KWH Pipe Canada, a Mississauga, Ont.-based specialty manufacturer of large-diameter pipe used in a variety of industrial applications — from waste-water management to mining — lives and dies by the ability of its sales reps to produce competitive and accurate quotes. So naturally the company, with
$70 million in annual revenue and 475 employees, became a little concerned when it discovered sales reps were firing off too many slipshod estimates — sometimes for multi-million dollar deals — that left clients wondering what planet they were doing business on.
The root of the problem was a lack of standardization. Some reps generated hand-written quotes, while others used Word or Excel. No two quotes were arrived at in exactly the same fashion. “”We had situations where the shipping cost was as much as 50 per cent greater than the estimate,”” says Robert Fuerth, sales and marketing manager at KWH Pipe. “”It looked like a firm price to the client, but the details of the quote were not quite right. That cost us money.””
Indeed it was costing too much, and KWH Pipe came to the conclusion it needed a computerized quote engine. But when the company began looking around for the right software, every system came as part of a larger CRM (customer relationship management) package. As a result, KWH Pipe decided to take the plunge into CRM.
Fast forward to the present. KWH Pipe has invested $180,000 in a mid-market CRM package that went live at the beginning of 2002. That’s the good news. The bad news is that to date, only the quote engine is working. The system’s other features — including a centralized contact management system and a report generator that is able to slice and dice sales and quote data — have yet to be rolled out. What’s more, KWH Pipe has no firm timetable for harnessing its unused CRM capability.
“”I don’t think we made the CRM installation enough of a priority,”” says Fuerth. “”I’m disappointed it’s taken as long as it has.””
KWH Pipe’s story is pretty typical. Small and medium-sized enterprises (SMEs) in this country are struggling with shrinking profit margins, faster turnaround times and increased global competition. To survive they have to be nimble and flexible.
Naturally the best way to ensure success is to be first to market with a hot new product. But beyond that, a competitive advantage can only be sustained by reducing internal costs and improving customer service. That’s where CRM and ERP (enterprise resource planning) systems enter the picture.
For manufacturers with annual revenue between $10 million and $20 million, the question is no longer do I need an ERP or CRM system, but rather which vendor do I buy from?
“”Manufacturers have to get costs out of their operations,”” says Robert Antonioni, manger of the industrial sector at Markham, Ont.-based IBM Canada Ltd. “”Status quo is not an option. How you can leverage technology within your own four walls, and beyond — to suppliers and customers — is what counts.””
There is no arguing with the fact that sophisticated IT systems are a part of daily life for SMEs. But at the same time, their track record with this technology is spotty at best. Consider that the rule of thumb among manufacturers is only one quarter of ERP and CRM installations are a success, another 50 per cent are never fully implemented, and another quarter are outright failures.
In light of these statistics, is there anything a company can do to increase its probability of success? “”Know what the business problem is, and have clearly defined objectives in mind,”” says Antonioni of IBM Canada. (IBM Canada helped KWH Pipe select a CRM vendor.)
Says Warren Shiau, software analyst with Toronto-based IDC Canada: “”Don’t look at ERP and CRM installations as a panacea for all your problems. The most successful installations are those that address a specific set of issues such as accounting automation and HR (human resource) management.””
Where did KWH Pipe go wrong? Part of the problem is prior to embarking on a CRM installation, KWH Pipe had little of the necessary IT infrastructure in place to make it work.
“”It took a lot of time to get all the routers, switches and cabling in place,”” says IT manager Robert Sernowski. “”That pushed back implementation — almost too far.””
But the single biggest problem was the CRM project did not have a serious buy-in from senior management. That meant KWH Pipe expected its small implementation team, led by Sernowski, to handle the CRM project in addition to other responsibilities.
Atlas Hydraulics Inc. — a manufacturer of hydraulic hose and tube assemblies used in forestry and construction equipment took a different approach with its ERP installation. The Brantford, Ont.-based company with $34 million in annual revenue and 200 employees dedicated a seven-person team to the ERP project. “”We had a huge commitment from senior management,”” says Frank Beattie, systems manager with Atlas Hydraulics. The new ERP system replaced legacy software, and went live April 2002 after a nine-month installation. “”This is one of biggest projects we have undertaken in the last few years,”” says Beattie.
“”But without a solid ERP system you cannot grow a company, or manage people and machines.””
The new features Beattie is most excited about are a materials requirement planning (MRP) tool that keeps a tight rein on inventory, and a real-time data collection tool that tracks work-in-progress. On the surface that may not sound like a huge deal, but consider it previously took up to six weeks to update the status of work-in-progress. That meant the company had to carry excess inventory to be sure it never ran out of raw materials.
Beattie estimates the MRP and tracking tools alone have saved the company about $100,000 in the last 12 months. Contrast that against the $300,000 Atlas Hydraulics invested in CRM hardware, software and training, and you get a healthy annual return of about 33 per cent.
What’s the secret to Atlas Hydraulics’ success? “”You can be coached by vendors,”” says Beattie, who has been involved with three ERP installations over the years. “”But until you take ownership and do the bulk of the work yourself, you won’t succeed.””
Beattie admits all companies struggle in the first year of a major IT installation, but they should begin to milk the benefits by the second year. There is no time to coast, however, because by the third year it’s time to think about an upgrade.
At KWH Pipe, Sernowski is psyched about the foray into CRM despite early setbacks. “”I want to take CRM to the extreme,”” he says.
He wants to activate the modules sitting dormant and introduce a wireless interface so sales reps can call up inventory data and access information from PDAs.
Maybe he should learn how to walk before he tries to run, but vision is important for any manufacturer who decides to dance with an ERP or CRM system.