Low-Cost ERP With Integrated MRP Helps Startup's Sales to Soar
Networking startup Assured Access Technology, Inc., Milpitas, CA, has been able to double its sales every quarter. The “magic” involved in this meteoric rise has been an exceptionally low cost integrated enterprise resource planning (ERP) system that includes powerful, integrated manufacturing resource planning (MRP) capabilities. For a very reasonable price, Assured Access — a supplier of internet access solutions for service providers — implemented the ERP system from Expandable Software, Santa Clara, CA, which integrates a sophisticated MRP system, inventory, financials, purchasing and order fulfillment. In addition, this software package integrates seamlessly with Assured Access' Agile product data management (PDM) system, saving administrative time by eliminating the need to create bill of materials and preventing data entry errors. This integrated approach helps the firm keep inventories in check, track costs on a real-time basis and run its manufacturing operations with just a few administrative staff members. It has, according to company executives, made a significant contribution to the firm's success and rapid growth.
Fulfills ISP Objectives
Assured Access develops markets and supports a family of multi-service access concentrators to fulfill the operational and business objectives of Internet Service Providers (ISPs). With an advanced architecture that is scalable to many times more than the capacity of current access solutions, the Assured Access product family is positioned to help ISPs increase switched and dedicated access capacity. The product family supports a wide variety of subscriber local area network and wide area network access technologies enabling Service Providers to flexibly offer a broad portfolio of access, hosting and virtual private network services. Value-added services such as corporate network outsourcing, wholesaling and multiple quality of service and quality of access levels can be provided to meet the evolving demands of their business and consumer customers. In addition, the product family architecture will support emerging access technologies such as digital subscriber line (DSL) and asynchronous transfer mode (ATM).
Key managers at Assured Access were originally at another networking startup, then called Alantec and now known as FORE Systems — the company that commercialized ATM technology. In its early days, they were assigned to select and implement an ERP system. “We were extremely limited on both financial and human resources,” said Pat Royan, chief financial officer of Assured Access. “We needed an inexpensive system that could be implemented quickly without any customization. But we also needed fully integrated MRP, inventory, order entry and financials. As fast as we expected to grow and as fast as inventory depreciates in a technology business, we recognized that the ability to generate real-time reports on our inventory, cost of goods sold and financial performance would be critical to our success.”
High End Too High
“We looked at high end ERP systems such as SAP and Oracle,” Royan continued. “They could handle our business with ease but the minimum cost and lead-time to get them up and running was $1,000,000 and one year. We couldn't handle either number. So we looked at PC-based systems and discovered Expandable Software. The neat thing about this package is that it's still the only one I know of that provides full-fledged and integrated MRP in a simple PC framework that allows it to be implemented in a few weeks. And, the system's low cost is well-suited to startup organizations.”
The implementation worked out perfectly and played a major role in the success of the startup. “We got the system up and running in just a few weeks without having to get a consultant involved,” Rich Weber, information systems manager for Assured Access, said. “One factor in our success was the ability of the software developer to provide experienced, in-house trainers, eliminating the need to get consultants involved. Getting a fully integrated ERP system up and running in that time period provided a major boost to our organization. We had the ability to track at any given instant exactly what inventory we have in stock and how much would be required to meet our manufacturing plans. We could also make profit and cash flow projections on a real-time basis in virtually no time, simply by using the information already entered in the system for manufacturing scheduling. The whole thing ran like a top and required only a single person to support it.”
While he didn't customize the system, Weber did creatively utilize its capabilities to handle one of the company's business practices that is common to the network equipment business. Assured Access loans out large amounts of its equipment to ISPs for a specified period of time after which they have to either purchase the equipment or return it. Most companies in the networking business are forced to undertake an expensive customization of their ERP system or track loaned product on time-consuming spreadsheets. Weber developed a unique approach. Each instance in which a prospect is loaned equipment is entered as a separate inventory stockroom. When a salesperson loans equipment, he or she creates a zero-revenue order. The order identification number becomes the inventory location number to tie the two closely together. The date at which the trial ends is also entered. Weber created a report that shows merchandise loans by expiration date so the sales staff has a list of who to call to either close the sale or get the equipment back.
The integration between MRP, inventory, order entry, inventory, purchasing and financials has been crucial to Assured Access' success. “Consider the importance of inventory in the networking business,” Royan said. “Every year our selling prices drop by 20 percent to 50 percent, which means the value of our inventory is dropping by the same amount. Expandable provides powerful tools for keeping inventory as low as possible without incurring stock-outs that reduce our sales. The software's sophisticated MRP capabilities immediately explode every order we receive into the components required to produce it. The fact that MRP is integrated with inventory and financials means that we know in real-time exactly where we are. To make sure we stay on track, we dispense with physical inventories but employ a full-time stock person that performs cycle counts on a daily basis. The system has helped us successfully navigate the perils of a networking startup.”
The fact that Assured Access uses a turnkey vendor to perform manufacturing combined with the integration of its information systems has made it possible to achieve an extraordinary level of growth with just a handful of manufacturing staff members. The firm's staff currently includes a vice president of operations, buyer, test engineer and a shipper — that's all. “Our ability to run such a tight ship while growing at a breakneck pace is largely due to the fact that the integration of our information systems means that technology does a lot of the work for us,” Royan said.