Supply-Chain Fast Lane

Two years ago, John Krieger did something that many of his colleagues couldn't quite understand. Krieger, who as president of Star Sales & Service, a Bay City, Mich.-based auto-parts aftermarket distributor, also oversees IT, switched his small business from a large, well-known solution provider to a smaller company he'd never heard of for a supply-chain management solution. That decision saved his company half a million dollars in inventory.

"A lot of people would ask, 'Aren't you nervous about going with a smaller company?' but I said, 'No, not really,'" Krieger explains.

The problem? Krieger had been running a relatively outdated supply-chain management system by Activant (formerly CCITriad), with which he had been doing business for about 20 years. But he was typically working a day behind, with information not processed or available in real-time. "If it happened today, we wouldn't know about it until tomorrow," Krieger says. The obvious result: inventory problems and poor customer service.

In addition to needing an automated supply-chain solution, Krieger also wanted to get online and open up an e-store. Naturally, Krieger first went to Activant about upgrading the existing platform, but found the service fees were out of his price range.

That's when the mail arrived. Call it serendipity, but Krieger received a flier from Rocky Mount, N.C.-based DMS Systems that touted its eStore solution and IBM partnership for its on-demand strategy. He read that DMS, which provides solutions and services for the auto, truck, marine and RV parts and accessories markets, could offer a customized e-store, which Krieger says is rare in his industry.

"A lot of the e-store solutions out there are so generic; you just slap your name on it," Krieger says. "I wanted something and somebody that I could have input with on upgrades, changes and customization."

Intrigued by the flier, Krieger called DMS, had some ongoing conversations during the next several months and eventually decided to sign on.

"It's a long sales cycle in the industries we serve," acknowledges Grady Davis, CEO of DMS Systems, who says that ongoing meetings and demos are key to securing the sale. "The typical installation takes anywhere from four to six months."

Krieger is pleased with the solution. "With our e-store, now customers can do anything they want without having to call us," Krieger explains. "They can look up parts, buy parts, check pricing, check their account and do returns." He adds that about 27 percent of Star Sales' business is coming across the Web now, which saves the company a significant amount of money. Web interactions run at about a 1 percent cost basis, as compared to about 10 to 11 percent cost basis for phone interactions, he says.

Improving Inventory

The solution also addressed Star Sales' supply-chain woes. Using DMS' Distribution/Express solution combined with IBM middleware--which is comprised of an integrated suite of supply-chain and e-commerce applications powered by WebSphere Application Server Express, a DB2 database and an IBM eServer iSeries database--Krieger can integrate inventory, warehouse tracking and the online-ordering system. The system also helps Star Sales forecast industry demand by analyzing sales trends, and product-delivery time estimates vs. customer demand.

Initially, Krieger says he wasn't familiar with the IBM platform the DMS solution ran on, but after completing a questionnaire to gauge what type of unit Star Sales would require, he was sold. The eServer iSeries midrange server that was appropriate for Star Sales is "a tank of the world--nothing ever goes wrong with it and it never goes down," Krieger says.

After the implementation, Krieger discovered he was stocking half a million dollars worth of inventory that he didn't need. "We typically stock about $2.2 million to $2.5 million in warehouse inventory, and to downgrade that by 20 percent is a huge amount of product to not have sitting there," he says. The system projects usage and demand, he explains, and forecasts trends specific to the "bell curve" of the auto-parts industry. For example, when a new vehicle comes out, there is typically low usage of new parts, but as the vehicle gets older, the need for parts spikes way up, but then drops down very sharply.

"The DMS system allows us to follow that bell curve very tightly so that we don't ramp up on products too late, and as soon as the demand goes down the inventory can be cut down as well."

In addition to the e-store and inventory-management forecasting, DMS implemented a wireless network in the warehouse that lets employees use wireless handheld devices for shipping, receiving, returns and inventory. "We've dropped our error rate down to practically nil," Krieger says. And it's a very easy application to use, he adds. A new receiving employee was able to get up to speed in a half day, for example.

In total, the solution ran roughly $195,000, with monthly maintenance and services from DMS running about $1,200 a month.

You Scratch My Back...

As for working with a smaller solution provider, Krieger has no regrets. "The DMS customer service has been better actually because we're not just a number to them," he says. "People are willing to go outside of what they've sold us to help us out." For example, Star Sales recently put in a Cisco firewall with the help of SBC Communications. Even though the firewall is not something that DMS typically supports, Krieger says his DMS contact knew enough about the Cisco product that when he needed help, the solution provider was more than willing.

Star Sales returns the favor by evaluating and testing new products for DMS Systems, David says. In fact, Star Sales is currently testing a new WebSphere-based product that will create a total graphical environment for the company, instead of the green screens currently used. And on an ongoing basis, DMS provides help-desk support and software enhancements for Star Sales.