COVER STORY
SWITCHED ON CEO:
Surf's (Still) Up!
Stephen Kay, Rip Curl
As it approaches its 40th birthday, iconic Aussie surf brand Rip Curl is in the
midst of a technology and systems overhaul designed to deliver consistency and
give its management team state-of-the-art decision making tools...
By David McNickel
F
ounded in 1969 by Torquay surfers Doug
Warbrick and Brian Singer, the Rip Curl
journey began with the garden shed
manufacture of surf boards.
Although they were successful at this, within a year Warbrick and Singer recognised that there were
already too many players making surf boards – but almost
none operating in the apparel side of the surf business –
specifically in the manufacture of 'surfer friendly' wetsuits.
For, while wetsuits were available at the time, they
were designed for the limited mobility needs of divers, as
opposed to the flexibility and range of motion required by
surfers.
Sensing a niche, the partners secured a pre-World War
II era sewing machine, took over an old house in Torquay
and went into production, cutting out the rubber on the
floor and handing the pieces to an over-worked machinist.
By today’s standards these prototype Rip Curl wetsuits
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were primitive, but they differed from others on the market
in that they evolved through interaction with surfers. The
people who ran the company actually used the products
in the field, and whether its surf gear or sunglasses, the
'we test it so you don't have to' ethos is a philosophy that
remains with Rip Curl today.
Fast forward 39 years and Rip Curl remains in private
ownership (unlike other Australia founded labels Billabong
and Quiksilver) and is managed by former action sports
publisher Stephen Kay.
Annual turnover is north of $400 million (as the company is privately owned, Kay won't put an exact figure on
it) and nine corporate licensees make and sell Rip Curl
products (which include surf boards, shoes, eye-wear,
clothing, bags and accessories) in Australia, Argentina,
Brazil, Canada, Chile, France, Israel, Indonesia, Mauritius,
Japan, New Zealand, Peru, South Africa and the US.
Explaining the company structure, CEO Kay says
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COVER STORY
Number one, we see Rip Curl as a
marketing company. We're very
focused on our brand, the projection
and presentation of our brand and
we're just obsessed by our products.
TURNING UP THE HEAT
A
n interesting aspect of Rip Curl's surf wear business is that most of its customers don't actually
live in balmy locations like Hawaii or Fiji – in fact, many of the best surf beaches in Australia,
New Zealand, South Africa and the east coast of the US are downright chilly at times, especially for
those who want to surf year round.
For surfers this means a lot less time in the water because as their bodies cool, blood flow is
redirected to their core internal organs and the arms, legs and fingers gradually become numb and
ineffective – and if you can't swim, you can't surf. With this in mind, Rip Curl has recently launched
the 'H-Bomb' - the world's first heated wetsuit.
Two Lithium-Ion batteries heat the wetsuit meaning the body's core remains warm and blood
flow to the extremities is not reduced, meaning surfers can stay in the water for longer.
The fact that the suits are heated also means the neoprene does not have to be as thick as a
standard wetsuit – thus allowing cold water surfers a better range of motion in the water. The suit's
electronics have a water resistance rating of IP68 and have also been tested by the Natal Sharks
Board to see if the electric current generated attracted sharks (it didn't, by the way).
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SWITCHED ON CEO // STEPHEN KAY
Rip Curl operates a central company called Rip Curl
International, and all the major regions and licensees are
fully owned subsidiaries of that company.
“So Australia is a fully owned subsidiary of Rip Curl
international,” he says, “as is America, NZ, Indonesia and
Europe. 90 percent of our global revenues comes from
companies that are fully owned subsidiaries of Rip Curl.”
Interestingly, this ownership philosophy does not
extend through to the manufacture of Rip Curl product,
although this is not an unusual situation in the apparel
business.
“Very few of our licensees or subsidiaries actually
manufacture,” says Kay.
“Most of our goods are made by third parties - manufacturers from Morocco through to China. We own a very
large wet suit manufacturing facility in Chiang Mai in
Thailand which is the largest single employer in the Rip
Curl world (650 employees). And we maintain a very small
wet suit factory in Australia that produces maybe half of
one percent of our total requirements. Other than that, it's
pretty much all made overseas with China as our No.1 supplier.”
Although Rip Curl does operate around 170 branded
retail stores Kay says the company is first and foremost a
wholesaler – albeit with a retail arm.
What's The Big Idea?
