INTRODUCTION
Summit Electric Supply Co., Inc. engages in the wholesale distribution
of electrical equipment, supplies, and solutions for the electrical
professionals in the United States and internationally. This company is one of
the top wholesale distributors. Summit obtains finished goods from
manufacturers and sells them to electrical contractors working on projects
ranging from small construction job to sophisticated industrial projects. This
company was known as middle on the supply chain, so it must be able to handle
high volume of transactions and swift inventory turnover. However, the
information built in the 1980s could not keep up with the business growth, it
could only handle a fixed number of locations and limited the range of numbers
that could be used on document.
Summit is dedicated mission to:
·
Serving the customers
by adding superior value with industry expertise, innovative systems and
commitment to them;
·
Serving the
associates and their families by providing opportunities for associates to
grow, advance and secure a prosperous future;
·
Serving the suppliers
through mutually rewarding relationships; and
·
Serving the
communities in which we live and work.
Vision:
·
To be the best place
to work and to do business in the electrical industry, period.
PROBLEM OF STATEMENT
1. Which business processes are the most important at Summit Electric
Supply? Why?
2. What problems did Summit have with its old systems? What was the
business impact of those problems?
3. How did Summit’s ERP system improve operational efficiency and decision
making? Give several examples.
4. Describe two ways in which Summit’s customers benefit from the new ERP
system.
5. Diagram Summit’s old and new process for handling chargebacks.
CASE SUMMARY
Summit electric supply is one of the top wholesale industrial electric distributors
in US. The product range is from basic commodities to sophisticated electrical
components. It provides many value-added services that help electrical
contractors purchase electrical supplies efficiently. Founded in 1977 in
Albuquerque, New Mexico and has grown very quickly. Unfortunately, its old
legacy information system could not keep up with the business. The old system
could no longer process its nightly inventory and financial updates. Summit
needed a system that could handle a very large number of SKUs. Changed to new
system ERP which is SAP that would require improve its business process and the
way people worked.
SUGGESTION AND ACTION
1. Which business
processes are the most important at Summit Electric Supply?
Answer
The company is known as a one of the top distributors, Supply chain
management played the most important business process at Summit Electric.
Supply chain management (SCM) is the management of the flow of goods. It
includes the movement and storage of raw materials work-in-process inventory,
and finished goods from point of origin to point of consumption.
Why?
Answer
The reason business processes are the most important is both
manufacturers and end users rely on distributors to efficiently bring products
to market. As the ‘middle men’ of the supply chain, distributors thrive on high
transaction volumes and swift inventory turns. Distribution industry has some
unique aspects that drive its business. The company has a very large number of
SKUs (Stock-keeping –units) and transaction (very short lead times). Inventory
distributed in various models, including at customer job sites. In the
distribution business, the lead times for fulfilling an order can be only
minutes.
ERP System
An ERP System is a packaged business software system that enables a
company to manage the efficient and effective use of its resources. It’s automated
and integrated the majority of an organization’s business process. It is
functionality in sales and distribution, materials management and financials. Moreover,
it share common data and practices across the entire enterprise, produce and
assess information in real-time environment.
SAP Application
SAP is a core ERP application. It’s the best practices function in sale
and distribution, materials management, Human Resources and Financials and its
knowledge in distribution business. SAP’s Net Weaver support Summit Electronic
more organize and be able to control how much was needed to be produced and
distributed. It’s useful for business intelligence reporting and analysis. it
helped the company to evaluate the profitability of its sales channels, using
what the solution.
Batch Management
It is a software that treats a wire reel a batch rather than single as
single products. It used to cater high demand for wires and cable products. For
examples- every time customer buys a length of wire, the length can be entered
into the system to track how much of the batch was sold. The batch management
process removed the problem of maintaining the inventory of such product.
2. What problems did Summit
have with its old systems?
Answer
Summit had facing problem with its old system where the system had
reached their breaking point. The old system could no longer process its
nightly inventory and financial updates in the amount of time that was available.
For example, it separate or different systems for sales and purchase order and
back-end reporting- integration between the system was done manually in
batches. The system could only handle a fixed number of locations and limited
the range of numbers that could be used on documents. Summit’s information
system had to use the same range of document numbers over again few months. Not
able to handle the volume and complexity of the company’s chargeback agreement
and reporting capabilities were limited. Gathering and reviewing invoices tool
an entire month- invoices 2-3 months old.
