South Shore Furniture boosts internet sales without adding staff, based on solutions from IBM and SAP

Published on 08-Jan-2013

"The combination of fully integrated SAP software, best-of-breed business practices, and the reliability and ease of management of IBM i and Power Systems enables South Shore to stay focused on running its business, maintain our edge on the competition, and keep satisfaction high with our clients and end-customers." - Claude Bernier, IT Director, South Shore Furniture

Customer:
South Shore Furniture

Industry:
Industrial Products

Deployment country:
Canada

Solution:
Business Integration, Enterprise Resource Planning, Information Integration, Information Management Foundation, Server Consolidation, Web Services

Overview

South Shore Furniture of Sainte-Croix, Quebec, manufactures ready-to-assemble furniture for the North American market. The company employs more than 600 people at factories in Canada, Mexico and the United States, and boasts more than 70 years of industry experience.

Business need:
When South Shore Furniture launched a new web-based distribution channel, it introduced significant changes to the company’s business model. The furniture manufacturer was now managing growing volumes of sales through a number of internet retail giants, which had strict requirements around order speed and accuracy. The company wanted to gain tighter control and better visibility over its operations, so that it could ensure that the online ordering process ran without a hitch.

Solution:
South Shore Furniture has integrated its range of business processes, rolling out a standardized SAP ERP platform across its operations in Canada, Mexico and the United States. SAP solutions have considerably streamlined what were once complicated sales order processing systems, introducing a high degree of automation. The company operates all its SAP ERP applications on a single IBM Power 750 Express server with IBM internal disks, running the IBM i operating system and IBM DB2 databases. Backup and archive data is stored on three IBM System Storage TS3100 Tape Library Express systems.

Benefits:
Enabled South Shore Furniture to increase internet-driven sales to become the company’s number one sales channel, without adding staff. Gained a significant market advantage over competitor by cutting shipping times by more than 65 percent, from 72 hours to less than 24 hours. Delivers enhanced, up-to-date insight into inventory levels, ensuring that client websites reflect the latest availability of South Shore Furniture products and helping to reduce error rates. Highly reliable system requires a minimal number of employees for support, helping to keep a tight control on IT costs.

Case Study

South Shore Furniture of Sainte-Croix, Quebec, manufactures ready-to-assemble furniture for the North American market. The company employs more than 600 people at factories in Canada, Mexico and the United States, and boasts more than 70 years of industry experience.

South Shore Furniture sells its products through an intermediary network of retail distributors. These are split into two main channels, the first being traditional furniture retailers operating in the domestic market, which display South Shore Furniture items in their stores. Since 2003, the company has also partnered with a growing number of major internet retailers, such as Amazon, Cymax, Sears, Target and Walmart, offering customers a range of up to 500 different products online.

Changing business model
Introducing an online sales channel challenged South Shore Furniture’s business model significantly. The company is shifting from purely retail distribution towards a drop/shipping manufacturer, managing large numbers of orders from multiple online outlets – who are effectively South Shore’s clients.

Claude Bernier, IT Director at South Shore Furniture, states: “The new web-based distribution channel opened up a wealth of business opportunities to us, and simultaneously presented a number of challenges.

“We were dealing with huge e-tailing corporations who had very strict requirements, and we were competing against a much broader range of companies in a market segment that was still very new to us.

“On the internet, you need to be lightning fast and very adaptable in order to keep customers happy and beat the competition. And it’s not just South Shore Furniture’s reputation that is at stake – any errors or delays will reflect poorly on our clients and could potentially cause us to lose their business. It is vital for us to provide the customer with a seamless experience, from the moment we receive their order to the moment that it is delivered.”

Guaranteeing that the online ordering process runs without a hitch requires tight control and excellent visibility over operations, with inventory management being of particular importance.

According to Claude Bernier: “Any inaccuracy in inventory planning on our end could lead to a situation where, for example, a retailer displays a certain product as being available for purchase when we actually have none in stock. This can have serious repercussions if a customer then places an order for that product and we discover that it is not available to ship.”

As South Shore Furniture saw its internet sales channel take off, it found that a lack of integration and standardization across business systems was starting to hold the company back. “If we were to compete effectively in the online market, we required a faster reaction time and greater standardization in processing customer transactions than our existing ERP systems could provide,” remarks Claude Bernier. “Moving to a more modern system would help us to keep pace with this growth as our business model continued to evolve.”

Selecting SAP ERP
Recognizing that a radical business process overhaul was required, South Shore Furniture decided to replace its existing systems with an integrated suite of SAP® ERP applications.

“We chose SAP ERP because of its clear ability to integrate our business processes on a very robust platform,” explains Claude Bernier. “We wanted to roll out a highly standardized system across all of our operations, introducing as little modification as possible, and with SAP ERP we were able to do just that.”

South Shore Furniture managed the deployment independently, using preconfigured SAP ERP templates and following standard SAP implementation processes to ensure a smooth migration to the new software. The company deployed the SAP software module-by-module, starting at its operations in Canada, before moving to roll out the solution at its two factories in Mexico. By applying the same methods and templates used for the implementation at its Canadian locations, South Shore Furniture was able to considerably reduce the roll-out time at operations in Mexico, completing the roll out at one subsidiary in just two weeks.

Streamlined order processing
The company now uses a comprehensive suite of SAP ERP applications to manage all aspects of its operations, including modules for Financials and Controlling, Materials Management, Materials Requirements Planning, Profitability Analysis and Sales and Distribution, as well as SAP ERP Human Capital Management, SAP Payroll and SAP BusinessObjects™ Business Intelligence (BI). Approximately 150 users access the SAP applications at South Shore Furniture.

