Fortress MentalityBy Edward Cone | Posted 2003-10-01 Email Print
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The lubricant maker used to have a Brand Forress.
As long as WD-40 occupied what it called the "Brand Fortress" built around that single powerful name, its mainframe-based systema Unisys machine operated by San Diego-based Data Systems, running homebuilt applications for order management and other basic jobs -- worked fine. But when Chief Executive Garry Ridge decided to move to a "Fortress of Brands," including products that would be No. 1 or 2 in their categories and occupy some niche of what the company calls the "squeak, smell, and dirt business," the system had to change. New product types and new retail channels had to be accommodated.
It was a whole new world for a company that began producing its core product in 1953, doing business at first as the Rocket Chemical Co. WD stands for "water displacement"the process by which the lubricant does its joband 40 was the batch number that finally worked. By the time Freeman, a native Southern Californian, joined the company in 1990, the lubricant occupied a special place in the lives of handymen everywhere, who live by the adage, "If it moves and it's not supposed to, use Duct Tape; if it doesn't move and it is supposed to, use WD-40."
Freeman's background was in marketing. To get a notion of how critical that is to WD-40, consider this: Its information technology reports to the head of marketing. That's who deals with the contract manufacturers and retail channels critical to the company's success.
WD-40's core business operates much like Coca-Cola's. The company makes concentrated lubricant, then ships it to contract manufacturers who package the stuff and ship it to retailers. The company owns very little inventory at any time; packagers own the product until they ship it to the customers who have purchased it. WD-40 systems track that product flow and manage relationships with the retailers, which include a wide variety of hardware stores, big-box retailers, and specialty stores.
The first acquisition, 1997's purchase of 3-in-One Oil, fit easily into the existing supply chain, because the product is sold in many of the same places as WD-40. But the next purchase, a 1999 deal for the heavy-duty Lava brand hand soap, "started to break the supply chain a lot," says Freeman. "Lava was the a-ha! moment."
For one thing, none of WD-40's contract manufacturers made anything like the pumice soap, and the company needed to take on distribution duties for the heavy-duty skin cleaner.
The contract manufacturer WD-40 uses to make Lava, Valley Products, had to re-enter orders into the system of its third-party logistics provideran inefficient process considering WD-40 is sold in 160 countries.
"That wasn't going to work for us, because we have so many trade channels," says Freeman. Grocery chains, for example, have a welter of special needs, such as deductions for promotions, fees to guarantee the best placement of products on shelves and coupons. Home stores have their own needs, which are different from industrial suppliers.
"We couldn't find an ERP package that could handle the promotional allowances and customer orders of different channels," says Freeman.
With more fields than its old system to handle data on new suppliers, products, and sales channels, Innatrack let WD-40 handle domestic and international order processing, do order processing through Electronic Document Interchange (EDI), maintain enough flexibility to process and ship in the face of many types of promotions, and track the promotional allowances for advertising and other expenses at some types of store.
"Other packages had no capability to handle these situations," Freeman says. "Using them would have forced us to bend our business processes to their capability, which is unacceptable, but very common in ERP packages. All other ERP systems we looked at, we thought we would get caught in the cycle of paying for implementation and enhancements and then paying to do the same work again with each major release or upgrade over the years not good."
Innatrack also integrated into WD-40's pallet labeling and EDI systems more easily than the other ERP packages.
The Innatrack system went live in March 2000. Thirty days later, WD-40 bought Global Household Brands, the maker of 2000 Flushes, Carpet Fresh and X-14. That nearly doubled the size of the company and greatly increased its grocery store business, previously only about 5% of sales.
After running the Innatrack system in parallel to GHB's homegrown system for six months, the whole business was on Innatrack by the beginning of 2001. "We have found it's best to pick the system that runs best and junk the other," he says. "Otherwise, you can spend forever integrating and synchronizing data and systems, instead of avoiding duplicate efforts and data."