The IT factor

Building a new facility is challenging, but likewise opens up a whole new window of opportunity. So when Pepsi-Cola Bottling of Hickory, N.C., built a new corporate office and warehouse, management decided to install a more robust telecommunications network.

“We were fortunate because the timing was right,” says IT Manager Jim Bare. “Our old system performed well, but we were growing and adding buildings, and the cost of adding sufficient bandwidth to meet expanding requirements would be nearly as expensive as putting in a new infrastructure.”

The new network gave the bottling company the bandwidth to improve the efficiency of backbone tasks such as processing invoices and accounts payable, in addition to making it easier for salespeople to communicate with customers.

The changes at Pepsi-Cola represent just one example of how manufacturing and distribution companies are learning to use information technology as a primary tool in business transformations.

Gary Curtis, global manufacturing partner of strategic IT effectiveness at New York-based consulting firm Accenture, says all manufacturers—especially midsize and large companies—are looking for ways to strategically and tactically transform their businesses using IT.

“We tell companies—and many discover on their own—that the single most important change they can make to improve economic efficiency and business effectiveness is to do more with IT,” Curtis says. “Often, traumatic business events trigger an in-depth evaluation of a company's IT strategy, and that ultimately leads to a business transformation.”

There doesn't necessarily need to be a loss of business to make that discovery, however. Curtis says many times executives at large global companies suddenly realize they are operating with an underlying IT infrastructure more suitable for a midsize national company—and the situation is preventing the business from meeting performance goals.

That type of realization occurred at Gates, a Denver-based manufacturer of industrial and automotive belts and hoses, as executives wanted to reduce costs while improving responsiveness to market conditions. Gates' IT environment simply was not meeting its expanding business requirements, which included ever-increasing customer demand for shorter product delivery cycles.

Using both Novell and Microsoft technologies, the company's old communications strategy incurred duplicate licensing, training, and support costs. To make matters worse, sales reps, division heads, and engineers travel internationally, and were forced to use dial-up access to corporate systems over a difficult-to-navigate virtual private network (VPN) solution.

“Management has challenged the IT department to be more nimble and responsive,” says Greg Vigil, director of global enterprise collaboration at Gates. “Our customers are striving to reduce costs and shorten cycles for getting products to market. We must be responsive so we can meet their needs on tight deadlines.”

Accomplishing that required a new strategy. “We needed to rethink our approach to IT investments and look not at individual products to solve various problems, but rather at finding an end-to-end solution capable of supporting our global vision,” Vigil says.

Gates decided to migrate to a Microsoft-only environment and use solutions such as the Windows SharePoint Services feature of Windows Server 2003 to create a centrally managed collaboration infrastructure. The result, Vigil says, is a consolidated, cost-effective, easily managed technology infrastructure that supports employees' individual and collective efforts to work smarter and faster.

“Microsoft tools and technology saved us a significant amount of money during deployment,” Vigil says. “Systems Management Server saved us more that 7,000 hours of work as we shifted the desktop environment from Novell to Microsoft. We expect to recover our costs in six months. We also are saving duplicate licensing, support, and maintenance costs of more than $1 million.

“With Microsoft,” Vigil continues, “we have an IT environment that allows us to be more agile and responsive. We were looking for reduced total cost of ownership as well as greatly expanded collaboration capabilities, and Microsoft delivered on both.”

For Pepsi-Cola Bottling, continued growth exposed limitations of its IT infrastructure. As Bare, the IT manager, point out, the company was fortunate that growth and the requisite building of new facilities offered the chance to upgrade that infrastructure.

Bare began by assessing the performance of the networking and telecommunications infrastructure that included a T1 line used partly for frame relay and partly for Internet connectivity. As the company grew, Bare realized the T1 line was insufficient to run main backbone applications. The aging networking and telecommunications system also included a Microsoft application server for email and Internet access, as well as outdated IBM routers that provided only limited security.

The frame relay network in particular posed many programming challenges as the company grew and traffic flow increased, Bare says. For example, the network was bogged down by email containing large files sent by users at remote sites. Due to the flooded network, employees experienced slowdowns while processing Web applications such as consolidated billing, as well as backbone applications such as payroll, invoicing and accounts payable, inventory, and sales reporting.

After Bare completed his initial assessment, he worked with Vernon Hills, Ill.-based CDW, a supplier of technology products and services, to create accomplish these goals:

• Build a strong and secure network that provides back-up and disaster planning, eliminates downtime, and ensures business continuity;
• Streamline invoice, reporting, and inventory procedures;
• Improve phone communications between warehouse facilities;
• Install new phone systems with Voice over Internet Protocol (VoIP) capabilities;
• Install T1 lines to allow redundant Internet/email access;
• Establish a secure VPN for remote access for maintenance and support; and
• Redesign data back-up and recovery systems for Linux, Microsoft, and associated databases.