The SAP solutions have streamlined what were once complicated sales order processing systems, introducing a high degree of automation. Incoming customer orders are relayed from online retailers via electronic data interchange (EDI) to South Shore Furniture’s SAP systems, where it is assigned to a particular shipping plan based on the product lines included in the order.

The purchase order is then sent to one of the company’s factories, where it is picked and prepared for shipping, and dispatched to the customer through small parcel shipping companies.

“Our whole system is configured to be completely seamless,” comments Claude Bernier.

“Once a customer’s payment is cleared, the purchase order is sent through our systems automatically. We only have to intervene once the order is ready for picking on the warehouse floor.

“Our factories in Canada even have a special machine that automatically prepares the order packing slip and shipping label and applies them to the package. As there is so little need for human intervention, orders can be processed extremely quickly.”

Solid hardware foundation
South Shore Furniture relies on IBM technology to deliver the performance and high availability needed to support its SAP systems. The company operates all of its SAP ERP applications on a single IBM® Power® 750 Express server with internal disk, running the IBM i operating system and integrated IBM DB2® databases. The company has activated four of six available POWER7® processor cores, and 128 GB of memory.

“The IBM Power 750 Express offers outstanding availability for our business-critical SAP systems,” states Claude Bernier.

“This is a crucial advantage for our online operations, which have to be kept up and running 24/7. The IBM i operating system offers extremely easy manageability as the integrated DB2 database is very largely self-managing. The automation and functionality of IBM i and DB2 means that we have no need for a dedicated systems administrator – we simply outsource technical support. This delivers considerable time and cost savings, which are important to us as a mid-sized manufacturer.”

The Power 750 Express offers 3.3 TB of storage capacity for SAP production data and 3.1 TB for SAP BusinessObjects BI data, with an additional 6.2 TB available for development and quality assurance systems.

Backup and archive data is stored on three IBM System Storage TS3100 Tape Library Express systems. The tape storage solution offers outstanding capacity, performance and reliability, enabling South Shore Furniture to operate a cost-effective midrange storage environment. To further streamline maintenance effort, South Shore Furniture manages all software and hardware upgrades concurrently. The company replaces its servers every three years and handles operating system and SAP application updates side-by-side with the hardware replacement. The risk of an outage or a long upgrade project is minimized by a full side-by-side migration and the ability to fully test the environment before making the move to the new environment.

Driving up online sales
With the entire organization running on centralized SAP software supported by the IBM Power 750 Express server, stability and integration have improved considerably.

This consolidated environment helps South Shore Furniture to cut infrastructure costs, enabling the company to optimize performance and productivity without significant resource investment, simplifying a complex environment. According to Claude Bernier: “We have increased internet-driven sales to the point that this is now our number one sales channel. And we have achieved this without any rise in staff levels. This would be impossible without IBM and SAP systems supporting highly stable and efficient operations.

“We now run a 24/7 commercial shipping operation, and deal with massive volumes of individual orders. The combined IBM and SAP solution allows us to handle this growth smoothly, and has considerably streamlined the way in which we manage the order process. We are able to handle more customer orders, more rapidly.”

Speeding up shipping times
South Shore Furniture has accelerated order turnaround times considerably, with automated and integrated SAP systems speeding up the order-to-cash process. The company is able to ship orders more than 65 percent faster than before, providing it with a significant edge on market competitors.

“Typically, we were unable to ship any products inside 72 hours,” notes Claude Bernier. “Now, we are able to guarantee same day shipping for a number of product lines, and we can usually ship most products within 24 to 48 hours. As we market products around the same price point as other manufacturers, we need to distinguish ourselves in other ways, and the ability to beat other companies with faster delivery times is a huge advantage.”

Better client and customer relationships
The improvements delivered by South Shore Furniture’s IBM and SAP systems have strengthened the company’s relationship with both its clients and end customers, and help to keep customer satisfaction levels at a high rate of around 95 to 98 percent. The company can rest assured that the websites selling South Shore Furniture products always reflect the current stock position, with SAP applications delivering enhanced, up-to-date insight into stock levels. From the moment a customer enters details on an e-tailer's site, South Shore Furniture is certain that the order will be handled and shipped without delay or error.

“We are fully confident in the reliability and accuracy of all our systems and processes, which is a great boost when it comes to managing our client relationships,” says Claude Bernier.

“Many retailers will perform random spot-checks throughout the year, where they will send us a number of orders to see if we are meeting their targets. IBM and SAP systems play a crucial role in helping us to meet these targets, ensuring that we continue to be a welcome reseller on their sites.”

South Shore Furniture can keep a much closer track on profit margins per individual client, thanks to the improved visibility into production and shipping costs delivered by the SAP systems.

This enhanced insight has also enabled the company to shift from a discount-driven market strategy to a margin-driven strategy.

“We can determine the profitability of each client by product name and product line, which allows us to take a much more strategic approach to product pricing. Thanks in part to the enhanced visibility and accuracy provided by SAP systems, we can maintain a tight control on margins. This has helped us to keep our revenue stable at times when other furniture retailers were losing money or forced to close.”

Claude Bernier concludes: “With IBM and SAP systems supporting all aspects of our operations, we are able to maintain the high service levels needed to satisfy our clients and to guarantee that we make our orders on time, every time.

“The combination of fully integrated SAP software, best-of-breed business practices, and the reliability and ease of management of IBM i and Power Systems™ enables South Shore to stay focused on running its business, maintain our edge on the competition, and keep satisfaction high with our clients and end-customers.”

Products and services used

IBM products and services that were used in this case study.

Hardware:
Power 750, Storage: TS3100 Tape Library

Software:
DB2 for i5/OS, IBM i

Operating system:
IBM i

Service:
IBM-SAP Alliance

Legal Information

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