Wallboard Tools

www.wallboardtools.com.au

Executive Summary

Wallboard Tool (WBT) is a supplier of specialised tools and accessories for the plasterboard industry in Australia. WBT has been in operation for 26 years and is based in Burleigh, Queensland. The company employs 12 full time staff.

Managing director, Stewart Orchard, began the e-commerce initiative four years ago with the introduction of a network system connecting the Queensland and Sydney office. The connection facilitates real time control over stock, which was deemed necessary by Stewart to survive and succeed in the industry. Stewart also planned for the development of a company website which would serve as an online catalogue to showcase WBT products.

Linkage between the inventory and accounting system provides a centralised, real time view of stock levels.  The system enhances visibility of supply and demand across the supply chain, placing management in a better position in which to make decisions regarding purchasing and pricing.   The effectiveness of the system assists the company to control inventory levels and stock obsolescence as well as enabling faster responses to customer stock enquiries.

The company gained additional revenue of $500,000 in 2001 as a result of the e-commerce initiative. Total cost savings of $160,100 were achieved from more streamlined administrative processes and the resulting improved staff efficiency.  WBT invested a total of $19,760 into the e-commerce initiative. After deducting the ongoing costs of $38,857 in 2001, the company realised a net operating benefit from e-commerce of $271,243.

In the future, WBT plans to implement a Customer Relationship Management (CRM) system. Through the collection and monitoring of customer data, the company can analyse customer purchasing habits and target marketing initiatives accordingly.

The Business

Wallboard Tool (WBT) is a supplier of specialised tools and accessories for the plasterboard industry in Australia. The family-owned company develops and manufactures a wide range of Australian made hand tools.

WBT has been in operation for 26 years and is based in Burleigh, Queensland. The company employs 12 full time staff.

Getting Started

Managing director, Stewart Orchard, initiated e-commerce four years ago. Stewart introduced a network system connecting the Queensland and Sydney offices to enable online accounting and inventory management across the company.  The high cost of inventory management required the implementation of an online solution.  It was envisaged that this would not only reduce costs but also maintain company growth and competitiveness within the industry. 

In adopting the network system and website, Stewart received advice from external Information technology (IT) consultants. Stewart conducted research by examining other businesses' websites and talking to people within the IT industry, before developing the e-commerce initiatives inhouse.

WBT markets the company website via company literature and magazine advertisements. The site is maintained inhouse and is updated quarterly.

Real Time Stock Control

For many companies, high levels of inventory are kept on hand as a buffer against uncertainties in demand and supply. However, maintaining high levels of inventory is costly as the company's working capital is effectively tied up while incurring expensive storage costs and the risk of obsolescence. Real time stock control enhances inventory management leading to reductions in storage and finance costs as well as obsolescence.

WBT's real time stock system enhances company visibility of supply and demand across the supply chain, placing management in a better position in which to make decisions regarding purchasing and pricing.  Equipped with a better understanding of customer demand for certain products, stock obsolescence can be better controlled, freeing up capital for allocation in other areas of the business.   Furthermore, by automatically adjusting stock level records, the delivery cycle can be shortened and order fulfilment obligations met more efficiently. The direct linkage between inventory and accounts reduces the incidence of administration errors in regard to invoicing, wrong stock codes and incorrect quantities.

Current e-commerce strategy

WBT's website provides company information, links to other supplier websites and an online catalogue of products and services. Contact details are provided enabling customers to email WBT directly with enquiries or order requests. On average, the company receives five enquires per week via its website.

The accounting package used by WBT contains the inventory management function. Over 4,500 items are registered and monitored via this system. Each time a product is sold or purchased, the system records the change in inventory level, and the stock levels are automatically updated.  For inventory monitoring purposes, a stock report is generated on a daily basis.

The Internet is also utilised to simplify administrative functions such as online banking, payroll, market and product research. Ordering from overseas suppliers is generally conducted via email and payments are discharged electronically.  Electronic data interchange (EDI) is often used to deliver tool specifications and drawings to manufacturers. EDI provides a collection of standard message formats for businesses to exchange data via electronic messaging services such as email.

WBT employs several security measures to protect its online system.  These include firewall technology, daily installation of anti-virus software and strict password protection.  A backup of business data is made on a daily basis and stored offsite.

Revenue and Costs

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

Financial Analysis

In 2001, WBT generated $500,000 in additional revenue from e-commerce.  This was the result of additional sales made through the online catalogue system as well as business gained as a result of online marketing via the website.  The contribution to gross profit was $150,000.

Total cost savings amounted to $160,100 in 2001.  The most significant savings were in staff time ($70,000), stock obsolescence ($35,000) and reduction in inventories ($20,000) as a result of the efficiencies flowing from the real-time inventory management system.    Development of the online catalogue has reduced the need to produce and distribute hard copy marketing material, reducing printing ($5,000), postage ($1,500) and marketing costs ($1,000).  The prevalence of email and EDI as the main form of communication between staff, suppliers and customers has reduced costs associated with telephoning and faxing, including photocopying ($1,000), staff time ($3,000) and telecommunication charges ($10,000).

The establishment cost of the network system and website totalled $19,760. Preliminary research conducted by Stewart represented a time cost of $1,500. Web development costs were $3,500 while the registration of the domain name for the company website was $360.  Costs associated with the new network system include accounting software ($4,000), server software ($5,000), backup tape ($700) and printers ($1,500).  Staff training undertaken to ensure maximum utilisation of the new system incurred $2,500.

Ongoing costs during 2001 totalled $38,857.  Costs directly associated with supporting the new network system include financing of leased IT equipment ($13,000), external IT consultants required for system repairs ($4,000), staff time required for system maintenance ($2,000) and software application fees ($400).  Temporary system failure has also incurred staff down time valued at $10,000.  In addition, $4,940 was allocated to the amortisation of capital expenditure over a four-year period.

Non-Financial Benefits

The main qualitative benefit generated from the real-time inventory system lies in the more simplified and co-ordinated management of stock.  With over 4,500 items in inventory, the integration of customer's orders, stock level adjustments and invoicing reduces the volume of manual data entry and paper handling.  With a resulting reduction in administrative errors, staff satisfaction is improved as staff now spend less time correcting errors and more time towards productive tasks.

From the customer's perspective, enquiries regarding stock availability and pricing can be promptly responded to based on current stock information.  In addition, the improvement in delivery cycles has had a positive impact on customer satisfaction and the company's reputation for excellent customer service.

Challenges

A major challenge faced by WBT is the unreliability of connections. Coupled with power surge issues, staff productivity is at times disrupted by system down time (up to two to three hours at a time).  This issue and other technical problems are being addressed by an external IT consultant.

Future

In the future, WBT plans to implement a Customer Relationship Management (CRM) system. Through the collection and monitoring of customer data, the company can analyse customer purchasing habits and target marketing initiatives accordingly.  The company hopes that most future marketing efforts will be via email.  WBT also intend to upgrade the website to include a customised account section in which customers can access and view order details, invoices and print reports.

Stewart's recommendation to those companies considering an e-commerce implementation is to conduct extensive research and seek as much professional assistance as possible.  Stewart regards adequate research and external information as crucial to the success of the initiative.  Companies should invest in an IT solution that suits its purposes rather than settling for second best.