So if Rip Curl isn't really in the manufacturing business, what business are they in?
“We think of ourselves differently these days,” says
Kay.
“For example, our Australian head office we think of
as an exporter of intellectual property in that probably 60
percent of the goods that are sold in the Rip Curl world
are designed here in Torquay.”
And it's here that Kay's media background has played
an important part in the growth of Rip Curl since he
joined the company nine years ago. Whereas most company heads come from an accounting or economics background, his experience in publishing (essentially a business of ideas, imagery and presentation) is closely aligned
to Rip Curl's vision of itself.
“That's why this company isn't run by accountants,”
he says.
“We have some great financial people here but if you
looked at our company values, creativity and innovation is
right at the top of the list. Number one, we see Rip Curl as
a marketing company. We're very focused on our brand,
the projection and presentation of our brand and we're
just obsessed by our products.”
So focused, in fact, that when Kay arrived he set about
creating an internal design and media arm that would
rival many advertising agencies for size, scope and project
capability.
“Whilst we were spending some pretty significant
amounts of money on marketing,” he says, “the structure
within the company was rudimentary and I was given a
very broad license to develop the fabric of advertising and
promotions.”
Media staff went from three to about 25 in two years.
“We believe in doing things in-house,” says Kay.
“We have our own edit suites, internet specialists, film
editors & photographers. We have the full box of tricks in
Torquay and we see those skills as essential competencies
that the company must have and keep in house.”
Although the value of IP has always been understood
at Rip Curl, when Kay first joined the company (as the
global head of advertising and promotions) branding consistency was an area that needed his attention.
“Trying to be a global brand with regional sensitivities
can be a real challenge,” he says.
“We set about standardising formats and the use of
brand and logo around the world and having more of a
global team of athletes, a global events platform and things
like that. When I arrived there was very little globalisation in that area and nine years later we have quite a high
level of globalisation and a lot more guidelines in place as
the company has got bigger as to how people can use our
brand.”
Evolving ERP
With its branding standardised & globalised in the
early years of Kay's tenure, more recently Rip Curl have
looked to doing the same with its core business systems.
High on the list was a new ERP solution to replace Rip
Curl's ageing GABS solution.
“We are in the final stages now of specifying a new ERP
platform,” he says, “that will give us standardised reporting
processes, policies and hardware from every fully owned
Rip Curl subsidiary in the world.”
Rip Curl IT manager Steve Westmoreland says the
company went through a comprehensive evaluation process to find the right ERP fit.
“We prepared a request for tender document,” he says,
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COVER STORY
“based on our required functionality and went out to the
market. The obvious people who responded were SAP,
Microsoft, Intentia (now swallowed up by Lawson) and a
few others. We then went through an elimination process
around things like the complexity of the software, time to
install and so on.”
Ultimately Rip Curl opted for M3 from Lawson – a
speciality ERP package for the apparel and fashion industry.
“M3 is based on the Movex system. Movex was owned
by Intentia and was a very solid apparel ERP system that
many of the global apparel companies were using.”
Westmoreland says although SAP was considered,
he found it more suited to a larger organisation than Rip
Curl.
“It's great for the globalisation of big companies,” he
says, “whereas the M3 system wasn't quite as difficult
in terms of implementation, maintenance and training.
Basically the software and the size of the company was a
better fit for Rip Curl.”
The M3 implementation began in August and
Kay says the first roll out of the system is expected in
early 2009 in Australia and New Zealand with a subsequent global roll out over the ensuing 12 to 18 months.
Westmoreland says the introduction of M3 will also
impact the profile of Rip Curl's in-house IT team.
“At this time our IT team is made up of about seven
people in Australia predominantly supporting our Lotus
Notes and our OsiPOS system. But what we're doing with
our ERP implementation is starting to build a global IT
team that will be involved in every roll out around the
CEO GADGET WATCH:
BlackBerry Curve
83 Series
“My essentially tool is my BlackBerry,” says Kay.
“I've learnt to use it over the years and I'm onto my third one so it's
become very valuable for me. Usually I am going from one Rip Curl subsidiary
to another and outside of that environment I get my email through the BlackBerry,” he says.
“My staff are trained not to send me large files or attachments, I get them to give me one
paragraph summaries. It's very light and a lot of what I do is attend meetings and I take some
pretty substantial paper files as well – so it helps me to keep my weight down as I don't have
to carry a laptop everywhere.”
