September 06, 2013, 10:28 AM — FMW Fasteners, a distributor of down-to-earth items such as nuts and bolts, now sees its future in the cloud.
The Houston-based company grew up much like its fastener industry peers, running its business systems in-house and selling through inside and outside sales reps. FMW, however, has evolved to a new model: Running its operations in the cloud. The company deployed NetSuite enterprise resource planning (ERP) software, along with the cloud vendor's customer relationship management (CRM) and ecommerce offerings.
Cloud adoption has dramatically changed how FMW conducts business. The cloud, says FMW Sales manager Steve Baker, eliminates the headache of managing on-premises IT, improves business agility and accommodates a high-growth track. "It has completely transformed the business and what we were able to do and our sense of the possibilities of what we could get done."
Channel, Software Vendors Starting to Fill Vertical Cloud Gaps
The task of moving the fastener company into the cloud, however, took a bit more than switching on a cloud service. The company tapped Irvine, Calif.-based Sererra Consulting Group for verticalized cloud ERP bolt-ons geared toward the fastener industry. (The field calls for software able to address such requirements as vendor-managed inventory, or VMI, and material testing reports, or MTRs.)
The deployment of cloud services in vertical niches such as fasteners will typically call for some level of customization. Industry-specific support has been lacking in many cloud solutions, but vendors and channel partners now seek to fill that gap.
"In the past, there wasn't enough demand to permit these companies to make the necessary investments...and also not enough hands-on experience to develop the necessary expertise to know what was really required from a delivery point of view," says Jeff Kaplan, managing director of THINKstrategies, a Wellesley, Mass.-based consulting firm focusing on Software as a Service and cloud computing.
But the growing demand for cloud-based business software encourages cloud providers to create vertical extensions to otherwise horizontal cloud offerings. "Vendors and channel partners are working even more intensively to develop the right kind of tools and solutions to meet those vertical market and niche market requirements," Kaplan says.
After Starting With Cloud CRM, Cloud ERP Made Sense
FMW's first foray into the cloud was with Salesforce.com. The experience with cloud-based CRM led the fastener company to adopt NetSuite. Baker said the company became aware of NetSuite through Salesforce and the companies' common thread: Oracle CEO Larry Ellison owns stakes in both.
FMW's adoption of NetSuite initially focused on ERP. The company found itself quickly outgrowing on-premises ERP systems and struggling with the necessity of maintaining infrastructure. The company actually went through two different traditional ERP systems, shedding the first system after two years of use. Another year after that transition, FMW was once again looking for a system that could keep up with its growth.
"After two product evaluations and then migrating off of one platform to another, we really wanted to step back and take a hard look at what...would really allow us to grow without doing any additional migrations," Baker says. "We felt like we were in the migration business."
FMW opted for NetSuite. The capability to quickly update cloud software proved to be a key factor.
"Speed for SMB-type companies is everything. How quickly can I react to change? How quickly can I solve process problems? How quickly can I implement actual change that impacts my customers and ultimately my profitability?" Baker says. "The speed at which we can evolve on the cloud is what has best served our growth."
Baker says FMW can now implement a new feature in 48 to 72 hours. Adding a feature used to take 45 to 60 days when working with a vendor of on-premises software. "We were simply not as nimble as we wanted to be," Baker says. "The rollout process and the implementation process was simply too long. We were struggling before we moved into NetSuite."
Consolidation of data in the cloud is another plus. Baker says he doesn't have to worry about integrating changes across multiple software packages. Financial, inventory and customer sales data are housed in NetSuite, on the same platform, he says.
Adding Functionality to Cloud ERP Isn't Hard
One knock against cloud services has been a lack of features that specialized customers demand. FMW, however, was able to work through that particular issue. The company partnered with Sererra to obtain more specialized capabilities.
Baker says the consulting firm was able to bend NetSuite's products around the fastener maker's business processes. Sererra estimates that Netsuite can meet some 90% of the fastener industry's requirements, with additional functionality provided through bolt-on additions to the NetSuite platform.
Sererra's VMI module, for instance, lets fastener businesses manage consignment-based inventory for customers. In this inventory approach, fastener companies stock and maintain products at the customer's location. In some cases, the customer pays for the product at the time of consumption. In others, the customer purchases the inventory, but the supplier repurchases unsold products. The VMI module tracks the quote-to-cash process for this style of inventory management.
The MTR and Certificates of Compliance module, meanwhile, aims to help fastener companies manage the quality assurance documents that need to accompany each lot of shipping product. Customers - a car manufacturer, for instance - use MTRs to verify that fasteners meet a certain quality. An MTR provides information on a product's chemical composition, tensile strength, tempering temperature and other pieces of information. It also notes whether a product complies to a particular standard.
The job of managing MTRs can become complicated for fastener companies and other manufacturers dealing with lot-based inventory. Vijay Saha, Sererra CEO, says one line item on an order could involve three separate lots for the same bolt and three separate test reports for that one product. Sererra's MTR module, bolted on to a NetSuite instance, ensures that the testing documentation remains associated with each lot of inventory.
Sererra's MTR support helped FMW avoid the cost of building such a capability on its own. "We could have spent millions building a process around that [MTR]," Baker says.
Kaplan says bolt-on modules represent one way to add vertical features to the cloud. An integrator could also tie systems together in a customized fashion, taking advantage of available APIs and other integration tools. Kaplan anticipates plenty of demand for both techniques.
'Natural Progression' From Cloud ERP to Improved Ecommerce
FMW got on board with Netsuite's cloud ERP in 2009 and followed that deployment with cloud vendor's ecommerce offering.
Baker describes ecommerce as a natural progression from ERP. Ecommerce has enabled the fastener company to expand the scope of its business. FMW had traditionally focused its sales outreach in the Houston area. As an online distributor, the company now pursues opportunities across the U.S. and international markets. "We're shipping all over the world, Baker says, adding the majority of the company's business in 2013 will come from outside Houston.
FMW first went live on Netsuite ecommerce in 2010. Since then, the company has experienced month-over-month sales growth of 25 to 30%, with this year's sales growth coming in slightly higher than that range.
Baker says the fastener company continues to refine its ecommerce site with assistance from Sererra. In one major project, the company is redesigning its shopping cart, moving toward one-step, or one-page, checkout.
Currently, customers attempting to check out using a traditional cart may need to navigate a number of pages: One to provide and confirm billing information, another to provide and confirm shipping information, and another to submit an order. The new cart, in contrast, will hover as a pop-out on the same page, letting the user see what's in the cart, add to the cart or modify it, and make a purchase.
In addition, FMW has started looking at its 2014 website upgrade. Baker says the company plans to undertake an annual refresh of its site, completely revamping its look and feel and layout.
As FMW's Netsuite deployment continues to evolve, Baker says the most dramatic cloud impact has been the ability to expand the company. "We're able to stop spending all our time managing the things we had to have to make the business run," Baker says, "and able to execute on things we need to have in place to make the business grow."
John Moore has written on business and technology topics for more than 20 years. His areas of focus include mobile app development, health IT, cloud computing, government IT and distribution channels. Follow everything from CIO.com on Twitter @CIOonline, Facebook, Google + and LinkedIn.
Read more about customer relationship management (crm) in CIO's Customer Relationship Management (CRM) Drilldown.