Many companies recognize the benefits in having an IT infrastructure that is highly integrated and collaborative. Attempting to change to this type of structure is extremely difficult for most companies, as the infrastructure has become a complicated web. Many companies fall into a business-IT alignment trap where IT is continually tapped to support the business, leading to overcomplicated legacy applications and systems which consume time and resources to maintain. This case study examines a company that recognized the importance of good IT infrastructure, made this a primary concern and when faced with massive change was able to switch to an integrated solution with minimal difficulty, allowing them to grow substantially while maintaining the flexibility of a smaller company.
Don’t Shoot the Messenger, Inc. (DSM) started with two ex-bike messengers, Josh and John, who wanted to build a better messenger bag. Their proprietary design was a messenger bag that was lighter, more durable and utilized a proprietary weight distribution system making it easier to carry heavy loads longer. Production was outsourced to a local specialty sewing shop. Initially only targeting the messenger market, they approached friends and ex-colleagues for sales - the first order of bags sold out almost instantly. Word began to spread to messengers in nearby areas and purchase requests started pouring in. The orders were accompanied by suggestions for improvements and requests for new features and different bag styles.
The company outgrew the local sewing shop and found a U.S. based company that manufactured apparel and other fabric based goods for small to medium companies. The service was relatively inexpensive and provided access to a software solution that could be integrated with a website to handle order management, route it to the facility where the bag would be manufactured and shipped directly to the customer. This software had support for the most popular small and medium business accounting software, so it simplified things tremendously. By outsourcing the manufacturing the company could grow without having to concern itself with the supply chain and production as well as helping to keep costs low. The manufacturing facility allowed for some flexibility including many different available materials, access to work with suppliers to find materials that may be better suited to the task and the ability to quickly do small test runs of new designs.
To ensure things would run smoothly, three employees were hired. The first person, Kate, handled administration including accounting and other financial tasks, timely payment to vendors and other suppliers, corporate documents etc. The second, Jack, was there to verify payment before forwarding the order to the manufacturer, monthly order auditing and delivery confirmation, and handle customer service inquiries, as this was expected to have minimal need. The third individual, James, was what constituted as the “IT department” with responsibilities like website creation, maintenance and integration with the software from the manufacturer as well as the accounting software.
A basic website was created to take orders and gather input and suggestions from their customers. Integration of the ordering, manufacturing and accounting software had gone very smoothly making every process nearly fully automated. A few design changes were made based on the feedback received before DSM put their messenger 2.0 plus a laptop variation up for sale on the new website. Demand, spread by word of mouth was building and there were many people anxious to order a DSM bag. The moment the web store opened, orders started pouring in from around the country, and all the systems worked flawlessly. The founders began to think about the future of the company and, alleviated of most day to day activities, were able to focus on new product ideas and modifications or upgrades to the old designs. They hired a textiles expert, Michael, to work closer with suppliers to find new, better materials, and keep an eye out for any R&D the company may find useful.
The primary objective of the company was to minimize costs, streamline ordering and production as much as possible so they could maintain barebones staff to maximize net income. The 5 year plan was to expand the product line to many types of bags for daily use targeted to not only messengers but students and professionals as well. The longer term plan included various types of luggage, specialty travel bags and apparel including jackets. DSM’s founders had a lot of ideas about how to improve the things people use as mobile storage. They decided the most effective way to do this would be to save as much cash as possible over the next few years by outsourcing as many aspects of the business as possible. Minor changes could be made as needed; they were already researching larger manufacturing facilities and ways to outsource aspects of accounting, order handling, customer service and some IT responsibilities to ensure they were prepared for any amount of growth. They knew outsourcing everything would only work for so long if they wanted to grow. The plan revolved around slowly introducing new products to gain popularity, begin planning a new corporate structure and governance where all aspects are handled in house, implement said structure just before announcing plans for the new bags, luggage and apparel, then utilizing the new structure to grow while keeping costs low and maintaining the flexibility of a small company.
Their timeline lengthened significantly as, heading into their fifth year, growth was still steadily increasing. The comfort, design and quality of the messenger bags had attracted students and professionals alike. They made a few modifications and grew the product line to six styles of messenger bags, now version 3.0. They were all basically the same in general design, but one maintained the classic messenger internals, the second added internal organization ideal for students, and the third added internal storage for professionals (especially journalists, a large market) and had a slightly classier fit and finish. Laptop variants of each made for six available choices. A new material was also utilized that was a bit lighter and more durable without giving anything up in feel and allowed for a plethora of color choices. Once released, demand quickly overwhelmed production capabilities, but their business plan had a contingency for this and within a week manufacturing was outsourced to a production facility in China. Because of volume, this ended up being less expensive and provided even more capabilities for future production. One such capability allowed DSM to introduce a custom bag option where customers could pick the style and the colors of the various parts of the bag and have it custom built – this was introduced six months after the initial 3.0 release.
