Customer Solution Case Study
/ / Seal Maker Expects $5 Million Revenue Boost from Internet Ordering System
Overview
Country or Region:United States
Industry:Manufacturing and Distribution
Customer Profile
Gulf Coast Seal, Ltd., of Houston, Texas, distributes and manufactures all types of seals for the oil and gas industry. The company of 130 employees has annual revenues of U.S.$30 million.
Business Situation
Manual order processing grew increasingly expensive as the company’s order volume grew. GulfCoast Seal wanted to introduce electronic efficiencies to drive costs down and customer satisfaction up.
Solution
Using Microsoft® Commerce Server 2007 and BizTalk® Server 2006, Gulf Coast Seal built an e-commerce site that allows customers to order and maintain their accounts online.
Benefits
Projected $5 million growth with no staff increases
Order-processing time reduced from days to seconds
Improved customer experience
Better business reporting / “We’re projecting an additional $5 million in sales growth over the next three years due to our e-commerce initiative.”
Jeff Lynch, E-Commerce Manager, GulfCoast Seal
GulfCoast Seal distributes the O-rings, seals, and gaskets that keep oil and gas pipelines secure and leakproof. The 130-person company in Houston, Texas, recently made a U.S.$37,000 investment in an e-commerce system that it expects to yield up to $5 million in additional revenue within three years, due to the ability to serve more customers and serve current customers better. Using Microsoft® Commerce Server 2007 and Microsoft BizTalk® Server 2006, Gulf Coast Seal created a full-service e-ordering site that allows customers to place orders, check order status, and self-service every aspect of their account. Not only will the system enable Gulf Coast Seal to handle more customers but to do so without increasing staff. Customers love the faster, easier ordering, and Gulf Coast Seal has reduced order-processing costs from as much as $75 to three cents per order.
Situation
GulfCoast Sealis a leading global distributor and manufacturer of industrial seals for the energy, oil, and gas market. Founded in 1982, the company distributes more than 50,000 seal-related products made by other companies, and it also creates more than 4,000 custom solutions each year. GulfCoast Seal employs 130 people in Houston, Texas, and Glasgow, Scotland, and it has annual sales of U.S.$30 million.
The company’s business is built on lots of low-cost parts, some costing as little as three cents each. Some customers routinely place $1 orders, with the average order size being just $10. With orders bouncing between people, paper, faxes, and phones, Gulf Coast Seal calculated that its order-processing costs were between $50 and $75 per order, so these small orders were hurting the company’s profitability. “On paper, we were losing money on many of our orders, which forced us to look hard at reducing the cost of order processing,” says Jeff Lynch, E-Commerce Manager for Gulf Coast Seal.
The problem was the lack of electronic links between its customers’ enterprise resource planning (ERP) systems and its own. A customer would create an order on its ERP, then phone or fax the order to Gulf Coast Seal. The company’s small sales staff,who doubled as order entry and customer service staff, took the order, checked that the delivery date was possible, and cleared up any ambiguities. The salesperson then entered the order into the Gulf Coast Seal character-based ERP system (FACTS from Infor Global Solutions). The whole process was laborious and required three to five days before an order hit the Gulf Coast Seal ERP system. The more orders, the bigger the backlog, and the louder customers grumbled.
The company tried hiring more salespeople, but they not only drove up operational costs, they also were hard to come by in boomtown Houston, which was blessed with very low unemployment. “Plus, it takes us six months to train a new person, and our business couldn’t wait,” Lynch says. “We were growing like crazy and needed immediate help.”
In late 2003, one of its larger customers requested that Gulf Coast Seal use Microsoft® BizTalk® Server to connect the two companies’ ERP systems and process orders electronically. GulfCoast Seal purchased BizTalk Server 2002 and quickly implemented electronic order processing for that one customer, followed shortly by electronic invoice processing.
Around this time, the price of oil started rising, and the company’s business rose with it, due to increased drilling activity across the industry. In the space of one year, Gulf Coast Seal experienced tremendous growth with its largest customers, watching 5,000 line items a year leap to 20,000 line items. “Thank heavens we had implemented BizTalk Server, which enabled us to handle that growth without adding people,” Lynch says.
