Aviall IT investment boosts bottom line in hard times
ADT's 2003 Innovator Awards
Middleware/Application Integration Winner
|If at first you don't succeed ... for Aviall Inc.'s IT operation, a failed effort to modernize in the late 1990s left the firm with the option of cutting costs or trying again. A new management team installed on January 1, 2000 chose the latter and has watched the company double in size since.|
With the start of the 21st century, Aviall, a 70-year-old distributor of aviation parts, found itself at an IT crossroads. During the late 1990s, the firm made significant technology investments in an effort to replace accounting, marketing and sales systems with more modern, customer-friendly technologies for its 200-plus suppliers and worldwide cadre of customers.
In the end, Aviall found that the new stovepipe systems made dealing with the company more difficult for customers, leading competitors to take advantage of the difficulties and forcing Aviall to slash prices. The problems were cited as major reasons for a sales decline of more than 20%.
|At that point, Joe Lacik (pictured) was hired as vice president of information services by new CEO Paul Fulchino to fix the mess. 'Myself and the new CEO started the same day in a $380 million company going the wrong way,' Lacik said. 'A turnaround usually involves cutting and slashing, but we went to the board with a different plan. We proposed spending $30 million to $40 million on new technology' to integrate and significantly improve the stovepipe systems.|
Lacik said the board was wary of the spending plan -- especially considering the earlier inefficient effort to boost business via technology -- but ultimately approved the plan.
Indeed, Aviall found itself in a declining market that saw numerous commercial airlines and airplane manufacturers struggling mightily even before economic times turned sour and terrorist threats caused a significant decline in air travel. ''There's no doubt that the plan was a risk,'' Lacik conceded. ''But to be successful in business you have to take calculated risks.''
The plan, Lacik said, was to continue using the recently installed Lawson accounting program, the Broadvision online catalogue and ordering system, and the Siebel customer relationship management system, all brought in during the late 1990s, and integrate the software silos. And Aviall officials realized the batch Web-ordering system had to be updated to a more expensive and riskier transactional one.
''We stock about 380,000 parts and the pricing is fast-changing. There are pricing tables for all customers -- we have 20,000 pricing tables in Lawson. It's a very volatile situation,'' Lacik said.
The firm looked at a variety of options ranging from toolsets and adapters supplied by installed vendors Siebel, Broadvision and Lawson, to separate middleware technologies and tools. Lacik chose the latter option despite pressure from the installed vendors. ''We looked at point-to-point solutions from our vendors, as well as several good integration tools.''
The company turned to the New Era of Networks (Neon) adapter set, as well as eBiz Integrator and Formatter from Sybase, primarily because of that firm's experience in supplying tools to Wall Street financial houses, Lacik said. ''Sybase and Neon grew up on Wall Street doing hundreds of thousands of transactions a minute,'' he said. ''We didn't think the other applications had the scale of Sybase.''
Lacik said the firm utilized both internal engineers and consultants from Siebel and Sybase to undertake the effort that was started in June 2000, less than six months after he joined Aviall. The project utilized technology and product-specific experts in an effort to force team members to rely on others for expertise, rather than undertake long debates on the merits of each step in the process.
In addition, Lacik's plan called for phased-in development, without hard completion dates that could force systems to go live before completion. Thus, the strong testing process was also used to provide Aviall engineers with a thorough understanding of the technology before the integrated system was implemented.
Improvements when the work was done included the ability to automatically reflect in the Lawson customer information file any changed customer information in Siebel, ensuring that packages are always addressed correctly; full search capability between Lawson and Broadvision; and automation of the process of sending RFQs to suppliers and routing electronic responses to Aviall's purchasing system. The purchasing operation could then update pricing on the online catalogue and send an e-mail to customers.
Overall, Lacik said, the project cut annual inventory costs by $2.1 million, increased order speed from five days to 30 seconds, increased Web orders by 65%, and is credited with playing a major role in signing new contracts with Rolls Royce ($500 million) and Honeywell ($50 million a year).
The bottom line: Aviall reported sales of $803 million in economically depressed 2002, compared to just over $500 million a year earlier. Profits totaled almost $40 million, up from $6.5 million in 2001.
Project: Supply chain and organizational integration
Purpose: To retain the existing infrastructure while allowing internal systems to communicate to improve efficiency.
Benefits: A reduction in inventory of $2.1 million per year, order response speed went from five days to 30 seconds, 65% increase in Web orders, and exclusive offerings estimated to bring $500 million in deals over the next 10 years.
Tools: Neon adapter set, Sybase eBiz Integrator and Formatter, Lawson accounting program, Broadvision online catalogue and ordering system, and Siebel customer relationship management system.
Development Group: Jim Lacik, Jim Park, Rolly Antonio, Elissa D'onofrio, Elizabeth Slizeski, Bill Bradley, Charles Evans, Cris Chavers, Jeffrey Martin, Jeff Dill, Joseph Kalloor, Dar Hackbarth and Lisa Durst
After having purchased and implemented three best-of-breed packages to boost sales and gain exclusive distribution deals, this independent aviation parts distributor watched sales drop more than 20%. The application silos, although independently successful, could not exchange information to enable corporate goals. The packages included Lawson (accounts), Siebel (sales) and Broadvision (online ordering and catalog).
Joe Lacik persuaded the board, who were wary of new technology by this stage, to keep their existing IT assets and integrate them using Sybase's eBiz Integrator, with adapters from New Era of Networks (Neon), Lawson and Siebel. The results speak for themselves: a reduction in inventory of $2.1 million per year, response speed on orders from five days to 30 seconds, an increase in Web orders of 65%, and exclusive offerings estimated to bring $500 million in deals over the next 10 years.
Aviall was prepared to risk yet another package, and their business, to realize their existing IT investment -- and to regain sales. Their use of services-based architecture and a dollop of practical decisions in the selection of technologies paid them dividends.
Team Leader: Neville Goedhals, Manager, Enterprise Architecture, Keane Inc.
to read about the finalist in this category, ''XML spurs Liquidnet link to Europe,'' or click here
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Mike Bucken is former Editor-in-Chief of Application Development Trends magazine.