ROI Roundup

Tempe, AZ  December 12, 2001  U.S. electronics manufacturer AMETEK and Scandinavian retailer KappAhl have both reaped the benefits of moving to e-enabling technologies, according to reports this week from the solution providers involved in the respective implementations.

Procurement services provider ICG Commerce says that Paoli, Penn.-based AMETEK, which manufacturers electronic instruments and electric motors, realized 16 percent savings in seven indirect purchasing categories during the first year of using ICG, prompting the manufacturer to look at expanding its e-procurement initiative in 2002 with the addition of strategic categories.

ICG says it accelerated AMETEK's return on their e-procurement investment by providing pre-negotiated pricing and immediate access to online catalogs for 24 AMETEK facilities.

AMETEK, which had 2000 sales of about $1 billion and which purchases an annual average of $60 million and $80 million worth of indirect goods, invested in an Internet-based procurement application as part of a larger enterprise resource planning (ERP) project in late 2000. The objectives of the software implementation were to automate purchases and streamline transaction processing. In addition, AMETEK wanted to reduce procurement costs by at least 5 percent within a year. However, the company's large supply base, with more than 7,000 suppliers, made problematic the task of integrating their suppliers and developing the catalogs and content required to make the software operational.

To solve the content and supplier integration challenges and achieve their cost reduction targets, AMETEK contracted ICG Commerce to integrate several of its pre-built catalogs with the manufacturer's Oracle procurement software. This gave AMETEK immediate access to the 30-plus indirect categories that ICG had already sourced and put into online catalogs with more than 2.5 million stock keeping units (SKUs), making the path to return on investment (ROI) that much shorter.

"It would have taken us a significant amount of time to develop the catalog content in-house for our e-procurement initiative," said Sue Eckel, director of e-procurement for AMETEK. "The sourcing savings and readily available content, combined with ICG Commerce's ability to integrate with our existing e-procurement software helped us achieve significant savings and recognize a rapid return on our investment."

To date, AMETEK and ICG Commerce have implemented seven categories, including electrical, industrial, janitorial, lab, office and safety supplies, and power transmission and bearings, with plans to add additional categories over the next few months.

AMETEK's goal is to expand its e-procurement initiative to 2,000 employees while increasing the number of categories it will purchase online. In addition, AMETEK is working with ICG Commerce to achieve savings in a few strategic categories through the provider's Enabled Sourcing solution, as well as off-catalog purchasing support for unique and non-routine purchases.

Meanwhile, Retek, a sell-side solution provider, reported this week that Scandinavian retailer KappAhl has increased its sales by 9 percent by using the software company's merchandising, logistics and supply chain solutions.

The KappAhl Group, headquartered in Mölndal, just outside Göteborg in western Sweden, has 270 stores in Sweden, Norway, Finland and Poland, including apparel and cosmetics stores, generating about $390 million in annual sales.

KappAhl began to face the enormous challenge of meeting the changing needs of its customers while operating hundreds of stores across multiple countries. The retailer managed the specific functions of the supply chain 9 such as planning, sourcing, allocation, warehouse management, distribution and controlling 9 separately for each country. KappAhl needed an information technology infrastructure to consolidate information for these functions across markets, improve efficiency and become a more customer driven organization. Ultimately, the retailer replaced its legacy systems with the providers solutions to help restructure business processes.

Pal Vindegg, logistics director at KappAhl, reports that since implementing the provider's solutions, the retailer has seen improved service levels in its stores. "Using Retek's merchandising and supply chain solutions, sales have increased 8 to 9 percent for the same merchandise," Vindegg said.