ERP Case Study JOHNSON INDUSTRIES, INC.

Company Overview
Originating as a family business in the 1920s, Johnson Industries, Inc. began as a wholesale distributor of auto parts. In 1998, Genuine Parts/NAPA acquired Johnson Industries as a means of expanding into a marketplace that provided parts to vehicles still under warranty and still serviced by dealerships. Today, with annual sales of $150M, Johnson Industries has more than doubled its business by procuring companies in similar markets. With an infrastructure of 11 distribution centers (DCs) and three retail outlets that service more than 2,000 dealerships, Johnson Industries is the largest OEM auto parts distributor in the country. See Figure 1.

Figure 1: Company Infrastructure

Challenges Faced
After acquiring the business in 1998, Genuine Parts/NAPA engaged CD Group, Inc. to conduct an audit of the JD Edwards software implementation that Johnson Industries had previously contracted from another consulting firm. CD Group discovered that the entire project budget was spent and only the General Ledger module had been implemented. CD Group also concluded that as a result of acquiring businesses and not consolidating functions or duties across the organization, no clear strategy had been defined as to which business processes were to be centralized versus distributed and what the final solution would look like upon completion. Specifically, CD Group discovered duplicate and/or inconsistent business practices and rules, IT systems, and job duties across the organization as illustrated by the following: Critical business practices, such as invoicing, applying cash, purchasing, and paying suppliers, were being distributed across several DCs, impeding managements ability to ensure consistent accounting practices company wide. Purchasing from multiple DCs generated multiple statements, requiring payment to be sent to multiple places, thereby creating multiple corporate identities. Business information was managed on four different IT systems, creating complexity. Job duties were duplicated across all 11 distribution centers, creating inefficiencies.

ERP Case Study JOHNSON INDUSTRIES, INC.

In addition, Johnson Industries current legacy system no longer supported its needs as evidenced by the following: Specifically, CD Group discovered duplicate and/or inconsistent business practices and rules, IT systems, and job duties across the organization as illustrated by the following: No support for multi-warehousing functionality, making it impossible to fill customers orders from alternate distribution centers. Limited ability to smooth slower moving inventory between distribution centers, forcing the company to invest more resources in inventory that has fewer turns. No automated means of receiving inventory and tracking inventory movement within the distribution center; the process had to be performed manually, which created inaccuracies in quantity on hand and reduced management confidence. As a result, management lacked clear visibility as to how the business was performing until the end of the month, month-end closes were laborious and time consuming, and consumers and suppliers viewed Johnson Industries as having multiple corporate identities. Consequently, Genuine Parts/NAPA extended its partnership with CD Group to define a new business model that would present Johnson Industries as a single company to its customers and suppliers.

Business Solution
Representing Johnson Industries as a Single Entity To address the above inhibitors and to define a new business model (See Figure 2) that would represent Johnson Industries as a single entity, CD Group implemented JD Edwards OneWorld in a centralized footprint, using an NT operating system and a SQL database to support multiple warehouses as a standard for all distribution centers. This new, centralized footprint allowed Johnson Industries to check inventory availability from multiple DCs, thereby driving up service levels. CD Group also incorporated centralized, critical business processes (i.e. journal entries, invoicing, applying cash, purchasing, paying suppliers, etc.) in all DCs to ensure consistent Best Practices across the organization. This, in turn, enabled customers to receive one statement for all purchases and the ability to forward all payments to a single location. Also, by standardizing customer and item numbers across DCs, this created clear visibility regarding customer spending as well as consistency in ordering and procurement processes.

Figure 2: Future Business Model

Real-time Inventory To gain visibility to real-time inventory, CD Group launched three business initiatives. First, it leveraged RF technology to automate the tracking of inventory movement within a DC and to immediately update inventory balances, thereby eliminating the paper trail and human intervention required to manually update inventory. Second, CD Group implemented a warehouse

ERP Case Study JOHNSON INDUSTRIES, INC.

location system to improve inventory tracking. This framework provided visibility to inventory on the receiving dock, in a staging area, in product overflow, or on the shelf. Lastly CD Group applied a consistent cycle count program that validated and maintained inventory accuracy. This solution quickly rebuilt confidence among management regarding inventory accuracy, which greatly reduced stock checks and improved forecasting processes.

Business Benefits
The resulting business model achieved all defined objectives and was met with a high level of customer satisfaction. The centralization of many processesincluding financials, pricing, purchasing, supplier payment, invoicing, monthly statements, applying cash, etc.helped to: Streamline future acquisitions Increase inventory turns and improve cash flow Ensure the consistent and timely application of price changes Present a single company image to its customer base Defer the need for warehouse expansions Close the month earlier Eliminate eight full-time equivalent FTEs, which lowered payroll expenses by 400K Additionally, Johnson Industries was able to increase inventory visibility across DCs and among customer service personnel. This, in turn, smoothed slower moving parts between distribution centers, improved cash flow and inventory turns, and increased order fill rates by 1%growing gross profit by $419K per year. Furthermore, by increasing inventory turns, Johnson Industries received a one-time reduction in inventory estimated at $7.6M and, moving forward, will receive an ongoing savings of approximately $1M in annual inventory carrying costs. Also, by consolidating the different IT systems, the elimination of hardware and software maintenance reduced SG&A expenses by 1%, increasing Johnson Industries annual profits by $247K. Lastly, its incorporation of a new, three-way matching process (PO, invoice, receipt) reduced the number of new hires required to support new businesses, and its incorporation of a Best Practices and standards model reduced employee training costs.

About CD Group
Founded in 1992, CD Group is a nationwide consulting firm and is a leading provider of enterprise software and services for small and medium-sized Manufacturers and Wholesale Distributors. Our employees specialize in linking business strategy and processes with IT capabilities to drive financial improvement.
5550 Triangle Parkway, Suite 200 Norcross GA 30092 Phone: 678-268-2000 email: info@cdgroup.com www.CDGroup.com