Features

For all businesses, growth is a good thing. More sales, more customers, more demand, more revenue. But growth has a funny way of exposing inefficiencies by shining a harsh light on wasteful, entrenched business practices, loosely stitched together by siloed IT systems, that lead to high operational costs and act as roadblocks to real change.

At Dorfman Pacific, a mid-market manufacturer and distributor of headwear and handbags, the business had always been about serving the Mom-and-Pop stores that had constituted the company's customer base since its inception in 1921. But although the company had kept current with fashion, its warehouse processes had scarcely changed during 86 years in the business. Despite technology's march, its warehouse processes remained paper-based and relied on the workers' tacit knowledge of the warehouse and each customer's needs.

But in the late 1980s and on into the 90s, a new sales and distribution channel created room for growth: Dorfman Pacific began selling to the big-box retailers such as Wal-Mart, which craved more of the 25,000 items that the company sold. Dorfman Pacific still sold to the small and midsize retailers, but the split between the two was now about half and half.

As the company sought to expand during this period, its modus operandi showed cracks: The paper-based order-picking processes that served Dorfman's 100,000-square-foot (9290-square-metre) warehouse were too inefficient; the warehouse itself was too small; the use of a temporary workforce and loads of overtime to meet demand peaks meant it incurred huge operational costs; and siloed IT systems offered little computing assistance and inventory visibility. In short, the company's growth had spotlighted the inefficiencies inherent in the way things had always been done.

"In the environment we had, it was a challenge to actually do a good job," says Mark Dulle, the IT services director for Dorfman Pacific, who came on board in 2003. "It was stressful and very difficult to maintain any level of quality and get it right."

Executives at Dorfman Pacific could see the future and knew they faced a challenge in expanding operations using the existing warehouse and technologies. So starting in 2001, top management, most notably CEO Douglass Highsmith, began to push for a big technology-driven change to business as usual. "I don't want to fight technology. I want to embrace it," Highsmith says. "We've got to constantly improve the technology applications of our company." A total revamp of Dorfman's operations, including a complete IT overhaul inside the warehouse, was called for. Paper was out. Wireless was in.

What follows is the story of how one company upended every square metre of its warehouse operations — its interior layout, day-to-day shipping and receiving practices, the equipment workers used and the IT systems enabling it all — and reduced its warehouse labour costs by 30 percent, saving more than $US250,000 a year and vanquishing many inefficiencies that had plagued its operations.

But the road to success wasn't without bumps. "There are things we didn't do right," Dulle admits. For one, he says, the project team pushed too far, too fast on the wireless implementation. As a result, the company didn't meet the initial March 2005 go-live date, which negated the first return on its investment.

What's most notable (and applicable for other CIOs), however, is what Dorfman Pacific did do right: The business side took full responsibility for the project's success; a cross-functional project team determined the overall plan, chose the appropriate technology and managed workers' expectations throughout; and a non-IT sponsor shepherded the entire project. IT was there at every turn but "this was not an IT project. No way", Dulle emphasizes. "This was strictly a business project." Which is why, he believes, it was such a success. Here's how the company did it.