DSM was still fairly small as they had maintained their outsourcing mentality, but they had grown to around 20 employees. Josh and John found that Kate understood and believed in their vision, in fact she had been invaluable in all discussion and planning in aspects of continuity, contingency, growth and the future. She now handled oversight of the day to day activities as CEO. Aspects that had been handled by just one person were now small departments, each with at least a few employees. Jack was made head of Administration and Finances which included oversight of HR and personnel, financial, internal auditing, billing and legal aspects. Michael was now the head of R&D. Josh and John were still heavily involved in the design process, John had especially taken an interest in textiles and materials, but they started staffing up and had begun design on the products they planned to introduce in a few years, creating a requirement for someone to head up R&D and maintain the quality DSM was known for. James was made the head of IT as handling the website and integration soon became too much for just one person. Josh, John and Kate all agreed that IT was one of the most important aspects for the future of the company, especially once all processes are handled in house, so they always supported any way in which IT could help grow the business. Finally, customer service had been outsourced but they hired a head of customer support, Desmond, to ensure customer support was being handled well and compile complaints and confusions to help improve the product in the future. This was the same basic structure, excluding production, the company would take in the future. The candidates were ideal because they all had various levels of experience at large companies in their respective fields; this knowledge was used in planning the future organizational structure to improve efficiencies and eliminate problems they found with their previous experience.
At the beginning of the 7th year version 4.0 of the bags were released with additional changes and modifications. This was also the first time DSM had released any products outside of the traditional messenger style bag. Two backpacks, each with a laptop variant, were introduced in addition to a duffle style bag, an airplane carry-on bag and a camera bag. A number of accessories were also released including sleeves and cases for laptops, cell phones, portable media players and other devices. They also introduced their first clothing products – a zip up hoodie and a jacket. These new products maintained the quality, durability and comfort of past DSM products, and utilized a specialized pocket structure to maximize storage space while simplifying organization. All services were able to handle the new product and additional load, but these were the last major iterations DSM planned to release before they started handling all aspects of the business in house.
A lot of time and money had been spent by the R&D department looking for and experimenting with new materials. One of the most promising was a synthetic fiber discovered by some researchers. The materials needed to produce the fiber were readily available and relatively inexpensive. DSM found the fiber easy to manipulate, dye, spin, weave and sew. It was also discovered that slight adjustments to the spinning and weaving processes allowed the resulting fabric to have different properties, making it easy to change flexibility, comfort, waterproofing, etc. as needed. After extensive testing, DSM acquired all rights to the fiber for future production. They had formed solid relationships with producers of the raw materials necessary to produce the new fiber. This was the first step to becoming completely independent.
R&D had also been working on a number of new product designs. Everything had been moving smoothly, and they would be ready to roll out the expanded and improved product line for the companies 10 year anniversary. Plans were in place to open offices in Europe within a year and the company had just acquired a manufacturing facility in Vietnam. Between steady sales and minimizing expenses, the company was extremely cash rich. This was the position they were building toward, and they were nearly ready to implement the new business structure and strategy.
Handling all aspects of the company in house was expected to be a large undertaking. The decision to handle manufacturing, in conjunction with the new material, had more extensive requirements than were originally anticipated. Substantial supply chain management was now needed, as well as systems to simplify the steps to take the raw material, spin into thread, weave into fabric and construct the bags. Organizing orders and ensuring packages were shipped in a timely fashion were also important aspects.
DSM would need better order handling and customer tracking history. Historically orders were made by individual customers and were entered via the website. Over the years a number of retailers had approached DSM wanting to sell their product in stores, but in the past DSM never agreed to any deals. As part of their reorganization, they wanted to pursue this market and they needed infrastructure that could support online customers and efficient handling of retail orders. As part of the overall restructuring plan the company had gotten in contact with a number of previously interested retailers and had already established preliminary agreements with a half dozen national retailers who would sell the new line of products from store shelves. Working with retailers creates unique challenges due to volume and requirements for order processing, record maintenance and billing.
In order to protect proprietary information about their new textile materials, DSM decided customer support should be handled in house as well. While easy to care for, the material had some unique quirks. This would require inbound telephony and a larger technical support staff to ensure customer service representatives would have access to customer records and other information. The company would be growing in many other areas as well. New departments were being created and the company structure was about to be much more complicated than it ever had been.
Josh, John and Kate knew the one thing that would make or break the company following the structural change would be the ease of information transmission across departments to ensure all areas of the company were working together to meet objectives. All previously outsourced solutions provided solutions integrated well with each other, for the most part, and the company and they recognized the value in this. Even though the new structure was more complicated and dense, DSM wanted to find a solution that would allow for easy integration, compatibility and growth. Some flexibility would be nice so proprietary software could be written and utilized when necessary, but above all they wanted a well-established, strongly supported system. While the IT department had and would continue to experience substantial growth, the company preferred to not develop a solution in house.
By the end of the 7th year, European offices and the Vietnamese production facility had been acquired and were in the process of being staffed. Headquarters was still based in the United States, as was the primary R&D facility. Agreements were in place for raw materials and retail sales. State of the art equipment was purchased; the new designs were nearly complete. They had two years to make sure they had a solid information system in place before rebranding and production. With massive changes to the corporate structure and needing to staff up all departments and ensure the systems to connect those departments were effective and reliable, DSM brought in an IT consultant to help find the best top level solution.
