Case Study Submit Electric Light Up with a New ERP System

INTRODUCTION

Summit Electric Supply Co., Inc. engages in the wholesale distribution of electrical equipment, supplies, and solutions for the electrical professionals in the United States and internationally. This company is one of the top wholesale distributors. Summit obtains finished goods from manufacturers and sells them to electrical contractors working on projects ranging from small construction job to sophisticated industrial projects. This company was known as middle on the supply chain, so it must be able to handle high volume of transactions and swift inventory turnover. However, the information built in the 1980s could not keep up with the business growth, it could only handle a fixed number of locations and limited the range of numbers that could be used on document.

Summit is dedicated mission to:

• Serving the customers by adding superior value with industry expertise, innovative systems and commitment to them;
• Serving the associates and their families by providing opportunities for associates to grow, advance and secure a prosperous future;
• Serving the suppliers through mutually rewarding relationships; and
• Serving the communities in which we live and work.

Vision:

To be the best place to work and to do business in the electrical industry, period.

CASE SUMMARY

Summit electric supply is one of the top wholesale industrial electric distributors in US. The product range is from basic commodities to sophisticated electrical components. It provides many value-added services that help electrical contractors purchase electrical supplies efficiently. Founded in 1977 in Albuquerque, New Mexico and has grown very quickly. Unfortunately, its old legacy information system could not keep up with the business. The old system could no longer process its nightly inventory and financial updates. Summit needed a system that could handle a very large number of SKUs. Changed to new system ERP which is SAP that would require improve its business process and the way people worked.
 

QUESTIONS

QUESTION 1 : Which business processes are the most important at Summit Electric Supply?

The company is known as a one of the top distributors, Supply chain management played the most important business process at Summit Electric. Supply chain management (SCM) is the management of the flow of goods. It includes the movement and storage of raw materials work-in-process inventory, and finished goods from point of origin to point of consumption. 

Why?

The reason business processes are the most important is both manufacturers and end users rely on distributors to efficiently bring products to market. As the ‘middle men’ of the supply chain, distributors thrive on high transaction volumes and swift inventory turns. Distribution industry has some unique aspects that drive its business. The company has a very large number of SKUs (Stock-keeping –units) and transaction (very short lead times). Inventory distributed in various models, including at customer job sites. In the distribution business, the lead times for fulfilling an order can be only minutes.

ERP System

An ERP System is a packaged business software system that enables a company to manage the efficient and effective use of its resources. It’s automated and integrated the majority of an organization’s business process. It is functionality in sales and distribution, materials management and financials. Moreover, it share common data and practices across the entire enterprise, produce and assess information in real-time environment.

SAP Application

SAP is a core ERP application. It’s the best practices function in sale and distribution, materials management, Human Resources and Financials and its knowledge in distribution business. SAP’s Net Weaver support Summit Electronic more organize and be able to control how much was needed to be produced and distributed. It’s useful for business intelligence reporting and analysis. it helped the company to evaluate the profitability of its sales channels, using what the solution.

Batch Management

It is a software that treats a wire reel a batch rather than single as single products. It used to cater high demand for wires and cable products. For examples- every time customer buys a length of wire, the length can be entered into the system to track how much of the batch was sold. The batch management process removed the problem of maintaining the inventory of such product.

QUESTION 2 : What problems did Summit have with its old systems? 

Summit had facing problem with its old system where the system had reached their breaking point. The old system could no longer process its nightly inventory and financial updates in the amount of time that was available. For example, it separate or different systems for sales and purchase order and back-end reporting- integration between the system was done manually in batches. The system could only handle a fixed number of locations and limited the range of numbers that could be used on documents. Summit’s information system had to use the same range of document numbers over again few months. Not able to handle the volume and complexity of the company’s chargeback agreement and reporting capabilities were limited. Gathering and reviewing invoices tool an entire month- invoices 2-3 months old.

What was the business impact of those problems?