Together, Pepsi-Cola Bottling and CDW staff selected products and solutions, including a Multiprotocol Label Switching (MPLS) data network with fail-over redundancy from Sprint, an Avaya phone system with unified dial plan, Sprint and AT&T Internet T1 lines, and Cisco routers and switches.

The new high-speed T1 data line for Internet access delivered a significant return-on-investment for the company, Bare says. For example, the faster and larger bandwidth creates a more reliable network experience for employees, which enables them to perform tasks such as invoicing and accounts payable more efficiently. It also improves the response times and productivity of the company's salespeople, which contributes to the company's commitment to providing superior customer service.

“We are extremely customer-oriented,” Bare says. “Working with CDW enabled us to put an infrastructure in place to streamline communications so we can fulfill food and beverage orders more efficiently.”

For many companies, business transformation driven by improved use of IT solutions comes about from using software solutions to automate existing manual processes. In many cases, these slower processes tie up resources and inhibit profitability.

A.J. Antunes, Carol Stream, Ill., makes industrial controls, food-service equipment, and water filtration systems. In the past, it used a manual scheduling process, but because it was cumbersome to pull critical data from multiple report and inquiry screens, the company's production schedulers relied on a complex system of spreadsheets instead.

Since the schedulers couldn't get real-time information, the manually created schedules couldn't provide up-to-date demand, supply, and inventory data, says Mike Ferrusquia, director of manufacturing for A.J. Antunes. That lack of visibility compounded scheduling issues, and the inefficiencies resulting from the manual scheduling approach created incremental costs throughout production. Consequently, the company purchased and held excess inventory, had long production lead times, and at the same time, constantly found itself either underutilizing or over-scheduling its production capacity.

A.J. Antunes uses the MFG/PRO eB2.1 ERP suite from QAD, so when QAD's Production Scheduler application became available, decision makers at A.J. Antunes saw an easy opportunity for improving production scheduling process capabilities—as well as boosting production efficiencies and reducing costs.

A.J. Antunes schedulers now have near-real time access to scheduling data such as demand, capacity, and quantity-on-hand. Event-based visual alerts quickly point to potential problem areas, allowing schedulers to focus on what's most important, Ferrusquia says. Finally, scheduling simulation capabilities allow schedulers to balance capacity and demand before committing the production schedule.

“My daily scheduling process used to take two to three hours, but now, with QAD Production Scheduler, it only takes 10 to 20 minutes,” Ferrusquia says. “The significant increase in scheduling efficiency also makes the entire production process leaner. With QAD Production Scheduler, capacity can be managed to optimum efficiency, work-in-process is reduced, lead times are minimal, and inventory costs can be slashed substantially.”

Sometimes, manufacturers use IT solutions that, over time, prove to be inadequate and don't support business processes the way users expect. Implementing a new enterprise solution, for example, enables a company to streamline operations and become more efficient.

Consider, for instance, Sailrite Enterprises, a Churubusco, Ind.-based supplier of solutions for designing, constructing, and repairing marine canvas products. Sailrite previously ran the business using various business management software packages and custom applications.

“There were some very nice features, but it was never enough,” says Matthew Grant, VP and general manager of Sailrite.

Recently, Sailrite implemented Everest Advanced Edition, an enterprise solution from Everest Software. Today, all functions—accounting, sales management, purchasing, inventory, order fulfillment, and electronic commerce—are integrated. The result, Grant says, is that the company is more profitable and productive.

For example, use of inventory control helped Sailrite overcome its challenge of back-ordered items, which is a substantial benefit, Grant says. In the past, the company would have three to four orders on a daily basis with back orders.

“We got to a point where back-order issues were very costly,” Grant says. “Now we average one order a day with a back order of some sort—and that's a big difference. We're easily saving $10,000 to $15,000 a year in costs.”

Additionally, Sailrite uses the Everest e-commerce Web store, which increased customers' average order value. Now a customer can view products online, and enhance products such as the sailmaker's sewing machine kit with add-ons—and see the price change instantly.

“We've increased sales through the Web site by 35 percent using the Everest solution,” Grant says. “It's taken a huge burden off people taking orders on the telephone. We've almost eliminated mail and fax orders.”

There's no doubt that the correct use of IT can lead to a business transformation that enables a company to improve business performance and, consequently, the bottom line. Securing the necessary budget for those IT projects, however, can sometimes prove to be easier said than done.

“The key to getting project approval is knowing exactly what your costs will be moving forward if you do nothing, and what the costs of the new application will be,” concludes Pepsi-Cola's Bare. “It's a lot easier to get funding if you can identify problems and show how they will be solved using real examples and benefits.”