Under Armour: No SweatBy Kevin Fogarty | Posted 2004-09-01 Print
Under Armour's "Database" of back orders was a closet full of clipboards. Dave Demsky's trial by fire: put in systems without stalling the sports apparel maker's growth.
Imagine yourself as Dave Demsky, barely three months as information-technology director at Under Armour, a sports apparel company whose products are so cool that professional athletes wear them on TV without being paid to do so. It's August 2001, the busiest month of the busiest year in the company's history, and it's your job to build the technology to keep the company from being crushed by its own success.
Imagine just how much fun that could be.
Three years later, Demsky says he's still having fun, though he doesn't have to pack boxes anymore. Instead, he's launching four major technology projectsan extranet to help smaller retailers place orders, a voice-over-Internet protocol system to replace the PBX that Under Armour just flat outgrew, a data center running on new servers, and an operating system in the company's huge new warehouse.
Under Armour, which employed 31 other people when Demsky was hired, has now topped 300 and is due to hire another 100 or so in the next 12 months. It has outgrown three accounting applications, two warehouse management systems, two entire warehouses, one office building and, thankfully, the closet full of clipboards. Demsky has also been able to build an 11-person team of information-technology people to help keep pace with growth that is still screamingly fast.
Demsky's main goal is to make sure Under Armour's systems keep products moving quickly from its 350,000-square-foot distribution facility to its retailersfrom small-business owners to large sporting-goods chains such as The Sports Authority. Demksy says that Under Armour's ship times have stayed relatively flat despite the spike in volume; he declines to reveal specifics.
The most important part of the technology that lets the company keep up, according to Demsky, is an enterprise resource planning system from Lilly Software Associates. It provides the basis for both its order- and warehouse-management systems; Lilly's package offers inventory-planning capabilities and eliminates the manual work of printing orders, running them down to the warehouse and handing them to the people who fill the boxes.
A Wireless Warehouse in 4 Months
"We went from a $25,000 accounting package to a full-blown ERP [distribution-center management system], paperless, wireless warehouse, and we did it in four months," says CFO Scott Plank, one of several brothers who help founder Kevin Plank run the company.
"It was like we had a real warehouse all of a sudden," Demsky agrees. "We did $50 million [in sales] that year , so $300,000 [spent on the ERP system] wasn't that bad."
What was bad was figuring out how to get the system operating with only Demsky, a small group of staffers from several departments and a series of consultants involved.
"We couldn't take time off from our regular jobs to implement it, so that was 80-hour weeks for five months for eight or nine core team members," Demsky says.
The Lilly software is designed for light manufacturing companies and not specifically for apparel makers, but Demsky and his team picked it anyway. They liked the fact that the software can be customized easily and is known for automating warehouse operations like picking and shipping, where Under Armour was particularly weak.
Using the system, orders that come in via phone, fax or e-mail are entered manually; orders placed via electronic data interchange register automatically. The orders, originally stored in one of two Oracle 8i databases running on Windows 2000 servers, are matched with a current inventory list. The systemnow running Oracle 9i on larger Sun Solaris serversthen cranks out orders that can be downloaded onto wireless handheld devices that warehouse workers use to pick up and scan the items on the order. The warehouse management segment of the application tracks a picker's location and flicks on a light near the next item he's due to pick up. The pickers scan each item, then scan each box as it's filled, so the system can register not only the orders, but also the completion of each.
Though Lilly had some apparel-specific software patches available, Under Armour had to add front-office functions such as the ability to perform credit-card transactions and to handle a dozen variations on the same product, including color and size, Demsky says. Under Armour also hired one of the consultants on the Lilly project, a warehouse management specialist, to be its new vice president of operations.
The system came online in August 2002 in Under Armour's 65,000-square-foot warehouse. To keep pace with its growth, Under Armour moved its warehouse into the 350,000-square-foot site and its planning software onto the Sun Solaris servers.
E-mail is another key part of Under Armour's production-planning process. Without constant reports on the number of products sold at each store, the company can't plan effectively.
"Our e-mail went down at one point on a day when we were expecting a sell-through report from a major customer," says Scott Salkeld, Under Armour's business development director. "We were waiting to do our production plan, and that report just couldn't come through. It was driving us crazy. We ended up putting the meeting off for two days, which was a lot harder."
