HoMedics has for some years successfully marketed its personal well-being products locally through a third-party distributor, but 18 months ago the company decided to operate independently and opened its own office in Melbourne. Since that time its business has grown phenomenally says Paul Harrison, managing director of HoMedics Australia. “We’re 12 months ahead of where we predicted we’d be which is fantastic.”
In the first year of business in Australia, HoMedics had over achieved the previous year’s turnover by 78 per cent. As 2005 rolled in, business accelerated further to nearly 40 per cent ahead of last year’s comparable months. At this rate HoMedics expects its turnover to exceed three times the turnover of just 18 months ago.
Not bad for a business that began its independent Australian assault with only two people running the show and which now includes four and half personnel currently coordinating Australia-wide distribution and customer support and managing the tricky balance of demand and supply in such a rapid growth period. So how do they do it?
ERP for full throttle ahead
While it’s fair to say they’re kept extremely busy, Clare Kirby, administration manager and key coordinator of HoMedics’ Australian operations, commented that, “while we do fly by the seat of our pants, we utilise a sophisticated ERP system which takes care of the operational side of our business giving us more time to concentrate on marketing our products and providing quality service to our retailers.”
HoMedics utilises the Powermaster Enterprise Resource Planning (ERP) system, from IBS (Aust) which has been specifically designed for consumer electronics distributors. Areas that are typically automated include financials, order processing and billing, warehouse management, EDI interfaces and rebates.
The growing popularity of HoMedics’ products is also attributed to the company’s marketing efforts such as its recent development of interactive displays. “We’re working with retailers to provide them with product knowledge as our products tend to be first to market as far as the latest innovations in personal healthcare,” says Kirby. But while the company is on track as far as its ambitions to dominate the Australian personal healthcare products industry, it is equally keen to get its distribution and supply chain right.
“One of the main reasons we initially chose Powermaster was that we could see it would allow us to be highly efficient in handling supply chain processes,” comments Kirby. “As demand has increased, Powermaster has kept up with the different challenges and allows us to easily balance demand, distribution and service; otherwise it would be a nightmare.”
As far as the day-to-day running of the business, the Powermaster ERP system supports the business in several ways: it reduces the time and effort required to push products out of the door and allows the small number of staff to provide quality service by giving them (and HoMedics’ customers) precise information on a product at every step in the supply chain.
Processing and collaboration
Powermaster’s integrated order processing and billing system allows staff quickly and efficiently to process orders. The system allows for flexible pricing and discount structures and includes many features that cover every scenario as far as ordering and billing from batch and EDI order entry, fast order entry, cash/credit card orders to forward orders, back order release and cut-backs. A sophisticated workflow management system ensures that errors are caught before, not after they are propagated.
EDI transactions are also important as HoMedics’ products are also sold through Myer and Target who only trade electronically. “EDI within Powermaster was very easy to set up especially as Powermaster is an Australian ERP system and was already designed to handle the Myer EAN way of transacting,” says Kirby. “It was a simple process to initially get accreditation. We send ASNs (Advanced Shipping Notices), and transacting this way means there is no error handling and cost of manual transactions. What we love is that it’s a process that just happens in the background.”
Another way Powermaster minimises the pain and pressure usually associated in running this type of business is in the area of rebates. Rebates are an important part of trading in the consumer electronics industry and rebate programs that distributors set up for their retail customers can be complex to say the least. “If we didn’t have a rebates module, we would be pulling our hair out,” confirms Kirby. Simply put, Powermaster’s Rebate Module automates rebate payments and calculations, saving considerable time and effort. It gives HoMedics the flexibility to define virtually an unlimited number of rebate rates which can apply to a single customer, to a group of customers or to all customers. Once this is defined everything happens in the background without too much input from staff. “Having a software system that does all the rebate calculations for us also means that our rebate program benefits from a high level of accuracy and this also keeps our customers happy,” adds Kirby.
