Case Study: Web site adds inventory control and forecasting

Joseph Lacik Jr. doesn't try to measure the return on investment of his company's marketing Web site. The fact that Dallas-based Aviall was saved from financial disaster by a controversial multimillion-dollar IT project that included developing the Web site as one key element is all the return he needs to see.

That investment, in the words of Larry DeBoever, chief strategy officer at IT consulting firm Experio Solutions, "turned Aviall from a catalog business into a full-scale logistics business" that hundreds of aviation parts manufacturers and airlines large and small depend on for ordering, inventory control and demand forecasting. He says the new approach ties Aviall more tightly to customers such as Rolls-Royce.

"Aviall is now the logistics back end for the aviation firms," says DeBoever, whose company was retained to help with portions of Aviall's systems integration work. "And they did it even though the airline industry shrank over the last three years."

In early 2000, with quarterly sales dropping and Aviall on the ropes, "we invested US$30 million to $40 million to build this infrastructure," says Lacik, vice president of information services at Aviall Services, a unit of Aviall. "Our competitors thought we were insane. Some investors asked for my resignation."

The results of the project have been extremely successful. Publicly owned Aviall reported that in the quarter that ended in September, earnings from continuing operations rose 229 percent year-to-year to $6.9 million, and net sales rose 74 percent to $222 million. That represented a huge comeback from Aviall's problems, which sprang from a failed enterprise resource planning implementation that resulted in inventory getting out of control.

When Lacik joined the company in early 2000, "you couldn't properly order or ship things. My job was to bring back operational stability," he says. To do so, he implemented the CEO's vision of transforming Aviall into a provider of supply chain management services through the integration of a BroadVision online purchasing system, Siebel Systems sales force automation and order entry software, a Lawson Software financial system, a Catalyst Manufacturing Services inventory control and warehouse management system, and Xelus product allocation, inventory management and purchasing forecasting software.

Aviall chose Sybase middleware because it was judged to be vendor-neutral. But even with planning, some of the systems integration was more difficult than expected. And the combined system had to deal with customized pricing charts for 17,000 customers who receive various types of discounts and with an inventory of 380,000 different aerospace parts.

The development of Aviall.com was one of the least expensive parts of the project, at a cost of about $3 million, Lacik says. But it provides big benefits. Web ordering costs the company about 39 cents per order, compared with $9 per transaction if an Aviall employee takes the order over the phone, Lacik says.

New supply chain functions are also possible, such as the ability for customers to transfer their orders from an Excel spreadsheet directly to the Web site. Customers can also receive price and availability information on aerospace parts in less than five seconds -- a real-time feature that hadn't been available before the BroadVision system was installed, Lacik says.

The process also frees the company's sales force from routine order-taking and follow-up, thus allowing them to spend more time developing relationships with customers. What's more, the Web site helps Aviall build relationships with suppliers by providing them with customer ordering data that enables them to better match production with demand.

The Web site now generates $60 million of the company's $800 million in annual revenue, or 7.5 percent, up from less than 2 percent a year ago. "Over the next three to five years, it could become more than 30 percent," Lacik says.

Location: Dallas

Web: www.aviall.com

Project leader: Joseph Lacik Jr.

Business: Distributor of commercial and general aftermarket aviation parts

2002 sales: $506.2 million

Size of IT department: 47

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More about Aviall AustraliaBroadvisionExperio SolutionsLawson Software AustraliaSiebel SystemsSybase AustraliaXelus

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