Because e-mail is such an important medium for negotiating, confirming orders and otherwise communicating with customers, Under Armour hired Evergreen Assurance in Annapolis, Md., to provide software that could guarantee that the mail system would not be down for more than 15 minutes.
"Fifteen minutes doesn't usually matter that much, but it depends on which 15 minutes," Salkeld says. "This business doesn't happen slowly. If you miss some dates or an order is wrong, you're in trouble."
Also key was building a system to exchange documents electronically, helping automate orders and billing to big-box retailers like The Sports Authority and Dick's Sporting Goods, which make up 60% of Under Armour's business.
Major customers were willing to exchange data using spreadsheets for a while, Salkeld says. But after a year or so, they wanted to see some automation. Under Armour hired a service provider to do its EDI exchanges, but dropped the service after deciding its cost was too high and its responses too slow.
Instead, Demsky spent between $150,000 and $200,000 on contractors and equipment to put in a system that got Under Armour's top 15 accounts up and running.
Under Armour products sell quickly and reliably, and almost always at full list price, says Monty Marks, senior buyer, clothing for Olympia Sports, a 120-store retail chain in the Northeast. But what really sets the company apart, Marks says, is the reliability of its shipping and customer service, which can be so inconsistent with small companies that a large retailer who carries their products can end up losing money.
"You run into a lot of bumps with new companies, but [Under Armour's] customer service is really right up there with Nike or Adidas," he explains. "They did some warehouse moves [in June] and made sure we had our shipments early. Everything we've done in volume or other changes, they've kept up with."
But Under Armour has to cater to another constituency: the regional chains and mom-and-pop stores that often do business only by fax or phone. These companies make up 25% of Under Armour's business, while the rest comes from its Web site and special deals. "You can't abandon them; you have to keep taking care of them," Salkeld says of the small retailers.
"We're not a high-tech operation," confirms Henry Kanner, manager of the Natick Outdoor Store, an almost iconically popular two-store chain in Boston's western suburbs. "We do [purchase orders] on paper, so it's easier to just fax them in, and the first thing they do is fax us back right away and acknowledge receiving an order. That's not high-tech, but there are very few companies that do it. We buy from 800 or 900 manufacturers, and [Under Armour] is just a treat to deal with."
Already a Legend
Though only eight years old, Under Armour has built an internal culture and mythology thicker than those of companies many times its age and size. As the well-worn story goes, company founder Kevin Plank disliked the cotton T-shirt he wore under his University of Maryland football uniform. Seeking a garment that wouldn't bunch up or stay wet, he created his own, using stretchy lingerie fabric to tailor a skintight, moisture-wicking shirt. He loved it; so did his teammates. Within two years, he was selling tens of thousands of shirts. Today, most retail for $30 to $40.
Under Armour essentially created the market for "compression clothing," which makes athletes feel fresher by keeping light pressure on their muscles. That market has grown to more than $130 million a year and sparked competition from Nike's Dri-Fit One and Reebok's NFL Equipment products, according to Mike May, director of communications for the Sporting Goods Manufacturers of America
"The impact of Under Armour has been significant, to say the least," May says. "Retailers said they can't keep Under Armour on the shelf."
Though neither Demsky nor Scott Plank admits to having specific cost or payback goals for technology, the company is extremely cost conscious, though you couldn't tell by looking at its sleek offices or quickly gentrifying harborside location.
Under Armour rented its stainless-steel-and-brick Tide Point headquarters, a former Procter & Gamble factory, from a dot-com that made it over, stylized it heavily and then went out of business. The company got most of its furniture and a lot of its hardware in much the same way.
"We got some $20,000 or $30,000 servers for like $3,000," Demsky says. "You are taking the risk that they won't work right. But if they don't, you're only out three grand."
The bottom line for Under Armour, like any successful company: Keep customers happy.
"If you're late with an order to one of those local stores and they miss the Little League sales, that's really not good," Demsky says. "We're in 5,500 doors, and you have to take care of all of them."
Under Armour Base Case
Headquarters: Tide Point, 1020 Hull St., Baltimore, MD 21230
Phone: (410) 468-2512
Business: High-performance sports apparel
Director of Information Technology: Dave Demsky
Financial: Privately held; $120 million in revenue.
Challenge: Maintain high level of service to retailers as company growth surges.
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