As HoMedics in Australia is still a relatively small operation as far as staff resources, it uses a third-party warehouse, K&S Integrated Logistics, for its distribution but maintains some measure of control as the warehouse utilises Powermaster’s Warehouse Management system. “While we can’t control the entire process as far as movement in the warehouse we can control warehouse efficiency to some degree as we view and monitor from our end how quickly orders are being picked,” explains Kirby. This allows staff to provide accurate information to their retail customers regarding the movement of their orders.
HoMedics currently uses Allied Express for delivery of products and this is another area where Powermaster minimises manual handling with instructions sent electronically overnight to the transport company. Importantly, Allied Express has a website with a track and trace system that allows customers such as HoMedics to view where an order is as far as delivery and this again helps HoMedics provide accurate delivery information to its own customers.
The potential downside of running a distribution business that is growing so quickly is that things can get a little wobbly and relationship building with your retail channels can suffer if stock isn’t arriving on time or not at all. As Kirby admits, “It’s a little tricky but so far we’ve been able to respond quickly for a number of reasons: turnaround from the factory is only around 30 to 45 days and we have the advantage of being able to order smaller quantities, more frequently. We can also bring our orders forward. And because the factory manufactures products for all HoMedics subsidiaries worldwide it will at times take a product line manufactured for the US away from them and give it to us”.
As far as managing their relationship with the factory, HoMedics utilises Powermaster’s Purchase Management module. It streamlines the whole purchasing cycle and performs tasks such as automatically generating accurate landed costs while providing close control over orders and on-board shipments as well as monitoring delivery dates. In addition, the Distribution Requirements Planning (DRP) module produces a suggested order that automatically generates purchase orders which can be amended on-screen before releasing them. A Shipment Control feature allows HoMedics to also track by shipment and container, with multiple ETAs.
A sophisticated ERP system can handle most supply chain scenarios, in particular allowing for the ambition of shortening the supply chain to become a reality. For example, HoMedics recently had a large order from a major customer for their Sqush’s (a therapy massage pillow) which had to be delivered directly to the customer’s warehouse. Usually the factory in China ships directly to HoMedics’ own third-party warehouse but in this instance a drop shipment had to be organised direct ex China to the warehouse. Kirby explains, “I was amazed at how easy it was to organise a drop shipment as I had never done this type of transaction before in Powermaster. It was all in US currency but Powermaster works out the exchange rate and the whole process was simple and effortless.”
History makes the future
Now that HoMedics has been operating in Australia for 18 months, it is in a better position to more accurately forecast demand utilising sophisticated forecasting tools. “We’ll get to a level where we can forecast demand more scientifically now that we have some history,” says Kirby. “For example, we’ve got two new Shiatsu massage mats coming into the range and we’ve looked at the volumes of how well the original one performed and made some calculations based on that. In the future Powermaster will be able to provide us with some very advanced tools that allow for fairly accurate forecasting scenarios without us having to use complicated spreadsheets or just make intelligent guesses. As far as the future, that’s one area we’re looking forward to fine-tuning and getting absolutely right.”
Beyond that HoMedics will concentrate on managing its growth in a steady fashion. “Yes we run a lean operation,” says Harrison, “but this is possible because the ERP we utilise gives us the advantage of a large business complete with the flexibility of a small organisation.”
“This means we can respond quickly to sudden demand through the automation of organisational processes that reduce double handling and error-prone tasks. Powermaster is also flexible enough to handle myriad supply chain scenarios allowing us to concentrate more on our marketing efforts and as well as better service our customer base.”
“Because Powermaster is used by much larger companies than ours, we know it will also be able to handle our continued growth without having to add anything to the system”.
“We’re confident for now that we’re doing things right because no matter what is going on, and what sort of pressure we’re under to move product out of the door, we’ve got our finger on the pulse as our ERP system offers fantastic visibility throughout the supply chain. I would have to say that as far as the business is concerned, Powermaster is our own personal ‘well-being’ product.” n