The business impact from the problems was that the system was not able to keep up with the fast growing business. It limited the business as it was only able to handle a few range of numbers and location at a time. It caused of delays and time consuming task that was not needed to take as much time as it did in its business operations.

QUESTION 3 : How did Summit’s ERP system improve operational efficiency and decision making? Give several examples.

ERP improved operational efficiency and give scalability and the ability in Summit’s business process, especially in supply chain areas like sales and distribution, inventory management and financial reporting system-as the company expected strong growth in these areas.

Ø  Running more frequent inventory updates

It’s running smaller and frequent inventory update throughout the day, instead of a night-which caused a delay. New system provided accurate information of shipping order, which Summit’s was able to ship immediately.

Ø  Adapting the inventory tracking process

To replenish wire and cable, the ERP batch material management identified the customer purchase amount, length of wire and product manufacturer. Each time a customer buys a length of wire, the length is entered into the system to track how much of the “batch” was sold.

Ø  Changing how inventory is managed at job sites

To secure inventory for special customers, with long term projects, Summit created a “parent- child” warehouse relationship in ERP system to secure the materials in inventory as well as on premises.

Ø  Business intelligence.

To make a better manage its finance and ordering system, Summit implemented the SAP’s/NetWeaver BW data warehouse and business intelligence. By integrating the NetWeaver, Summit was able to analyze the profit of each sales person, manufacturer, customer and branch. Using SAP software, Summit was able to improve its ROI, by automating sales tax and chargeback’s. The SAP/Paybacks and Chargeback’s application was able to identify the billing activity, if there was a chargeback, the SAP system would automatically submit the information to bill the chargeback- increase its chargeback claims of up to 118%. Summit decision making for implementing the new ERP system was based on the growth of the organization, the complexities of processing orders, analyzing finances and back and reporting. Once the new ERP/SAP was in place, Summit management was able to focus on sales and orders and quotes, supplier performance and delivery schedule. The new SAP/ERP has allowed Summit to run its operations with flexibility and allow the SAP to operate efficiently. The new ERP system allowed management to have a greater vision for decision making and managing its operations.

QUESTION 4 : Describe two ways in which Summit’s customers benefit from the new ERP system.

Firstly, customer can rely on the company for their needs and products- the company now more efficient. The company wants that customers to feel that they can provide that they have produced products the customer want and sent to them in short time period.

Second is to accommodate large customers with long term job sites. SES sets up temporary warehouse on site to supply these customers with its electrical products. Create “parent – child” warehouse relationship to be able to work with customers. If the SES office has more than a few temporary onsite warehouse, the warehouse can be controlled like subparts of the main SES warehouse. It helps to prevent anybody from selling the consigned inventory into the warehouse.

QUESTION 5 : Diagram Summit’s old and new process for handling chargebacks.

Chargeback is the return of funds to a consumer. The chargeback mechanism exists primarily for consumer protection. For the distribution company, chargeback occurs when the supplier sells a product at a higher price to the distributor than the price they have set with the end user.

Old process

For handling charger backs had flaws in it where the company was losing money and sometime barely making any profit. Processing chargeback have to compare the sale to contract. A distributor can have up to hundreds maybe thousands of contract. SES need to identify the chargeback and which manufacturer with enough documentation of the contract or a lot of manual work. SES need go through the customers invoice with detailed manufacturers identified and put the chargeback in Microsoft Excel.

New process

For handling chargebacks had flaws more efficient. It automatically review Summit’s billing activity for the day. All chargebacks agreements loaded in the SAP system by the end of every day. There is a match in the system and they are able to claim. New process is able to create a separate chargebacks document outside the customer invoice and able to process more quickly with review in the same day. SES increased its claim by 118% over the old system.

CONCLUSION 

Summit Electric light up with a new ERP system bringing more revenue, more efficiency and improvement the firm to global industry. Summit is now able to see which vendors, customers and products are producing the most chargeback revenue.