Open Source ERP: Revving Up the Enterprise
By Acquiring a competitor in 2000, and another in 2005, PerTronix Performance Products amassed a wide-ranging portfolio of automotive exhaust and ignition products.
At the same time, though, the family-run business struggled with disconnected enterprise resource planning systems, with order management, billing and inventory systems spread across three separate facilities in Southern California.
That disparity stalled PerTronix's ability to meet customer demand, says project manager Steve Reh, who oversees information technology for the San Dimas, Calif.-based company. For example, when customers called in orders, a PerTronix employee in Rancho Dominguez, Calif., would key in the product and check inventory. (The company's third location is in Riverside, Calif.) But before the product-such as an exhaust header, ignition distributor or muffler-could be shipped, order slips had to be produced in San Dimas and faxed to the office where the order was taken. After that, the sale details had to be re-keyed into yet another office's accounting and billing system.
"We had no integration between the three locations," says Reh, who reports to the company's president and CEO, his father, Tom Reh. "Because the system wasn't across the organization, we had to key everything into the system twice."
That's just one of the problems PerTronix faced with the siloed setup. On top of that, in late 2004 Hewlett-Packard said it would no longer support its HP 3000 minicomputers, which PerTronix used to run its enterprise resource planning functions.
At that point, PerTronix was running three different ERP systems. The San Dimas headquarters had used GrowthPower, from Mapics (now owned by Infor), for almost 20 years, running on the HP 3000. The Rancho Dominguez office, formerly the location of Ermie Immerso Enterprises, which PerTronix bought in August 2000, ran a terminal-based production planning and inventory monitoring system. And in the Riverside facility, which PerTronix added when it acquired Doug's Headers in January 2005, the company used a customized Microsoft Access database.
So, Reh's first order of business in 2005 was to find a new system that would replace those systems and subsequently connect the three facilities. Initially, Reh says he thought the evaluations would lead to a decision within 30 days.
But the process took longer, exposing the 100-employee firm to some of the biggest vendors in the software world and ultimately landing them where they least expected: with an open-source ERP system.
PerTronix had been paying Hewlett-Packard approximately $8,000 a year for support on the HP 3000. In addition, the vendor charged PerTronix around $1,000 for any changes that had to be made to the system. Plus, PerTronix had to pay about $1,500 for every new user it brought into the system, plus 20% of that cost for ongoing maintenance, Reh says.
But with HP no longer supporting the system, Reh looked into third-party support options. And what he found was that support vendors would charge even more than Hewlett-Packard. (He declined to mention specific price quotes.)
Back to the drawing board. Reh and his team began evaluating replacement systems, checking out ERP offerings from Infor, Microsoft and SAP. But the up-front costs for implementation, training and consulting ranged from $40,000 to $60,000, tens of thousands more than PerTronix wanted to spend. And that was just the start: Reh says licenses and support contracts would push those costs up another $14,000.
On a whim, Reh looked into an open-source system by Compiere, a privately held vendor based in Redwood Shores, Calif. The company makes open-source ERP and customer relationship management software for small to mid-size businesses. In March, Compiere said its software had been downloaded 1.2 million times.
Still, open-source ERP systems are not nearly as popular or widely used as open-source platforms like Red Hat's Enterprise Linux or Novell's SUSE Linux. But a number of products have emerged in recent years besides Compiere, including Opentaps and xTuple (formerly OpenMFG), which is aimed at manufacturing firms.
Bernard Golden, CEO of Navica, a San Carlos, Calif., consulting firm that focuses on open-source implementations, says small to medium-size businesses are more likely to take on an open-source ERP system than a larger company with the resources to afford tools from enterprise vendors like SAP. But he sees promise for open-source ERP.
"Open-source adoption has typically come from the bottom up and is moving up the stack," Golden says. "Applications is the latest and most challenging frontier. Nevertheless, these apps are coming forward and gaining acceptance."
Reh wasn't exactly inclined to go for open-source. "We're not an open-source type of company," he says. "We don't use Linux or OpenOffice. Really, we're just looking for tools that work." That's not to say that the offerings he evaluated didn't work. But cost savings were a key selling point for the company.
Still, Reh admits he was hesitant about going with Compiere. He knew the product would have to be customized to align with PerTronix's operations, and the company's I.T. staff had little or no experience with open-source tools.
So, Reh began working closely with KnowledgeBlue, a Salt Lake City consulting firm and Compiere partner, to customize its Compiere offering-dubbed OpenBlue-to meet PerTronix's specific needs. In some cases, Compiere had more functionality than PerTronix needed; for example, the software includes a point-of-sale feature that PerTronix didn't want, since the company sells to distributors. In others, though, the out-of-the-box features came up short: PerTronix wanted to batch invoices and update price lists automatically without keying new figures into the system, but OpenBlue lacked those capabilities.
KnowledgeBlue's team added the features, and several others. The cost? About $20,000, Reh says, for licenses, training and implementation-half or even two-thirds less than some of the competitive products the company had considered.
PerTronix is now running OpenBlue across all of its properties, along with Crystal Reports software for reporting and an Oracle database. The system runs on a Dell Dual Xeon 3.0 GHz box along with Microsoft Windows Server 2003's Standard edition, which cost about $3,800. Ongoing support from KnowledgeBlue, including hardware and software, racks up to about $12,000 a year-$4,000 more than the base cost for HP support on the HP 3000. But that $12,000 covers 20 users, Reh says. Support for the HP system covered only eight users. So, effectively, PerTronix was paying $1,000 per user; with the new system, the company has knocked that ratio down to $600 per user.
PerTronix also saw efficiency and procedural gains. Before installing OpenBlue, PerTronix had a team of workers come in to headquarters on New Year's Eve and New Year's Day to manually key in changes to 37 price lists. Those lists would then have to be updated at the other facilities. That level of effort made it unreasonable for the firm to tweak its prices more than once a year. "It was such a hassle," Reh says.
KnowledgeBlue added a feature to OpenBlue that lets PerTronix enter prices on a single spreadsheet and, in one click, update the lists throughout the company. Another efficiency gain came in batching invoices. Since the company deals with many repeat buyers, Reh and his team wanted to cobble invoices together instead of creating and sending them one by one. Building that capability helped PerTronix's accounting staffers on both the exhaust and ignition businesses save a total of an hour a day.
And ordering has become more streamlined. Instead of customers having to make multiple calls or send repeat faxes to separate facilities, they now call or fax orders to one location, where the order is logged into the system and captured across the different facilities. On top of that, workers at any of the three locations can check inventory instantly through the software, negating phone calls to other facilities.
Those improvements have changed the culture at PerTronix, Reh says. Workers were hampered by the disconnected environment and how it made it difficult, at times, to serve customers.
"If you want to get into buzzwords, it's 'continuous improvement' for us," Reh says. "People are looking at their jobs differently now."
Petronix Base Case
440 E. Arrow Highway, San Dimas, CA 91773
Small, family-controlled company manufactures high-performance ignition and exhaust products primarily for the automotive aftermarket.
President and CEO:
Financials in 2006:
Revenue between $10 million and $15 million.
Find a new system to centralize orders, inventory management and other enterprise resource planning functions across three disconnected offices.
Cut the amount of calls needed to check inventory status and place an order, from three or four to one. Consolidate the order entry process from three locations to one.
Create batch invoices for repeat customers instead of sending them individually.