Austin Hardware Seizes Profit from Design
But being solely a distributor has built-in disadvantages. If an Austin Hardware customer wants a new door lock system, or if the customer decides a certain product is too expensive or could be bought from another distributor for less, sales staff had few options. They could go to suppliers and ask if the new lock could be produced or if a price could be reduced, but if the supplier said no, that was usually the end of their alternatives.
The result, says Mark Jeffries, Austin Hardware's chief engineer, is that customers might decide to defect to another supplier, or the company would have to pass on the opportunity to supply the customer with a new product. "Sometimes the supplier would help us, sometimes they wouldn't," says Jeffries. The end result is that Austin Hardware often felt as though it was not in control of its business.
In 2001, with competition heating up from distributors who were gaining access to lower priced hardware imported from China, the company decided it had to take matters into its own hands. "We made a basic decision: We can't let anybody hold us hostage to our own success," says Jeffries.
In effect, Austin Hardware decided to create its own product design business. Rather than pass on opportunities, it would now attempt to provide its customers with new products or lower-priced products, by designing and outsourcing their production to manufacturers at home and overseas.
The company's decision proved to be a success, particularly as it developed ties with manufacturers in China. However, managing a growing number of product development projects became increasingly difficult.
In 2003, Jeffries went looking for a software package that could not only help manage the product development process, but also serve as a collaboration platform for its work with overseas manufacturers. After evaluating several Web-based options, including Project.net and Basecamp, Jeffries chose a hosted platform called eProject. Seattle-based eProject, was renamed Daptiv earlier this month.
Jeffries says the Daptiv platform made sense for his company because information was stored in a Microsoft SQL database, which fit with the company's infrastructure. In addition, staff found the platform easy enough to use without having a technical background. The system has been in place for about three years, and Jeffries says at any given time it may house up to 600-700 ongoing projects.
No More Belly-Flops
Here's how it works: If a sales representative is talking with a customer and it comes to light that the customer is looking for a new slam-bolt lock design, the sales person can initiate a new project in the Daptiv platform. The sales person plugs in the specifications for the slam-bolt, along with the customer's price point, say $9.99, and the potential value of the overall contract.
Jeffries' engineering group, which now consists of five full-time employees, will take that lead and begin making drawings and initiate discussions with overseas suppliers. If it is determined early on that the product cannot be produced at the customer's price point and generate an adequate profit, the product development process is ended.
If it is determined that the slam-bolt can be produced at a profit, the Daptiv software is used to shepherd its development through design, manufacturing and eventual shipment to the customer.
Prior to implementing Daptiv, the product development process was much more risky. "Before, we could spend 50 hours or more on a project before we knew whether it made sense for us," says Jeffries. "Now, instead of doing a belly-flop off the diving board, we can dip our toes into the water first and make our way out to the deep end with confidence."
Another major benefit of the software is that it acts as a repository for all related information, such as drawings, notes and specifications.
The privately-held company won't reveal financial information, but Jeffries provides a hint of the initiative's success: "In 2001, we had never had a container (full of products manufactured overseas) arrive from China," he says. "Now we have a container coming over every 2-3 weeks."