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MCN Case Study: McNichols Co.

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New ERP System Boosts Speed to Market With its "no holes barred" approach to inventory, a new technology platform and a zealous commitment to customer service, McNichols Co. is well positioned for future growth. By Tim Triplett, Editor-in-Chief McNichols Co., already the nation's largest distributor of "products with holes," hopes to boost its competitive advantage with the rollout of a new computer system. Tampa-based McNichols, which recently observed its 62nd anniversary in business, stocks a wide range of expanded and perforated metals, gratings, stair treads, matting, textured metals and wire mesh at 18 service centers across the country. It generates the majority of its revenues through direct sales to end-users and approximately 20 percent through sales to other service centers. "We are grateful to the many service centers that buy from us. Many times the products we carry are just an add-on to a contract. Service centers must offer it, but they certainly don't want to stock it. So they come to our specialty house and pick it up or we drop ship it to their customer in their name," explains CEO Gene McNichols. Privately held McNichols Co. ranks among the Top 50 largest service centers in North America. Like virtually all of its peers, it was hit hard by the recession five years ago. In late 2008, its sales plummeted by 35 percent almost overnight. It had to downsize and economize, and do it very quickly. It went through a painful reduction in its workforce. It consolidated 17 sales offices into five large call centers. And it closed its service center in Mexico, among other cost-saving measures. Before the downturn, McNichols Co. had annual revenues of over $205 million and a workforce of 480. Today, it employs around 340, generating annual sales of approximately $170 million. Like the economy, McNichols has made slow, steady progress toward recovery. Its volume is nearly back to prerecession levels, though not its revenues, due in part to the dramatically lower steel prices. "The good part of the story is that because of our improved productivity, we are as profitable now as when we had higher revenue," says McNichols. Key to those productivity gains is the use of technology, he says. "With our old computer system, we were able to crunch the numbers and make adjustments very quickly," he recalls. Sophisticated communications systems allowed call centers to be centralized. Recognizing the limits of the company's old legacy computer system, which dates back to the 1970s, McNichols management decided to upgrade to the latest enterprise software. After two years of vetting, the company chose Oracle as its ERP solution. The customer relationship management modules, a critical component of the system, were rolled out beginning last August and completed by December, notably free of the typical tech-transition horror stories. McNichols attributes the smooth changeover to a well-conceived strategy and extensive training, both before and after implementation. "There was a little hiccup in productivity during the rollout because of the learning curve. But because of the time we spent pretraining, the learning curve was relatively short," says Dave Brenneman, McNichols executive vice president of sales. The new system and its suite of applications handle all the company's essential functions, from sales and customer relationship management, to marketing, accounting and inventory control. The company is in the process of adding planning, purchasing and supply services to its software suite. The system networks together the company's 20 facilities and facilitates the sharing of information and inventory. It helps streamline the transaction process and provides management with an abundance of analytical reports "to help us truly understand our business," Brenneman says. The new system also will offer new e-commerce functionality. Sales via the Internet comprise nearly 10 percent of the company's volume. "About 20 percent of those sales are first-time customers who come to us via the web. While business activity was down over the winter, largely due to the bad weather all over the country, the e-commerce portion of our business grew by 12 percent," he adds. John Farley, McNichols vice president of sales and operations, says the relatively trouble-free transition to a new computer system resulted from a commitment by all employees. Hundreds of associates put in hundreds of man hours to offer feedback and help with the testing to make sure the new program would enhance the experience for both customers and staff. With the help of various consultants, the customer relationship management portion of the software was rolled out one region at a time, five regions over five months. With each successive implementation, the challenges were fewer and the learning curve shorter. Oracle is a generic software platform, which uses a cloud-based approach. Applications and data are stored on highly secure remote servers, which are accessed in real time via the Internet. Thus McNichols does not need the hardware and support staff to maintain the system on-site. About 20 percent of the software's functionality had to be customized to McNichols' specific needs. "Out of the box" software programs tend to fall short for the service center industry because of the complexity of its transactions, particularly when it comes to fabrication and outside processing, Farley notes. Unlike the old legacy system that had evolved over time and required a lot of keystrokes to enter data, the new system features a familiar Windows-type interface that is more point-and-click. The graphics are familiar and make it easier to learn, especially for younger, more tech-savvy employees, Farley says. Employees were given the opportunity to voice their opinions on how functions should work and what they should look like. Involving them directly from the beginning helped them buy in to the process rather than resist the change. Staffers individually spent 20-30 hours in pretraining before it was their region's turn to make the switch. Working on their own a couple hours each week through 12 interactive computer simulations helped to familiarize them with the program before the trainers even showed up. Trainers included Oracle professionals, as well as fellow associates or "champions" who had just gone through the training in another region. They were especially effective at helping their peers due to their familiarity with both the software and McNichols' day-to-day operations, says Ryan Sterling, general manager of McNichols' Midwest operations. "We didn't just throw a new system out there and say figure it out. We gave them the time to get comfortable with it." One major advantage of the new system is its ability to boost McNichols' speed to market, Farley says. With an extensive inventory in 18 widespread locations, the system allows the company to move products from one facility to another in response to customer demand. "We have replication of inventory, so if an item is not in Chicago, chances are we have it in one of the other major centers in Atlanta, Dallas, LA or New Jersey. We can get it to customers anywhere very quickly." "Our customers' needs are changing, and we have always felt that putting service-friendly technology tools in the hands of our associates ensures they will stay inspired to serve," says President Scott McNichols. ["There was a little hiccup in productivity during the rollout because of the learning curve. But because of the time we spent pretraining, the learning curve was relatively short." Dave Brenneman, McNichols Co.]