Delayed Gratification

By Baselinemag  |  Posted 2002-05-15 Email Print this article Print

Brady Corporation CEO Katherine Hudson knew that before she overhauled the "high performance" label-making company she had to look at the people who ran the operation first.

Delayed Gratification

Brady overall is making gains, two-thirds through the Eclipse implementation. The number of days' worth of sales that is waiting to be converted to cash started at 54 days and is currently at 48 days; The number of days it is taking until sending payment to its creditors now stands at 32 days, up from 22 days.

However, inventory turns are developing more slowly than Brady had hoped. To date, they are running an average of five turns per year, Cullen says. That's just one-third of the goal.

Sales growth has vanished, though, and profits plunged. Brady fell short of its 15% per annum sales goal in 2001, by $87 million. Net income growth of 16% was missed by $20 million.

The company's executives point to the sour economy as largely responsible for the shortfalls and agree Eclipse has succeeded in key areas. The Identification Solutions and Specialty Tapes group and Signmark unit, for instance, have already reached the 50% electronic-transactions goal.

The Cost of a Customer Line Item, Brady's chief metric for evaluating the cost of filling a purchase order, has dropped from $5.39 to $5.08 per line, after Eclipse. The goal for 2002 is a COCLI of $4.79.

"Right now the early results are that they have some successful implementations under their belts, but I'm not sure they have seen the benefits they are looking for yet," says Reik Read, an analyst with Robert Baird Inc., a Milwaukee brokerage house. "But, I'm not sure you would get the benefits until 100% of the system is implemented."

Brady officials say they are currently on budget and, according to a filing with the Securities and Exchange Commission, have spent $25.6 million on the Eclipse project. The overall $30 million spending plan, executives say, includes: $15 million for consulting, $3 million for hardware, $4 million for SAP software licenses and $8 million on training and project costs. The company expects to recoup its investment by 2003, primarily through savings generated by turning its inventory of labels and other products faster; reducing the time it takes to turn sales into cash; cutting the costs of filling orders; improved returns on sales and marketing efforts; and a more efficient finance function.

And the company's results haven't exactly been flushed away. Profits, while down 41% to $27.5 million, are still at about 1998 levels. Nor has the company's sense of humor gone down the drain. There's still that photo in Hudson's office of Brady executives wearing Groucho Marx glasses and standing in front of a "great wall of china"—bathroom fixtures at Milwaukee's better known industrial fixture, Kohler.

And Hudson is still making sure, personally, that Eclipse stays on track, to see that new, digitally based processes actually serve the company's strategic purposes.

Hudson, once a Kodak CIO, wouldn't have it any other way: "I'm not going to let the propeller heads do it. I've got to do it—with sleeves rolled up and hands getting dirty."


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