The Money FactorBy Mel Duvall | Posted 2007-05-14 Email Print
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Wesco International didn't want to pony up big bucks for traditional enterprise resource planning system. How a new, quicker data warehouse helped the $5.3 billion company anchor its business.
THE MONEY FACTOR
When asked what kind of return-on-investment metrics Conte believes Wesco has achieved with the Teradata implementation, he says it depends on how you want to slice and dice it. In total, he says Wesco has spent about $10 million on the Teradata implementation, including the WebFocus piece, and additional applications written for the Oracle databases. That compares to the $110 million price tag scoped out for an ERP system.
He also calculates that Wesco has made a $10 million one-time margin improvement through the use of the system. A prime example is a direct-ship-margin reporting tool. For some sales, such as large-volume, high-value purchases, Wesco will often arrange for direct shipment to the customer. Typically, a blanket profit margin was applied to such orders. While this was a simple approach, Wesco was losing out on an opportunity to apply higher margins to some products that were perhaps hard to find.
Conte's team wrote an application that filters orders from WesNet into Teradata. When it finds a direct-ship order for more than $5,000, it sends an alert to an appropriate manager to see whether higher margins can be applied.
In other areas, Wesco says it achieved a $4 million savings in the first 24 months through better management of its discount practices (discounts are offered to customers making large purchases or paying on time), and an additional $1 million annual savings. It also achieved an $8 million one-time gain through inventory reduction and better distribution of inventory among branches.
Just as important, the company has gained an indefinite extension on its WesNet system. "The strategy we took isn't right for every organization, but it's something they should consider," Conte says. "Companies have invested a lot of money in developing applications that run their business really well. Why give that up for the cookie-cutter approach of an ERP system?"