SUMMIT ELECTRIC LIGHTS UP WITH A NEW ERP SYSTEM

Summit Electric Supply is one of the top whole-sale distributors of industrial electrical

equipment and supplies in the United States, with 500 employees and nearly $358

million in sales in 2011.Summit operates in four states and has a global export division

based in Houston, a marine division based in New Orleans, and a sales office in Dubai.

Summit distributes products that include motor controls, wire and cable, cords, lighting,

conduit and fittings, wiring devices, support systems and fasteners, outlet boxes and

enclosures, and transformers and power protection equipment.The company obtains

finished goods from manufacturers and then sells them to electrical contractors working

on projects ranging from small construction jobs to sophisticated industrial projects.

As a distributor, Summit Electric Supply is a "middle man" on the supply chain, and

must be able to rapidly handle a high volume of transactions and swift inventory

turnover.

Since its founding in 1977 in Albuquerque, New Mexico, Summit has grown very

quickly.Unfortunately, its homegrown legacy information systems built in the 1980s

could not keep up with the business.One legacy system was for sales entries and

purchase orders and another was for back-end reporting.Integration between the two

systems was done manually in batches.The systems could only handle a fixed number

of location and limited the range of numbers that could be used on documents.This

meant that Summit's information systems department had to use the same range of

document numbers over again every few months.Once the company found it could no

longer process its nightly inventory and financial updates in the amount of time that

was available, the systems had reached their breaking point.A new solution was in

order.

Summit started looking for a new enterprise resource planning (ERP) system.This

would prove to be challenging, because the company's legacy systems were so old that

the business had built many of its processes around them.A new system would require

changes to business processes and the way people worked.

Summit also found that most of the available ERP software on the market had been

designed for manufacturing or retailing businesses, and did not address some of the

unique processes and priorities of the distribution industry.Summit needed system that

could handle a very large number of SKUs (stock-keeping units, which are numbers on

codes for identifying each unique product or item for sale) and transactions, very short

lead times for order processing, inventory distributed in various models, products sold

in one quantity that could sold in another, and no touch inventory.Summit handles

some products that are shipped directly from the manufacturer to the customer's job

site.

Scalability and inventory visibility were Summit top requirements.The company

needed a system that would handle orders and inventory as it continued its rapid pace

of growth.In the distribution business, the lead times for fulfilling an order can be only

minutes: a Summit customer might call to place an order while driving to pick up the

order so the company has to know immediately what product is available at what

location.

After extensively reviewing ERP vendors, Summit selected ERP software from SAP

because of its functionality in sales and distribution, materials management, and

financials, and its knowledge of the distribution business.Summit visited other

electrical distributors using SAP, including some of its competitors, to make sure the

software would work in its line of business.Summit was able to go live with its new

ERP system across 19 locations in January 2007.

Nevertheless, Summit still had to customize its SAP software to meet its unique

business requirements.Most SAP delivery and material scheduling functions were

designed for overnight processing, because many industries have longer lead times for

order fulfillment.Waiting for overnight inventory updates would significantly delay

Summit's sales.Summit found it could solve this problem by running smaller, more

frequent updates for just the material received during the day, rather than running big

inventory updates less often.This provide more timely and accurate snapshots of what

was actually available in inventory so that orders could be rapidly processed.

Wire and cable are one of Summit's most popular product categories.Summit buys

these products by the reel in lengths up to 5,000 feet and then cuts them into various

lengths to sell to customers.This makes it difficult to determine how much of this type

of inventory has been sold and when it is time to replenish.To address this issue,

Summit used a batch management solution in SAP's ERP materials management

software that treats a wire reel as a batch rather than as a single product.Every time a

customer buys a length of wire, the length can be entered into the system to track how

much of the batch was sold.Summit is able to use this capability to find which other

customers bought wire from the same reel and trace the wire back to the manufacturer.

To accommodate large customers with long-term job sites, Summit sets up temporary

warehouses on-site to supply these customers with its electrical products.Summit still

owns the inventory, but its dedicated to these customers and can't be treated as standard

inventory in the ERP system.SAP's ERP software didn't support that way of doing

business.Summit used some of the standard functionality in the SAP software to

change how it allocated materials into temporary storage locations by creating a parent-

child warehouse relationship.If, for instance, Summit's Houston office has several

temporary on-site warehouses, the warehouses are managed as subparts of its main

warehouse.That prevents someone from selling the consigned inventory in the

warehouse.

Summit's old legacy systems used separate systems for orders and financials, so the

data could not be easily combined for business intelligence reporting and analysis.To

solve this problem, Summit implemented SAP's NetWeaver BW data warehouse and

business intelligence solution to make better use of the data in its ERP system.These

tools have helped the company evaluate the profitability of its sales channels, using

what-if scenarios.For instance, Summit is now able to analyze profitability by sales

person, manufacturer, customer, or branch.Business intelligence findings have

encouraged Summit to focus more attention to areas such as sales order quotations and

to supplier performance and delivery times.Management has much greater visibility

into how the organization is operating and is able to make better decisions.

A key lesson from Summit's ERP implementation was not to force the new system to

look like the legacy system.Not only is such customization expensive to set up and

maintain, it can perpetuate outdated ways of doing business.According to Summit's

CIO David Wascom, "we've done a lot to maintain flexibility for our users, but still run

within a standard SAP business flow."

Source: "Summit Electric Supply Energizes Its ERP 6.0 Upgrade with Panaya," www.panayainc.com; accessed July

14, 2012; David Hannon, "Bringing More Revenue to the Table", SAP InsiderPROFILES, April-June 2011 and

"Finding the Right ERP Fit," SAP InsiderPROFILES.

Question 1

Analyse which business processes are the most important at Summit Electric Supply.

Question 2

Discuss how did Summit's ERP system improve operational efficiency and decision

making.Give several examples.

If can plz including citations and reference