Staying stocked during disaster

Many U.S. companies still haven't recovered from last year's hurricanes. United Pipe & Supply, however, managed to keep growing despite supply shortages.

The storm shut down chemical plants along the Gulf Coast that produce the plastic resin used for making PVC pipe. For most pipe dealers, that meant coping with soaring prices, if they could even find pipe to buy. United Pipe & Supply, however, found it could use its business intelligence software to maintain its supply lines by ordering only the exact items it needed at a given point in time.

"I did some quick analysis in FileMaker and made some decisions on how much product to purchase, from whom, where to ship it from and how to keep track of that," says Dan Kraxberger, purchasing vice president. He customized a report to generate a critical-items analysis. He then sent the analysis to each vendor, so they knew exactly which items were most needed. The data was continually updated based on vendor feedback. "Where everybody else was asking to just ship them everything, we were saying that if you can just ship us these items, it will work out," Kraxberger says.

As a result, while competitors were running out of stock, United Pipe was able to keep its regular customers supplied. Instead of a disaster, the company had record-setting months during that time period.

United Pipe & Supply has transformed many aspects of its business operations using BI software. The company's pretax profit margin increased from 1.5 percent in 2003 to 4.7 percent in 2005, and in the past two years, its income before tax has risen from US$2 million to US$8.2 million.

"We have raised the bar on the performance of the company," says Mike Green, United Pipe's CIO and vice president of operations. "We are growing the company, but we are also squeezing more to the bottom line through the use of these tools." While he doesn't attribute the improvements solely to the use of BI, he does say that it is "part and parcel of the changes in the company" and that it "could not have been done without these tools."

Green joined the company in 2000 and was charged with the mission of increasing efficiency. His first foray into BI was installing activity-based costing software from ABC Technologies (since acquired by SAS Institute, and renamed SAS Activity-Based Management, or ABM). He set it up to pull data from the company's AS/400-based hard-goods distribution ERP system from Mincron Software Systems and put it into a Microsoft SQL Server data warehouse. The Mincron system has 1,100 data sets going back 15years.

"The proudest moment was when we were able to determine what our true profitability was for each customer in the company," says Green. Surprisingly, United Pipe's largest customer was costing it money. That discovery led to a re-evaluation of the deals being offered to attract new customers.

In some cases, it was better to forgo some business than try to undercut the competition. Green was also able to determine that some deliveries were costing three to five times the average. "We found pockets of inefficiency that drove changing out our fleet and redeploying personnel," he says.

Green used the SAS ABM system to model each of its local branches, find individual best practices and get other branches to adopt them. While this system did produce valuable insights, it was also expensive to maintain, so United Pipe temporarily mothballed ABM while implementing two smaller systems. The accounting department last year started using OutlookSoft CPM performance management software from OutlookSoft. It allows users to enter and extract data using Microsoft Excel as a front end, rather than having to learn a specialized BI interface. OutlookSoft partner IX Infotech helped with the implementation.

"They are an AS/400 shop, which is usually difficult to get data out of or run specialized reports without relying on programmers," says Scott Kolka, chief technology officer at IX Infotech. "We brought it all into Excel so they can do a lot of reporting."

IX Infotech started working on the project last September and is now wrapping up the score-carding and BI dashboards, including inventory and order metrics. Previously, the users had to run AS/400 reports and then key the data into Excel. Now the system is able to capture many of the business rules and pump out a daily sales report without any rekeying.

Cheryl Summers, United Pipe's controller, says the system has already enabled the company to move from a centralized, top-down budgeting approach to one where individuals are responsible for generating their own budgets. She says that this has increased financial responsibility throughout the organization. For the first six months of the year, the company was running ahead of its sales budget and within its expense budget. She says that's a big change from when the budgets were "just what upper management believed was going to happen."

"It was really a hands-on participative experience," says Summers. "They own these numbers, they believe in them, and they run their businesses accordingly."

For the purchasing department, Green established an ODBC link between the Mincron ERP system and a lightweight database from FileMaker. "Normally, I use it to do ad hoc queries and analysis of important items that are not available on our mainframe," says Kraxberger.

Says Rebecca Wettemann, an analyst at Nucleus Research, "This is a great example of how providing the supply chain with access to better intelligence can not just streamline operations, but also improve competitiveness."

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