For all the talk about building agile and flexible IT systems, many businesses still operate on legacy data systems that cannot be overhauled overnight. So how can CIOs burdened with older technology help their companies gain a competitive edge? Ralph Balestriere, executive vice president, chief financial officer and treasurer at Red Wing Shoe Company Inc. of Red Wing, Minn., has some advice: Follow the money.
Rather than taking on a full replacement of the company's ERP system, Balestriere worked hand-in-hand with his CIO and IT department to identify lightweight best-of-breed solutions and upgrades that zeroed in on revenue-generating business processes.
The results have been impressive -- from a new cloud-based CRM platform that provides real-time customer data to the company's global sales and marketing teams to an inventory tracking system that has reduced inventory levels by 20% and saved the 108-year-old footwear maker $30 million.
In this SearchCIO interview, Balestriere, a featured speaker at the upcoming Global Directions 2013 conference in Washington, D.C, sheds some light on new technology initiatives and the gains they are providing.
The theme of this year's Global Directions conference is "fast data -- getting the right information to the right people at the right time." How do you define fast data and how did you get started with delivering it at Red Wing?
Without doing a full ERP replacement, we've been able to upgrade and improve our business. We took a best-of-breed approach, utilizing the cloud and system enhancements.
Ralph Balestriere: Fast data allows you to make decisions in a real-time basis. It creates agility, improves productivity and improves the bottom line.
To decide where we should focus as a business in terms of updating systems and investing in new technologies, we did a [Strengths Weaknesses Opportunities Threats] SWOT analysis. We put together a SWOT team to identify all of the pain points of the organization and came up with a list of 300 points -- from back orders, poor service levels and customer dissatisfaction to bad working capital, poor financial controls and being behind competition in ecommerce. We discovered that these were issues we could correct with new systems and processes.
What fast data-driven initiatives and new technologies are being invested in currently at Red Wing Shoe Company?
Balestriere: The company had antiquated systems, and without doing a full ERP replacement, we've been able to upgrade and improve our business. We took a best-of-breed approach, utilizing the cloud and system enhancements. We realized we need quick systems to manage this business, so we decided to move forward with multiple initiatives.
- We implemented a CRM platform for our sales and marketing. We can now provide real-time data for our sales and marketing teams so they can address issues on a real-time basis and understand buying patterns of our customers.
- We had working capital issues -- we were making too much of the wrong inventory, which led to excess products -- in addition to not managing our plants well. Our demand planning was based off of 500-page Excel spreadsheets. It was very slow and antiquated and not very efficient at all, which led to cash issues. We now have taken down inventory levels by 20%, saving us $30 million, cleaned up shelf space, reduced back orders to customers and implemented better purchasing contracts. This improved our bottom line and resolved working capital issues. Now we're able to take that money and invest it in the business.
- We also upgraded to a new purchasing platform. We have 400 retail stores, so it made sense to get a new POS system. Up to this point, we have not been e-commerced, but we're going to be rolling out an e-commerce system by next year, allowing for a better buying experience for our customers. We also project the new platform will allow for an increase of $100 million in revenue over the first two years.
- We implemented a new warehouse management system to create more efficient distribution channels. With this upgrade, we can move product faster. Our previous service levels had been very poor -- around 70% -- and we want to get these to 90%. We have also improved controls, risks and the like with better tracking of inventory that allows for more accurate physical product counts.
- As we have been growing globally -- we have been acquiring companies -- we didn't have a good financial consolidation system. We want to get to a five-day closing period and get real-time data to management sooner. An updated financial consolidation system means a faster closing process.
Fast data for fast business
Sampling of new systems implemented by Red Wing Shoe to deliver fast data:
Point of Sale POS: Micros Systems Inc.
Ecommerce platform: Intershop Communications AG with a variety of other interfaces
Warehouse/supply chain management: Manhattan Associates
For more information on the conference, see GlobalDirections '13
Are you working with the CIO to formulate these data-driven strategies?
Balestriere: I work closely with our CIO, who is very engaged in all of these projects. He has built a strong organization with strong people. I work very closely with him to improve production and focus on where the money is versus "nice to have" information.
What advice would you give to a CIO or CFO in charge of a data-driven initiative?
Balestriere: Focus on the supply chain and customer-facing information versus financial consolidation and reporting. Though not optimal, you can always manage the organization through manual systems and reporting, but to have good, strong supply chain management to improve working capital and cash flow, as well as customer-facing information to take care of customers in real time will improve reputation and revenue. Revenue-driven initiatives and supply chain management service initiatives are the most critical.
Ralph Balestriere is the executive vice president, chief financial officer and treasurer at Red Wing Shoe Company Inc. He will be speaking about next-generation fast data initiatives at the Global Directions 2013 conference.
This was first published in September 2013