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Today Airgas, No. 4 on MDM's list of top 40 industrial distributors and a takeover target for Air Products, released details of the value it hopes implementing SAP across its business units will bring. Airgas had $3.9 billion in sales in 2009.
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Airgas – which has grown largely through acquisition over the past two decades – has been transitioning to a single software platform for its multiple companies since 2005. In today's release, it detailed the history and goals for the implementation, as well as some early success stories. Airgas appointed 300 "subject matter experts" from its field organization who worked with a full-time project team of more than 120 associates, which included SAP consultants from Deloitte Consulting and a cross-functional group of Airgas business leaders.
Early Success Story
Airgas detailed what it termed a success in the initial stages of SAP implementation. In early July 2010, Airgas converted its hardgoods supply chain to SAP. That part of its business includes 300,000 SKUs, six national distribution centers, four buying centers, and a safety products telesales organization. It serves as the fulfillment source for more than 875 regional company branches.
Of these areas, Airgas sees potential for significantly increased sales from its Telesales Channel, which is comprised of a 185-person sales force. The sales force is in four regional call centers, and generates more than $220 million in annual sales via the phone, with safety products delivered directly to customers from national distribution centers.
Airgas says it has long wanted to expand its Safety Telesales organization into welding hardgoods and packaged industrial gases.
"Full-scale adoption of the telesales model across Airgas' regional companies, however, has been hindered by the incompatibility of information systems, which hampers the effective fulfillment of welding hardgoods and gases from Airgas' local branches that distribute these products," Airgas said in today's release.
After conducting pilot programs with telesales in other areas of its business, Airgas has moved forward with its expanded telesales initiative, which it hopes will continue to generate sales to a "critical mass of generally smaller customers that do not otherwise receive the personal contact of a field sales representative."
The initiative will be supported by the common technology platform. Airgas says the expansion of telesales could yield incremental annual run-rate operating income of $25 million to $50 million upon full SAP implementation.
Other SAP Implementation Details
Other priorities for Airgas in its SAP implementation:
- According to Airgas, price management is the single biggest area of economic benefit of an SAP implementation.
- Airgas will focus on consolidating certain accounting, administrative and support functions from its 12 regional companies into four divisional support centers, with a fifth support center for Airgas' product line business units. This will happen later in the SAP conversion.
- All six of Airgas' national distribution centers now use radio frequency devices to support operations including receiving, shipping, auditing and inventory control.
- Airgas expects its Strategic Accounts business, which requires visibility into a customer's multiple locations, will benefit from the SAP conversion. It said: "Administration of this function to-date has required a team of back office personnel and a significant amount of manual data entry." Airgas expects "dramatic productivity improvements" in this area.