What was the business
impact of those problems?
Answer
The business impact from the problems was that the system was not able
to keep up with the fast growing business. It limited the business as it was
only able to handle a few range of numbers and location at a time. It caused of
delays and time consuming task that was not needed to take as much time as it
did in its business operations.
3. How did Summit’s ERP
system improve operational efficiency and decision making? Give several
examples.
Answer
ERP improved operational efficiency and give scalability and the ability
in Summit’s business process, especially in supply chain areas like sales and
distribution, inventory management and financial reporting system-as the
company expected strong growth in these areas.
Running more frequent inventory updates
It’s running smaller and frequent inventory update throughout the day,
instead of a night-which caused a delay. New system provided accurate information
of shipping order, which Summit’s was able to ship immediately.
Adapting the inventory tracking process
To replenish wire and cable, the ERP batch material management
identified the customer purchase amount, length of wire and product
manufacturer. Each time a customer buys a length of wire, the length is entered
into the system to track how much of the “batch” was sold.
Changing how inventory is managed at job sites
To secure inventory for special customers, with long term projects, Summit
created a “parent- child” warehouse relationship in ERP system to secure the
materials in inventory as well as on premises.
Business intelligence
To make a better manage its finance and ordering system, Summit
implemented the SAP’s/NetWeaver BW data warehouse and business intelligence. By
integrating the NetWeaver, Summit was able to analyze the profit of each sales
person, manufacturer, customer and branch. Using SAP software, Summit was able
to improve its ROI, by automating sales tax and chargeback’s. The SAP/Paybacks
and Chargeback’s application was able to identify the billing activity, if
there was a chargeback, the SAP system would automatically submit the
information to bill the chargeback- increase its chargeback claims of up to
118%. Summit decision making for implementing the new ERP system was based on
the growth of the organization, the complexities of processing orders,
analyzing finances and back and reporting. Once the new ERP/SAP was in place,
Summit management was able to focus on sales and orders and quotes, supplier
performance and delivery schedule. The new SAP/ERP has allowed Summit to run
its operations with flexibility and allow the SAP to operate efficiently. The
new ERP system allowed management to have a greater vision for decision making
and managing its operations.
4. Describe two ways in
which Summit’s customers benefit from the new ERP system.
Answer
Firstly, customer can rely on the company for their needs and products-
the company now more efficient. The company wants that customers to feel that
they can provide that they have produced products the customer want and sent to
them in short time period.
Second is to accommodate large customers with long term job sites. SES
sets up temporary warehouse on site to supply these customers with its
electrical products. Create “parent – child” warehouse relationship to be able
to work with customers. If the SES office has more than a few temporary onsite
warehouse, the warehouse can be controlled like subparts of the main SES
warehouse. It helps to prevent anybody from selling the consigned inventory
into the warehouse.
5. Diagram Summit’s old
and new process for handling chargebacks.
Answer
Chargeback is the return of funds to a consumer. The chargeback
mechanism exists primarily for consumer protection. For the distribution
company, chargeback occurs when the supplier sells a product at a higher price
to the distributor than the price they have set with the end user.
Old process
For handling charger backs had flaws in it where the company was losing
money and sometime barely making any profit. Processing chargeback have to
compare the sale to contract. A distributor can have up to hundreds maybe
thousands of contract. SES need to identify the chargeback and which
manufacturer with enough documentation of the contract or a lot of manual work.
SES need go through the customers invoice with detailed manufacturers
identified and put the chargeback in Microsoft Excel.
New process
For handling chargebacks had flaws more efficient. It automatically
review Summit’s billing activity for the day. All chargebacks agreements loaded
in the SAP system by the end of every day. There is a match in the system and
they are able to claim. New process is able to create a separate chargebacks
document outside the customer invoice and able to process more quickly with
review in the same day. SES increased its claim by 118% over the old system.
CONCLUSION
Summit Electric light up with a new ERP system bringing more revenue,
more efficiency and improvement the firm to global industry. Summit is now able
to see which vendors, customers and products are producing the most chargeback
revenue.
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