When it comes to digital transformation, the coronavirus crisis seems to have jump-started many enterprises' modernization efforts.
There is a general consensus that digitization is beneficial to any organization, yet many businesses continue to struggle to push past the concept phase of their roadmaps and actually implement meaningful change.
There was, indeed, hesitancy at metals supplier Ritchey Metals, which recently announced that it is implementing enterprise resource planning (ERP) technology from Sage. According to President and Chief Financial Officer Stephen Ritchey, overhauling internal processes and infrastructure to embrace a new ERP system is a "tremendous undertaking."
Speaking with PYMNTS, Ritchey explained why the company was ready to clear the hurdle of internal resistance to change, and he discussed the ongoing process of a technological implementation initiative that must address some of the more unique aspects of the metals industry and improve the bottom line.
Swivel Chair Processes
Before beginning the ERP journey with Sage, Ritchey Metals was operating from a proprietary system of disparate platforms and manual data entry — an environment that Ritchey explained was extremely resource intensive.
"We were using what I call 'swivel chair processes,'" he said, explaining that this system requires a professional to manually enter data into one system, swivel their chair to the next platform and manually enter data again, and so on. "We probably had 12 to 15 systems we were using."
In addition to wasted time, the opportunities to mistype data were significant. Not to mention, added Ritchey, that the process of actually finding and extracting data from these siloed systems was extremely difficult, leaving little room to obtain valuable, actionable insights from the information stored within these platforms.
The proprietary system that the company had built years prior was no longer fit for purpose. And as Ritchey Metals grew, that system was not able to fluctuate along with the company itself.
At first, the organization attempted to update its existing infrastructure, yet Ritchey Metals quickly realized that this would not provide the functionality the company was seeking. Despite this painful process, it was one that positioned the firm to be ready to make the leap into a third-party ERP solution.
"We probably spent over $100,000 with our developer to try to improve our existing database," said Ritchey. "It wasn't giving us the capabilities we need. Had we not gone down that path and spent that money. I'm not sure we would have been as ready to make the leap into a full ERP system."
The process of implementing an ERP can be a challenge for any organization. But for Ritchey Metals, there are some particular points of friction in the industry that had to be taken into account when choosing an ERP solution provider.
One of the largest is the continually fluctuating value of metals with which Ritchey Metals works — meaning the value of the company's own inventory was never stagnant.
"One day our inventory can be worth $1 per pound, the next it can be $0.95 per pound," explained Ritchey. "That fluctuation creates a lot of challenges within a system. You have to be able to track all of the moving parts of an inventory as it increases or decreases in value."
Inventory management is even more challenging for the company as it is able to not only work with raw materials extracted from the earth, but also recycle and melt down metal from existing parts. This type of malleability of product can further hamper visibility into what stock is available when customers need product.
Any ERP system had to be able track this type of obscure inventory, as Ritchey described it. With Sage, the company discovered that it was able to make use of the barcodes it already places on metals for its own customers, to be able to track the movement of those items as metal moves in and out of furnaces to be meltdown, in and out of warehouses, and on and off of trucks in the supply chain.
The complexities of the metals market, compounded by the challenges of overhauling internal systems, can be enough for any organization to avoid modernization efforts. But at some point, a business grows too big, and its systems too tangled, to maintain the status quo.
The benefits of making the leap to modernizing with an ERP are expected to be immediate once the system goes live in December, said Ritchey. Not only will the company be able to better manage inventory to have a clearer view of which metals and blends will be most profitable for the company, but integrated data means saving professionals hours of manual work that can be used for more strategic initiatives.
"One of the most obvious improvements is we're not going to be entering in the same information over and over again," he noted. "It will free my team to focus on the things that can make us money... Having information at the tips of our fingers will have an immediate impact."