United Bonded Fabric

www.unitedbonded.com.au

Executive Summary

Established in 1961, United Bonded Fabrics (UBF) is a leading manufacturer of pure Australian wool for bedding products such as pillows, mattress protectors and underfelt.  UBF is involved in the processing of premium quality wool from raw material to finished product.  Based in Ingleburn, NSW, the company employs 93 staff.

The e-commerce strategy was implemented to meet customer demand for use of online technologies as well to improve cost efficiencies and increased staff productivity.  External IT consultants were engaged to develop an intranet network and a company website.

Use of the intranet network has been successful in connecting the Melbourne, Sydney and Brisbane offices as well as providing staff access to information in other business units within the company.  By providing a central repository of company information, staff can now access product specifications, customer details and manufacturing schedules from their own desks.  Furthermore, the increased transparency across business units place staff in a better position from which to make business decisions.

As a result, significant cost savings totalling $345,530 were achieved in 2001.  Many cost reductions such as travel, staff time and inventory were due to the streamlining of business processes afforded by greater networking between staff, suppliers and customers.  Additional revenue of $1,200,000 was also achieved, contributing $216,000 to gross profit. The net operating benefit after deducting ongoing costs of $49,164 was $512,366.

The Business

Established in 1961, United Bonded Fabrics (UBF) is a leading manufacturer of pure Australian wool for bedding products such as pillows, mattress protectors and underfelt.  UBF is involved in the processing of premium quality wool from raw material to finished product.  The company's core customer market is major domestic retailers of bedding products as well as overseas customers in Japan, Korea, China and the UK. 

The company Head Office is based in Ingleburn, NSW and currently employs 93 staff throughout their three Divisions.

Getting Started

In 2000, Financial Controller, Ed Tabone, identified a need to upgrade the basic Information Technology infrastructure at UBF, which consisted of an accounting software package and networking technology.  Ed realised that e-commerce was vital to the company's success, as the industry was increasingly adopting e-commerce, and the business of large retailers could not be sustained without a shift to online systems.  To this end, an intranet network was set up to link the divisional systems within the business and across state offices. 

IT consultants were contracted to assess various solutions for the company.  It was concluded that the implementation of an intranet would best serve the company's needs.  A web developer was also commissioned to design the website. 

Intranet

An intranet is a private network contained within a company.  It consists of many interlinked local area networks such that company information and resources can be shared among employees.

At UBF, the intranet network is used to connect the company's three major offices in Sydney, Melbourne and Brisbane.  By centralising information such as product content, customer purchasing history, industry research and sample supply agreements, staff in any of the three offices can easily access required information.  This expedites the previous manual process of phone enquiries, photocopying and faxing through the requested documents to customers, suppliers and colleagues.

Current E-commerce Strategy

The intranet network forms the core of UBF's e-commerce strategy.  Currently, when a customer order is received, Melbourne personnel enter the data into the ordering system, a "manufacturing requirement request" is generated which automatically allocates the requested number of products to the client.  If products are not in stock, the system automatically generates a "request for manufacture" which is forwarded to the stock manager so that production of the product can be scheduled.

Aside from the intranet network, the company has web-enabled several other business processes.  Where previously, staff would have to rely on reading industry journals and industry forums, the majority of company research is now conducted online.  Staff access the Internet to research competitor movements, overseas business opportunities and industry purchasing trends.  Staff also conduct online research to source supply agreements which can be compared to the company's own supply agreements.

Additionally, an online repository of product information has also been developed.  This is a particularly useful resource for sales staff as it enables easy access to product content details and retail prices.  By expediting access to required information, customer enquiries can be responded to more promptly.

To compliment installation of the intranet network, a company website was also developed.  The website provides visitors with company history, details of the manufacturing process, products and an enquiry option.  On average, UBF receives 5-20 enquiries via its website each week.  Marketing of the site is conducted through co-operative advertising with customers and suppliers as well as links from search engines.

In order to prevent damage to software and hardware, UBF has employed several security measures.  These include firewall technology, installation of anti-virus software and use of double encryption technology to prevent unauthorised access to data being transferred between offices.  Business data is backed up on tapes which are stored offsite.

Furthermore, when implementing the intranet network, the company upgraded its dial up Internet access to Broadband Internet via an ADSL connection.  With UBF's increasing reliance on web-based transactions, fast and reliable data transmission is essential for achieving maximum cost efficiencies.

Revenue and Costs

* Note: Capital Expenditure is amortised over a four-year period

Financial Analysis

In 2001, UBF generated additional revenue from e-commerce of $1,200,000 as a result of customers having found the business online.  This contributed $216,000 to gross profit.

UBF achieved $345,530 in cost savings in 2001.  By allowing staff centralised access to customer orders and manufacturing schedules, staff are better informed to make purchasing decisions resulting in reductions in stock obsolescence ($1,250) and inventory storage costs ($125,000).   Streamlined administrative processes such as document filing and data transfer has increased staff productivity ($160,000), staff time spent in banking ($7,500) and bank charges ($5,000).   The use of email has negated the need to post hard copy marketing brochures and correspondence to colleagues and suppliers in interstate or overseas regions, resulting in savings in postage ($3,500), photocopying ($2,000), printing ($8,000) and stationery ($9,000).

UBF invested a total of $135,295 into the e-commerce initiative.  The majority of establishment costs were allocated to software required to support the intranet network including software upgrades ($21,000), multi-user licence for attaché accounting software ($11,385) and software linking to the network ($9,000).  Hardware purchases included extra computers and servers for the three offices ($40,000), a backup server and tapes for security purposes ($1,250) as well as installation of cabling to enable Broadband Internet via ADSL ($6,300).  In addition, time spent by staff undertaking training in the new system functionalities amounted to $5,500.  The Company also received a $192,000 Austrade grant for its 'Plant and Process' improvements which also helped support its e-commerce initiative costs.

Ongoing costs for 2001 totalled $49,164.  The majority of the costs were incurred in amortisation of capital expenditure over a four year period ($33,823).  Other costs incurred in supporting the intranet network including ASP hosting service fees ($2,100), system maintenance ($3,400) and ADSL connectivity fees ($6,840).

Non-Financial Benefits

Installation of the intranet network has produced significant benefits for the company.  By providing a centralised repository of company information, staff can now access information from other business units and offices within the company.  This assists in shortening the response times for managing client enquiries, payments to suppliers and confirming manufacturing schedules.  Furthermore, by enabling greater transparency across business units (such as manufacturing and finance) and state offices, staff now possess improved visibility with which to make business decisions.

Development of the company website has done much to lift the company's profile as an innovative, technology-savvy manufacturer.  An online presence has also introduced the company to new overseas markets for both customer orders and supplies.  Additionally, many customer enquires can now be directed to the website, which in turn contributes to increased staff productivity.

Challenges

Identifying the most appropriate network solution proved to be a daunting task considering the range of options available on the market.  This issue was overcome with the engagement of professional IT consultants to provide guidance and advice.  UBF also encountered some staff resilience to the intranet network, although staff training eventually resolved this problem and ensured that the new technologies were fully utilised.

Future

In the near future, the company plans to include an ordering function on the website so customers can log on, place orders and pay without having to directly contact the company.

Ed's advice to other businesses considering an e-commerce implementation is to ensure thorough research is conducted and a detailed implementation plan is established.