FEATURES: Phone, email, text messaging (SMS and MMS), browser, instant messaging and
organiser applications in a single smartphone; 2 megapixel camera with built-in flash; Media
player with audio and video playback; High capacity battery; Built-in GPS option; Trackball navigation; Full QWERTY keyboard; 64 MB of memory and expandable memory via microSD card.
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world so that we get consistency in the application of the
system and the processes to support it.”
Speed To Market
Around the same time as it went looking for a new ERP
system, Rip Curl also sought to further strengthen its IP
systems by implementing a Product Lifecycle Management
(PLM) solution.
The Infor/Geac Run Time application incorporates
proactive process workflow capabilities in its Quest
Workflow Engine, a tool Kay says has dramatically impacted Rip Curl's range development time frames.
“We use Quest as our product development system,” he
says.
“It's the format within which we design and manage our intellectual property – our designs – and it's of
immense importance to us as we go forward.”
Previous to the deployment of Quest, Kay says when
Rip Curl had finished a new range it had to burn disks
of the range and Fed Ex them to its licensees around the
world.
“It was cumbersome and time consuming,” he says.
“Then we moved to intranets which were poorly disciplined and inconsistent for transferring information. But
Quest is a highly refined system that allows our licensees
to tap into it at any time during the development phase.
They don't have to wait until the end of the process to
get the information that they usually require urgently. It
delivers massive improvements in apparel product time to
market while significantly reducing operational costs and
licensees can watch the range being developed on their
computers wherever they may be.”
Measuring Success
As with any company shifting large quantities of stock
around the world, warehousing and efficient SKU management is critical to Rip Curl, something the company has
directed considerable attention to recently with the deployment of RFID technology, integrated into Rip Curl's proprietary warehouse management solution.
Standing for 'Radio-Frequency Identification' the significant advantage of RFID as a tracking tool over other
methods (like barcode scanning for example) is that RFID
tags do not need to be positioned precisely relative to the
scanner. Explained another way, if items in your supermarket trolley had RFID tags embedded, you would be able to
simply wheel the whole trolley through the checkout for a
total price instead of scanning each item individually.
“All our processes from receiving, through to inventory control, through to pick & pack are all performed now
using RFID,” says Westmoreland.
“That gives us great control over our inventory and the
SWITCHED ON CEO // STEPHEN KAY
accuracy of our picking process. We have implemented that
in Australia, NZ and the US over the last 18 months and
that will be upgraded in January to the new M3.”
Kay says RFID has certainly lived up to its promise.
“It's been extremely successful,” he says. “It's when you
do your stock take that you see the true accuracy of your
inventory and at our last stock take in June it was a very
impressive result in terms of accuracy at the line level. And
that accuracy is a great driver of sales because if a customer
orders based on what they think is in inventory and it happens to be there, then we can deliver what they require. It's
really been an outstanding success from where we came
from two or three years ago, to where we are today.”
At the other end of the supply chain, Rip Curl's interaction with its suppliers is managed via the Belhara supplier
tracking system.
“We connect via a web portal,” says Westmoreland.
“They log into the system and confirm their production orders and ex-factory dates. When the goods are about
to be handed over to a freight forwarder they create a
packing list in this system, and the freight forwarder does
the tracking of our product from handover until it arrives
at its destination.”
Putting The Logic Into Logistics
Rolling out a globally consistent
process and adopting best practices
as we move through that process
has very much been our focus.
Both Kay and Westmoreland say that the last five years
for Rip Curl has certainly been focused on improving efficiencies and standardising systems and reporting. And in
the unforgiving global fashion business, quality of product
aside, success often boils down to who's got the most efficient logistics.
“For us what's important is what it costs to get our
products from our factories to our customers around the
world,” says Westmoreland.
“So international logistics is a big part of the measure
of success. Being more efficient in the way that we consolidate product into bigger containers so we don't trans-ship,
we don't hand over to multiple freight forwarders, we don't
go through too many regions. We need to make it very easy
for every country in the world to be able to purchase product that's developed at Rip Curl so we increase our production volumes and reduce our FOB price.”
Kay acknowledges that there's still a long road ahead.
“Rolling out a globally consistent process and adopting
best practices as we move through that process has very
much been our focus,” he says.
“Our new ERP system will give us the tools and the
visibility. We have a set of KPIs that we've established globally that we're measuring against now. We are moving progressively through the implementation and our objective is
to achieve our targets in two years.”
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