The Value of Enterprise Systems

Summit Electric Supply is a privately held, independent wholesale distributor of industrial electrical equipment and supplies. The company is headquartered in Albuquerque, New Mexico. Summit is one of the top whole- sale distributors of industrial electrical equipment and supplies in the United States, with 650 employees and nearly $469.9 million sales in 2017. Summit operates in four states and has a global export division based in Houston, a marine division based in New Orleans, and a sales office in Dubai.

Summit distributes products that include motor controls, wire and cable, cords, lighting, conduit and fittings, wiring devices, support systems and fasteners, outlet boxes and enclosures, and transformers and power protection equipment. The company obtains finished goods from manufacturers and then sells them to electrical contractors working on projects ranging from small construction jobs to sophisticated industrial projects. As a distributor, Summit Electric Supply is a “middle man” on the supply chain and must be able to rapidly handle a high volume of transactions and swift inventory turnover.

Since its founding in 1977 in Albuquerque, Summit has grown very quickly. Unfortunately, its homegrown legacy information systems built in the 1980s could not keep up with the business. One legacy system was for sales entries and purchase orders and another was for back-end reporting. Integration between the two systems was done manually in batches. The systems could only handle a fixed number of locations and limited the range of numbers that could be used on documents. This meant that Summit’s information systems department had to use the same range of document numbers over again every few months. Once the company found it could no longer process its nightly inventory and financial updates in the amount of time that was available, the systems had reached their breaking point. A new solution was in order.

Summit started looking for a new enterprise resource planning (ERP) system. This would prove to be challenging, because the company’s legacy systems were so old that the business had built many

of its processes around them. A new system would require changes to business processes and the way people worked. Summit also found that most of the available ERP software on the market had been designed for manufacturing or retailing businesses and did not address some of the unique processes and priori- ties of the distribution industry. Summit needed a system that could handle a very large number of SKUs (stock-keeping units, which are numbers or codes for identifying each unique product or item for sale) and transactions, very short lead times for order processing, inventory distributed in various models, products sold in one quantity that could be sold in another, and no-touch inventory. Summit handles some products that are shipped directly from the manufacturer to the customer’s job site.

Scalability and inventory visibility were Summit’s top requirements. The company needed a system that would handle orders and inventory as it continued its rapid pace of growth. In the distribution business, the lead times for fulfilling an order can be only minutes: a Summit customer might call to place an order while driving to pick up the order, so the company has to know immediately what product is available at what location.

After extensively reviewing ERP vendors, Summit selected ERP software from SAP because of its functionality in sales and distribution, materials management, and financials, and its knowledge

of the distribution business. Summit visited other electrical distributors using SAP, including some of its competitors, to make sure the software would work in its line of business. Summit was able to go live with its new ERP system across 19 locations in January 2007.

Nevertheless, Summit still had to customize its SAP software to meet its unique business requirements. Most SAP delivery and material scheduling functions were designed for overnight processing, because many industries have longer lead times for order fulfillment. Waiting for overnight inventory updates would significantly delay Summit’s sales. Summit found it could solve this problem by running smaller, more frequent updates for just the material received during the day, rather than running big inventory updates less often. This provided more timely and accurate snapshots of what was actually available in inventory so that orders could be rapidly processed.

Wire and cable are one of Summit’s most popular product categories. Summit buys these products by the reel in lengths up to 5,000 feet and then cuts them into various lengths to sell to customers. This makes it difficult to determine how much of this type of inventory has been sold and when it is time to replenish. To address this issue, Summit used a batch management solution in SAP’s ERP materials management software that treats a wire reel as a batch rather than as a single product. Every time a customer buys a length of wire, the length can