However, the company was still processing the vast majority of its orders with paper and telephones. The company’s 250 smaller customers, in particular, were being left behind. “Our business from smaller customers had been slowly shrinking, because our salespeople just didn’t have time to provide them with the attention they deserved,” Lynch says. “But we didn’t want to lose that business and become too dependent on a few large customers. We wanted to make it easier for large and small customers to do business with us.”
Solution
Gulf Coast Seal was successfully running BizTalk Server 2004 by this time (mid-2005) as a business-to-business (B2B) integration platform, and it was processing thousands of inbound purchase orders and outbound invoices for its two largest customers. The company couldn’t help but notice that the inside salesperson for those accounts was able to process four times the number of items processed by the other salespeople. (Even with BizTalk Server, the order process was not completely automated; a salesperson was still needed to review, check, and route orders.)
“We realized that we needed to extend this B2B system to all our customers and turn it into a full-blown e-commerce capability,” Lynch says. “We wanted our customers to be able to go to our Web site, look up a product by its part number, buy quickly and easily, and check on order status. Everything that customers were doing over the phone with us, we wanted them to be able to do over the Internet.”
GulfCoast Seal wanted its e-commerce site to provide:
A catalog of standard products with the ability to search for products easily
A secure, reliable method for customers to order products and check order status 24 hours a day
Integration of order entry, order status, and account status into its ERP system
Secure access to select users at each customer
Predefined custom price catalogs for both individual customers and groups of customers
Except for its ERP system, which ran on a UNIX server, Gulf Coast Seal had standardized on the Microsoft Windows Server™ 2003 operating system and other Microsoft Servers for its technology foundation.
“We looked at building the e-commerce engine ourselves using Microsoft .NET and Visual C#®,” Lynch says. “But we realized that it would take too long to build and maintain. Plus, we were impressed with Commerce Server 2007, then in beta stage.” Lynch had used Microsoft Commerce Server at another company and liked it. “The first thing you look for in an e-commerce system is the catalog function, and Commerce Server 2007 looked very intriguing.” Another advantage of Commerce Server 2007 was its seamless integration with BizTalk Server, already in use at Gulf Coast Seal.
The company decided to make Commerce Server 2007 its e-commerce engine and the Microsoft .NET Framework version 2.0 and Microsoft Visual Studio® 2005 development system its development environment. At the same time, the company upgraded to Microsoft SQL Server™ 2005 as the common data store.
“We chose the .NET Framework 2.0 because it represents the most cost-effective, widely used, and well-documented application platform on the market today,” Lynch says. “We also really liked the tight integration between Visual Studio 2005 and SQL Server 2005. SQL Server 2005 allowed us to do our work in the Visual Studio 2005 integrated development environment and manage it all in one place.”
Lynch says that the decision to upgrade to SQL Server 2005 was not made lightly. “We had to ask ourselves if we really wanted to introduce a new database at the same time we were introducing a new e-commerce system, but we’re glad we did it,” Lynch says. “Thanks to the development efficiencies provided by SQL Server 2005, writing and testing stored procedures took minutes. Wealso made heavy use of the new Integration Services, to move data around. Trying to do that with the old Data Transformation Service would have taken a lot more time.”
At same time, Lynch began sampling ASP.NET 2.0 and liked the improvements he saw there. So he upgraded to ASP.NET 2.0 for Web site development. The team used the Visual C# development language for coding.
Lynch and one part-time developer started creating the e-commerce application in December 2005 and completed the work in three months, with Lynch working half-time and the other developer working a third of the time. “The productivity gains delivered by SQL Server 2005, Visual Studio 2005, and ASP.NET 2.0 were dramatic,” Lynch says. “Even factoring in our learning curve with all the new products, I estimate that we had to write only half the code that would have been required if we had used another Web platform. This was a huge benefit, because we needed to get this site up quickly.”
GulfCoast Seal used BizTalk Server 2006 to connect the Web commerce application to the company’s FACTS ERP system, the SQL Server 2005 data warehouse, and a Windows® SharePoint® Services extranet in near-real time.
