Shifting Auto Parts Service into High Gear

By Michelle Megna | Posted April 25, 2005

In the movie Pulp Fiction, Harvey Keitel's character, "the fixer" knows how to make a bloody crisis go away. In the auto parts distribution business, Grady Davis' company, DMS System Corp. (DMS), plays that role; ready to clean up a "crime scene" splattered with inefficient inventory and sales management, its bottom line a bloody mess of red ink.

For John Krieger, CEO and president of Bay City, Michigan-based Star Sales and Service, "the fixer" showed up just in time. The automotive parts distributor for the wholesale sector was experiencing inventory inertia due to its software system's lack of real-time integration with customer orders. The result? Orders for popular items went unfilled due to lack of stock while too many poor-selling items lingered on the shelves.

Call in the Cavalry
Enter DMS System Corp., an IBM partner company based in Rocky Mount, NC that supplies software and hardware solutions to car, truck, marine and RV parts distributors.

The company set Star Sales up with a supply chain software application it developed and designed called DMS Distribution/ Express. DMS designed the software to run with IBM WebSphere Application Server Express and Universal Database DB2middleware — which all runs on IBM's backend iSeries servers.

The package lets supply chain businesses manage operations in real time — simultaneously — at multiple locations.

Star Sales has increased its inventory turn-around since it started using Distribution/Express to analyze sales trends, lost sales and estimated time of delivery. This, in turn, means the company can more accurately forecast demand.

Krieger says, "DMS came out, set up the stuff, got all the computers communicating, all the hardware operating, then dumped the software on. A week later they pulled data off the old system and imported it, worked over the weekend, and by Monday we were up and running on the new system."

But What Have You Done for Me Lately?
Six months after the DMS team showed up, Star Sales achieved a return on their approximately $195,000 investment. A year later, the company, which employs 54 workers and does about $6 million a year in sales, cut $500,000 in redundant inventory, set up an e-commerce site, automated operations and boosted its gross margin by 18 percent, or approximately $250,000.

"We've been using the system for about a year, and we have a 96 percent fill rate for orders," said Krieger. "On our old system it was 75 percent, so that's a huge improvement."

The DMS suite provides real-time access to the entire spectrum of operations, including sales, in-stock inventory and financial data so employees can quickly make informed decisions while dealing with the customer or scanning the financial records.

Another big advantage, says Krieger, is that the system can monitor his other stores. "If I have two parts at another site, I can transfer one to where it's needed instead of buying another one, so I maintain my inventory without overstocking."

The software also tracks lead times from suppliers so businesses can order the correct amount during the corresponding time frame. Krieger says the program averages the data from the last four part orders, so you're not basing operations on, for example, a seasonal fluke. "Most systems just look at what you've sold and run the numbers," he says.

Another way the package offers managers flexibility is by breaking down orders to one vendor. For Krieger, who uses AC Delco for lots of different parts, this means he can see which parts are back-ordered, which ones are increasing steadily in sales and so on. "The old system blended all the parts together so you didn't know that — when ordering starters or alternators for example — you had to have a minimum order of 50 units or they'd cancel the order."

Automating even small parts of the ordering process translates into huge pay-offs in efficiency. Davis explains: "In this business there's a tendency to have a lag on invoicing, because you need a copy of the statement before you send it, you go to the filing cabinet, pull out a pink copy, pink copies won't fax, so you sneaker-net it over to the copy machine so you can fax it. In our B2B environment you can see the account in real time, and if you want a copy you hit the printer icon."

Web Revenue, Too
In addition to tracking inventory on the fly and automatically updating purchasing and receiving, Krieger's business also benefits from its new e-commerce site. The online B2B store is called "Qwik Order," and it does just that. Davis says the cost of taking orders and processing them manually was as high as 15 percent for Star Sales. With the e-store, the cost is about one percent.

"For every customer there are two phone calls. They ask do you have this, we say let me check, I'll call you back," says Krieger. "To date, we've placed 5,023 orders on our site, which equates to 10,000 phone calls we didn't have to answer and make. So it's the best of both worlds. I didn't have to hire two people to take calls, but I'm also not losing the business. It was 24.6 percent of sales and just this month it went up to 27.5."

As for the company's bottom line — the one that was hemorrhaging cash a year ago? Consider it fixed. Krieger says: "Sales are growing exponentially."

When Michelle Megna began covering technology for computer magazines, the CD-ROM and AOL didn't yet exist. Since then, she's been on the byte beat for FamilyPC, Time Inc. and the New York Daily News. She's still waiting to see a pair of 3-D goggles that actually work.

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