Until about two years ago, an estimator at Hershey, Pa., builder/remodeler Shaffer & Son would work up a list of materials for every job and run the estimate by the guys in field operations, who passed the order along to a salesman at a local lumber dealer. Once at the dealer, the order changed hands several more times before it was delivered, an invoice was sent, and the bill was paid. This happened four times per house: for framing, for windows and doors, for roof trusses, and for interior trim packages.
Today, the estimator skips the field staff and the salesman, and places a single order for all four packages via e-mail directly with The Lumber Yard, a division of The Wolf Organization in York, Pa. Aside from avoiding a pile of paperwork, the builder of custom homes, townhouses, and duplexes saves about $300 of company time per home, estimates owner Jim O'Shea.
That windfall has trickled down from a decade-old redesign of business processes at The Lumber Yard, from which Shaffer & Son will order nearly $3 million worth of building materials this year. The dealer, which sells $170 million of lumber and supplies a year to pro contractors, has made the process of buying and selling as efficient for its suppliers, its customers, and itself as tapping a few strokes on a keyboard.
“It's wonderful,” O'Shea gushes of The Lumber Yard's ability to accept orders, send invoices, and note changes electronically—and automatically, a hallmark of the enterprise resource planning (ERP) system it adopted in 1999. “It's sort of like shopping online. It's like going on eBay and buying something. I order it, I pay for it, I know what I paid for it, and it's done.”
And, he adds, “This was their idea.”
Indeed, The Lumber Yard—along with its parent organization and Wolf Distributing, the wholesale distribution arm of The Wolf Organization—has developed virtually paperless relationships with a handful of builders and suppliers in its quest to corral the supply chain—from manufacturer to distributor to dealer to builder—into a system free from redundant and unnecessary actions.
Central to that effort is The Wolf Organization's ERP platform, SAP. SAP, which bills itself as the world's largest inter-enterprise software company, has incorporated best business practices from more than 25 industries into programs that allow clients such as The Wolf Organization to “shave a lot of manpower off” by adopting those highly efficient practices—and by using the powerful software, says Paul Pretko, an industry principal for SAP. The system links all Wolf departments—from the corporate human resources and accounts payable functions that the firm's wholesale distribution and retail arms share to the warehouse to the company's 18 lumberyards—so an action taken in one area is visible to all who need to know about it. That saves each department from recreating paperwork or missing out on information, which they now receive instantly.
Still, notes Geoff Brown, president of The Lumber Yard, world-class software alone wasn't enough to double The Wolf Organization's revenue to $385 million between 1998 and 2006—without requiring the firm to add to its 585-member staff. In fact, the company did not queue up its $10 million ERP system until five years after it began what Brown calls “a journey” that would lead the firm to re-examine every one of its business processes in an effort that would lead it to become ISO (International Organization for Standardization) 9001:2000 certified for quality management.
The Journey Begins The Wolf Organization's mission to streamline its supply chain began in 1994 with the vision of then-CEO Tom Wolf, a sixth-generation member of the family that created the privately owned company in 1843. “We were just running around with uncontrolled processes and no disciplined approach,” recalls Brad Kostelich, senior vice president of business process and technology for The Wolf Organization. “This wasn't going to be effective in the future.” The now-retired CEO, says Kostelich, decided the firm needed “a single best way to approach the management of our business.” After exploring various quality improvement options, it selected ISO. Then the CEO, says Brown, “got everybody to believe this was an investment of money, time, and resources that would be well worth it over time. He said we weren't going to do it halfway.”
And they didn't. While Brown notes that such an endeavor demands support from an organization's top guns, Wolf enlisted everyone at the firm, from executives to drivers, to participate in an examination of every key business process that affected customers: how the company ordered and received materials; how it staged, delivered, priced, quoted, and serviced those materials; and whether it installed them. “We had employees do it so employees took ownership for it,” he says. Employees for each function dissected their own practices for building a load in the yard, replenishing stock, and warehousing safety stock. They also asked customers what was important to them. “We took a look at what was happening at that time,” says Brown, “and whether there was a way to improve each process to eliminate errors and speed the delivery to market.”