Today, Gulf Coast Seal customers can visit the company’s Web site and sign in to a personalized site where they can place orders, view open invoices and orders, review their account history, and even look at the Gulf Coast Seal inventory to see whether the company has needed parts in stock. Customers can manage their own account profiles, including account IDs, passwords, and shipping addresses. They can view accounts receivable and transaction summaries, as well as view or print invoices.
The heart of the new application is the catalog and ordering capabilities. Using the Commerce Server 2007 Product Catalog, Gulf Coast Seal creates customer-specific product catalogs, where customers can search for products using their own part numbers (the application performs an automatic look-up to match requests to Gulf Coast Seal part numbers), see custom pricing, and order with a mouse-click. Customers can even save an order as a template and later recall, modify, and submit it as a new order.
Benefits
Using Commerce Server 2007 and several other Microsoft server products, Gulf Coast Seal was able to create a Web-based shopping application that has dramatically lowered its order-processing costs, allowed it to handle increased business growth without additional hiring, and promises to help Gulf Coast Seal generate up to $5 million in additional revenue within three years. The system paid for itself in less than two months.
Projected $5 Million in Growth with No Staff Increases
Because the new e-commerce application has eliminated the need for human intervention in Gulf Coast Seal order processing, the company has realized huge operational savings. “We’ve reduced our order-processing cost from $75 per transaction to less than three cents per transaction, in many cases,” Lynch says.
With its small sales/order-entry staff freed from manual order-taking, Gulf Coast Seal envisions a big increase in its custom parts business. Lynch says that the company lost a portion of this business in the past, because customers became tired of waiting for their salesperson to get back to them. “We expect both our custom and our standard parts business to increase,” Lynch says. “In fact, we’re projecting an additional $5 million in sales growth over the next three years due to our e-commerce initiative. The e-commerce system is enabling us to both prevent loss of customers and grow our business. Plus, it will allow us to continue our growth without increasing staffing levels. This system cost just $37,000 and paid for itself in less than two months.”
GulfCoast Seal is working to get its many smaller customers and remote locations of larger customers (such as offshore oil rigs) onto the e-ordering system, which will enable them to order products at any time of the day.
Order-Processing Time Reduced from Days to Seconds
Paper-based orders took from three to five days to hit the Gulf Coast Seal ERP system, because faxes often sit for hours or days and missed phone calls cause delays. “Internet ordering has reduced order-processing time from days to seconds,” Lynch says. “Now there is no need for manual order taking or manual entry of orders into ERP system, so our salespeople have more time to spend with customers on special orders and true account management.”
Improved Customer Experience
Another source of frustration for customers—and expense for the company—was the need to phone Gulf Coast Seal to check on orders. Today, customers can go online and check order status. “Customers are overjoyed that they don’t have to play phone tag with our salespeople anymore and to have their orders processed faster,” says Steve Leatherwood, President of Gulf Coast Seal, Ltd. “We’re giving pricing incentives to customers to order online in hopes of moving as many customers to the new system as quickly as possible.”
GulfCoast Seal took advantage of the Microsoft SQL Server Reporting Services built into Commerce Server 2007 to offer customers detailed reports about their business. For example, a customer can request reports showing Gulf Coast Seal on-time delivery performance, outstanding orders, and order history.
Better Business Reporting
Gulf Coast Seal management also takes advantage of the reporting capabilities built into Commerce Server 2007 to better understand customer behavior and better manage the business. Managers can easily run reports that show how customers search for products, which products are most popular, which parts of the e-commerce site are most popular, and which areas of the site cause customers to stumble. This helps Lynch continuously improve the site and the company’s e-business savvy.
In closing, Lynch says, “Commerce Server, BizTalk Server, and SQL Server work so well together. They handle the taking of orders, transferring order data to all necessary systems, then storing and reporting on it. They represent a complete e-commerce system that has been extremely cost effective and profitable for us.”
Commerce Server 2007
Microsoft Commerce Server 2007 enables developers to create, IT professionals to manage and Business Users to maintain full-featured Web business applications with a low total cost of ownership and rapid time to value. Commerce Server 2007 provides a solid foundation of modular subsystems that have been extensively tested for scalability, reliability, performance, and security. By leveraging deep integration with ASP.NET 2.0 it is easy to build custom Web business applications on top of this infrastructure, significantly reducing development, deployment, and maintenance costs while minimizing risk.
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