Josh, John and Kate worked directly with the consultant to make sure they got everything they needed. They spent some time explaining the company background, their objectives and what they wanted to accomplish with the future of the company. Aspects of the structure plan were proprietary, but a basic corporate structure was provided (Appendix A) covering all areas of the company that needed to be handled by the system.
There were a lot of aspects to consider – marketing and sales, administration and financial, R&D, purchasing raw materials, supply chain management, maintenance and upkeep and QA. Physical production alone required manufacturing the new fiber, spinning, weaving, cutting, sewing, finishing and sampling. While systems in the past had allowed for integration, there were issues and faults that they wanted to bypass. It was important that marketing, sales, administration, customer service and all aspects of production were tied together to simplify communication, and it needed to be easy for the IT department to maintain all systems, easily make changes as needed and ensure integration. In discussions with the consultant it became clear the issues caused by the amalgamation of various systems, while minor, could have significant impacts to the business in the future.
Various options were discussed, but it was eventually determined that a third party ERP solution would be the most reliable and suitable. There were a number of third party providers who had solutions that were popular and well established. The tools these companies provided were flexible and customizable, would provide tools for every department and guaranteed integration and compatibility. Though their structure was highly evolved, business practices had remained rather archaic, but since they were redoing the entire structure anyway, DMS had no qualms with modifying their practices to meet the requirements of an ERP system.
The consultant spent some time with the heads of all departments to better understand their operations, and learn about what features each department needs and issues encountered with past tools. A number of systems were evaluated including mySAP, JD Edwards World and EnterpriseOne, NetSuite and Microsoft Dynamics before the consultant settled on a recommendation. A presentation to Josh, John, Kate and all department heads summarized thusly:
The best choice is the Oracle E-Business Suite 12.1. This system provides services and applications for all areas of the company, is extremely robust, diverse, is backed by a well-established company and is proven technology. Not only will it meet the needs of the company today, but it will grow with the company in the future. This suite has been used by many businesses and is ideal for growing enterprises and provides rapid value solutions, integrated business processes and purpose-built industry solutions. Value chain planning solutions are a part of Oracle Supply Chain Management, which helps to maximize value by integrating and optimizing supply, demand, and design chains. Oracle Incentive Compensation helps effectively manage benefits, compensation and pay for performance on a global level, allowing for quick ROI. Inventory management and operational efficiency can be improved using Oracle Warehouse Management, and seamless integration of systems helps reduce deployment time and lowers overall cost by providing analytics on procurement & spend, HR & talent management and product development.
The suite consists of 7 primary applications: Customer Relationship Management (CRM), Service Management, Financial Management, Human Capital Management, Project Portfolio Management, Advanced Procurement, Supply Chain Management, Value Chain Planning, and Value Chain Execution (Logistics.) CRM is a set of applications servicing areas like channel revenue management, marketing, order management, sales and service. Service management provides service applications to provide world class service to customers including inbound and outbound telephony, a scheduler, depot repair, e-mail center support and other customer support tools. Aspects such as asset lifecycle management, cash & treasury management, credit-to-cash, financial control & reporting, financial analytics, governance, risk & compliance, lease and finance management, procure-to-pay and even travel & expense management are handled primarily by Financial Management.
The Human Capital Management application provides the services necessary to handle human resources, payroll, benefits management, time and labor, workforce scheduling, project resource management and many more. To ensure projects go as smoothly as possible Project Portfolio Management includes tools for project analytics, billing, contracts, collaboration, costing, management, portfolio analysis, resource management and time and labor.
Taking on the responsibilities as manufacturer, especially since DSM will be producing many of the materials, procurement and supply chain management are very important. Oracle Advanced Procurement will help keep all supply chain management costs low, reduce spending on goods and services and streamline processes. Oracle Supply Chain Management automates all key supply chain processes including design, planning, procurement, manufacturing and fulfillment in a single tool. Finally Value Chain Planning and Value Chain Execution are a set of tools to enhance the flexibility of purchasing, design, implementation and management of supply chain solutions.
Everyone at DSM agreed the Oracle E-Business Suite was an optimal solution. It met all their needs and was extremely versatile and flexible all for a relatively low cost. After the decision was made, the consultant stayed on, assisted in IT staffing, worked with IT, department heads and acted as a liaison with Oracle to ensure the system was exactly as requested before implementation. Working diligently over the course of a year and a half, DSM was finally ready for a trial run and switched all systems over to Oracle E-Business two months before they were ready to introduce the new product line. They had now grown to over 500 employees including extensive growth in IT and R&D, but the majority of the increase was a result of the factory in Vietnam. The systems had a few minor bugs, but these were easily resolved and the system was everything they had hoped. They announced the new product line, started production and sales and became hugely successful. The Oracle E-Business suite was able to keep pace with the growth of the company. The founders and CEO had always preached the benefits of a simplified, integrated structure, but it only worked because they recognized the importance and structured the organization to support integration and collaboration.