Joseph Lacik Jr. doesn’t try to measure the return on investment (ROI) of his company’s marketing Web site. The fact that Dallas-based Aviall Inc. was saved from financial disaster by a controversial multimillion-dollar IT project that included developing the Web site as one key element is all the return he needs to see.
That investment, in the words of Larry DeBoever, chief strategy officer at IT consulting firm Experio Solutions Corp. in Dallas, “turned Aviall from a catalogue business into a full-scale logistics business” that hundreds of aviation parts manufacturers and airlines large and small depend on for ordering, inventory control and demand forecasting. He says the new approach ties Aviall more tightly to customers such as Rolls-Royce PLC.
“Aviall is now the logistics back end for the aviation firms,” says DeBoever, whose company was retained to help with portions of Aviall’s systems integration work. “And they did it even though the airline industry shrank over the last three years.”
In early 2000, with quarterly sales dropping and Aviall on the ropes, “we invested US$30 million to US$40 million to build this infrastructure,” says Lacik, vice-president of information services at Aviall Services, a unit of Aviall. “Our competitors thought we were insane. Some investors asked for my resignation.”
The results of the project have been extremely successful. Publicly owned Aviall reported that in the quarter that ended in September, earnings from continuing operations rose 229 per cent year-to-year to US$6.9 million, and net sales rose 74 per cent to US$222 million. That represented a huge comeback from Aviall’s problems, which sprang from a failed enterprise resource planning (ERP) implementation that resulted in inventory getting out of control.
When Lacik joined the company in early 2000, “you couldn’t properly order or ship things. My job was to bring back operational stability,” he says. To do so, he implemented the CEO’s vision of transforming Aviall into a provider of supply chain management services through the integration of a BroadVision Inc. online purchasing system, Siebel Systems Inc. sales force automation and order entry software, a Lawson Software financial system, a Catalyst Manufacturing Services inventory control and warehouse management system, and Xelus Inc. product allocation, inventory management and purchasing forecasting software.
Aviall chose Sybase Inc. middleware because it was judged to be vendor-neutral. But even with planning, some of the systems integration was more difficult than expected. And the combined system had to deal with customized pricing charts for 17,000 customers who receive various types of discounts and with an inventory of 380,000 different aerospace parts.
The development of Aviall.com was one of the least expensive parts of the project, at a cost of about US$3 million, Lacik says. But it provides big benefits. Web ordering costs the company about US$0.39 per order, compared with US$9 per transaction if an Aviall employee takes the order over the phone, Lacik says.
New supply chain functions are also possible, such as the ability for customers to transfer their orders from an Excel spreadsheet directly to the Web site. Customers can also receive price and availability information on aerospace parts in less than five seconds – a real-time feature that hadn’t been available before the BroadVision system was installed, Lacik says.
The process also frees the company’s sales force from routine order-taking and follow-up, thus allowing them to spend more time developing relationships with customers. What’s more, the Web site helps Aviall build relationships with suppliers by providing them with customer ordering data that enables them to better match production with demand.
The Web site now generates US$60 million of the company’s US$800 million in annual revenue, or 7.5 per cent, up from less than two per cent a year ago. “Over the next three to five years, it could become more than 30 per cent,” Lacik says.
Alexander is a freelance writer in Edina, Minn. Contact him at [email protected]