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.
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