The Wolf Organization, a privately held company composed of the Wolf Distributing Co., a kitchen and bath distributor, and the Lumber Yard, a building-materials subsidiary, faced this issue when it decided to move from a legacy system to SAP's enterprise software. The upgrade to highly scalable software was vital for the company to continue to grow in a rapidly consolidating industry. "The industry is made up of a lot of small players, and many are being forced out or acquired by larger companies," says Ron Blevins, CFO at the 160-year-old company. Wolf, with 630 employees and about $300 million in annual sales, operates 40 locations in six states and is in its sixth generation of family ownership.
The company most recently implemented SAP's production-planning module and is about to deploy the vendor's human-capital management module. It's already running the latest versions of SAP's financial, supply and demand, and materials-management software, having upgraded to them from SAP R/3 this past fall.
But this time around, it's not doing any customization. That's a switch from the approach the company took when it began the project, which, at about $8 million to date for the software, hardware, and implementation, has been the single-biggest investment Wolf has ever made. "We learned the hard way that SAP, and probably other ERP products, are based on sound business practices," Blevins says. "At first we fought some of the process changes and attempted to customize SAP because we were reluctant to change."
Change is good when it's well managed. As the company moved from a decentralized structure in which each of its 40 locations ran its own version of legacy software with little coordinated interaction among them, it realized a number of process efficiencies. "The centralized view of data is a huge asset," CIO Vince Johnson says.
For instance, Wolf has been able to improve the delivery processes in the distribution business, because it can look across its internal chain and make smart decisions about dispatching deliveries from the most efficient shipping point. Average sales per employee in the division rose from $520,000 in 1999 to $730,000 last year as a result of improved sales opportunities from consolidated customer information. Inventory turns have improved from around eight per year to 18 in its wholesale division, and they're up to 14 to 15 turns in the building-products group.
Getting the technology in place wasn't as difficult as change management, though, Blevins says. "That was the huge challenge of the project. The way we do our jobs was affected." To make sure that employees embraced process changes, senior management traveled to every location and met with staff to discuss the impact of the changes.
Challenges remain, however. For instance, competitors could run the same software without customizing it and potentially reap the same advantages Wolf already has. But Blevins says that's easier said than done. "Our challenge is to continue to leverage SAP to our advantage," he says--and Wolf has an advantage in that it already has in place the "culture, staff, and management team to continue to leverage it."
Photo by The Image Bank