnoye complex into operation.

50% of capital stock of network belong to FC Uralsib, other half – to top managers of TD "Kopek". The TD Kopek management company exercises operational management by network (planning, coordinating, control and other functions). Trade operations and real estate transactions are assigned to divisions of the company. Shortly them will be three – Moscow, Nizhny Novgorod and Voronezh.

In the summer of 2005 the Standart&Poors agency assigned to Kopek credit rating on the international scale "In -", on Russian – "ruBBB", the forecast Stable. Say that the network actively prepares for the IPO. In any case, the company passed to IFRS and the third year books audit of the reporting under international standards.

One of the success factors "Kopeks" – the thought-over concept. The basic principles of strategy of network – uniform target segment, uniform assortment and price policy, the thought-over branding. Now two formats develop and work for Kopek: "Supermarket" (total area is from 600 to 1200 sq.m; floor space of 400-900 sq.m; 2500 goods items – food plus the limited range of nonfood of daily demand) and Super Supermarket (the total area of 3500 sq.m; trade – 2500 sq.m; 8000 goods items, food/nonfood ratio – 50 on 50).

According to ROMIR Monitoring, the network of supermarkets Kopek is the most known capital network. The rating was carried out by telephone survey in November, 2005. According to the results of a research, among familiar shops Kopek was called by 47% of Muscovites (to complete the picture: Auchan 43% of respondents remembered, Pyaterochka – 40%, Seventh Continent – 36%, and Intersection – 30%). Last year high rating positions of trading house were confirmed by mentioning in authoritative Russian ratings. The company was included into the rating of magazines of Forbes ("200 largest private companies of Russia") and Expert ("400 largest companies of Russia") and also in "TOP 200 Rossiyskoy of retail" National Trade Association.

In October Kopeyka became the leader of the industry in the sixth rating of the most professional managers made by Association of managers of Russia. Recognition of experts was gained by Alexander Samonov, the president of Kopeyka trading house, the CEO "Kopeyka Moscow" Sergey Lomakin and Victor Shlepov, the chief financial officer of the company.

Compare the prices

Not so long ago the Kopeyka network announced acceptance in management of 48 shops and the distribution center now working under the sign "Ekonta" in Nizhny Novgorod and adjacent areas. The specified assets were purchased at the end of February of this year by foreign investment fund at Millhouse Capital. Kopeyka calculates that the transaction will allow to take the leading positions in the market of the Nizhny Novgorod Region. The company management intends to develop further the Nizhny Novgorod division of the company (The Nizhny Novgorod, Ivanovo, Kostroma region, Chuvashia, Mari El). The total quantity of shops under control of TD "Kopek" according to the results of the transaction will make 179. The company already begins technical actions which will allow to apply in March in shops of technology of management, logistics, sales and marketing of Kopeyka. Retrofitting of the purchased shops by the cash equipment will be carried out to the shortest possible time, connection to the information system "Kopeks" is performed. Centralized deliveries of goods in shops from the distribution center located in Nizhny Novgorod are planned. Shops of network will be brought into accord with traditional positioning of Kopeyka as "shops at the house with the beneficial prices". In the last week of February in Yaroslavl three supermarkets Kopek were open at once. And it is the first shops of network in the city. Shops completely repeat well proved Moscow format: everywhere the same range, the same prices, the same design (a red-white gamma) and corporate advertizing campaigns (when discounts pass a psychological barrier of low cost). For buyers the programs "Compare the Prices", "New Goods Every Week", "The Best Goods at the Best Prices", "Special Offer of Month" are prepared.

Kopek accompanies opening of the shops in the city with the advertizing campaign carrying as it is accepted in networks, information character "goods price". Advertizing placed in television air and on the front pages of printing editions (and the January marketinovy action "Scandalously Low Prices" was carried out in all network and was announced on the central TV). In Yaroslavl Kopek managed to surprise buyers: for example, cut long loaf in its shops now costs five rubles (at the srednegorodsky price of 7 rub of 30 kopeks), sprats – ten (the srednegorodsky price – 13.45), and milk of 2.5% fat content – 11 rub 90 kopeks (at srednegorodsky to the price 13.70).

Since the beginning of 2006 13 Kopeyka shops were open and the number of shops of network reached 131 from which six opened only in February.