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Solutions May 2005
Cover Story
E-Commerce
Excitement
Smart
e-commerce solutions thrill end
users, continued.
Company:
FSi
Location:
Nashville, Tenn.
Founded:
1990
Principals:
Dan Swagler, president; Joel M.
Chyke, CPA, CFO and owner
Employees:
50
Business
in Brief: FSi has achieved 30
percent average annual growth
since 1999; it reported fiscal
2004 sales of $16 million. The
company provides complete inventory
management programs, warehousing,
fulfillment services and custom
online company stores to hundreds
of clients throughout the Southeast.
Ninety-five percent of its orders
arrive via the internet. FSi also
handles many of its clients’
electronic bill presentment and
payment, procurement, distribution,
kitting and accounting services
(including tax collection and
reporting).
“Technology
changes everything” may
seem trite, but it applies to
Nashville, Tenn., distributorship
FSi. “E-commerce changed
our business model, sales model,
compensation model and service
model,” says Joel M. Chyke,
CPA, the distributorship’s
CFO and owner, and a DMIA Board
member.
FSi
was a 2-person team when it launched
in 1990. In 1999, the year it
began offering e-commerce, its
sales were $4.4 million. Today,
the company is a $16 million distributorship.
Within the walls of its 100,000
square-foot-facility in Nashville,
FSi offers a spectrum of distribution
services, including printing,
inventory management, document
processing and project management.
Its clients include retail stores,
banks, insurance companies and
hospitals in the Southeast.
Nothing
has fueled FSi’s growth
like internet technology. At DMIA’s
Spring Management Conference last
month in Tucson, Ariz., Chyke
was a panelist for the session,
“E-Commerce—the Revenue
Stream!” Several facts he
gave about FSi impressed attendees:
•
95 percent of the distributorship’s
orders arrived online last year.
•
The company employs only two salespeople
who hunt for new accounts.
•
The firm carries approximately
$3.5 million worth of clients’
inventory.
FSi
has morphed from a conventional
distributorship to an inventory,
warehousing and distribution firm
that’s driven by its flagship
e-commerce system, WebMANAGERSM.
The distributorship created the
tool, which enables clients to
manage their inventories, order
new items, track purchase histories,
customize security levels, and
eliminate rush charges and back
orders. WebMANAGER’s interface
can be set up for companies that
use primary purchasing agents
and those who have multiple “hands”
touching each order. The system
is powered by Bel Air, Md.-based
Kramer-Smilko Inc.’s MANAGER
system, an operations software
platform that handles all facets
of a distributorship, including
inventory, forms management, order
processing, customer service and
accounting.
In
1999, FSi realized the impact
a system such as WebMANAGER could
have on saving customers’
fulfillment expenses. President
Dan Swagler recalls a current
client’s previous fulfillment
system: The customer, who regularly
orders uniforms for employees,
previously faxed an order form
to its uniform manufacturer. The
manufacturer filled the order,
shipped it to the client, then
sent the client an invoice. The
customer forwarded the invoice
to its headquarter facility, where
it was approved and forwarded
to the company’s accounting
department. After updating the
company’s general ledger
report, the accounting department
finally cut a check for the uniform
manufacturer.
Now,
the client can go to its secure
page on FSi’s web site,
www.myfsi.net, and place an order
for uniforms and other items.
FSi picks all of the customer’s
items from its warehouse, and
packs and ships them. The distributorship
automatically uploads invoices
into the client’s general
ledger account, streamlining the
payment process.
“Inventory
management is paramount—it’s
really what we do now,”
Chyke says. Most orders are bill-as-shipped.
“That was a big investment
because you’re buying a
lot of inventory,” he says.
“But if your competitor
comes in and has a competing product,
it’s difficult for him to
step up and buy $500,000 worth
of inventory. That’s one
way e-commerce changes your competitive
advantage.” Approximately
80 percent of clients’ orders
are sent directly from FSi’s
warehouse; its manufacturers drop-ship
some items such as business cards.
Clients buy back their inventory
if they back out of written contracts
with the distributorship.
Because
FSi’s national customers
have locations in multiple states,
it collects and remits sales tax
to each location during the bill-as-shipped
process. “We found this
to be the No. 1 hot spot when
we explain our e-commerce model
to CFOs,” Chyke says. He
recently gave a presentation attended
by a CFO of a potential client
in Florida, who said he had been
audited three times in three years
about sales tax compliance. FSi
gained the account.
Chyke
says e-commerce has changed FSi’s
business model because the company
now targets firms with multiple
locations and concentrates on
selling programs instead of products.
E-commerce also has changed the
distributorship’s sales
model, he says, because the company
now makes presentations to “C-level”
principals or directors instead
of purchasing departments, competes
with the majors and has a longer
sales cycle (6-12 months). FSi’s
two salespeople “do nothing
but go after new business,”
Chyke says. “Their responsibility
rarely involves calling on an
existing customer.” Twelve
account managers concentrate on
account penetration and support
the salespeople. “It’s
a whole lot easier to train two
people on solution-selling than
it is to train your whole staff,”
Chyke says. “And our customers
now are loyal to the company,
as well as the salesperson. That’s
huge.”
One
such customer is Mike Schoettmer,
director of Nashville-based Tractor
Supply Company, the largest retail
farm and ranch store chain in
the United States. In search of
a company to provide his company’s
supply management, he surveyed
several distributorships over
six months. Schoettmer discovered
FSi, and now the distributorship
warehouses and replenishes hundreds
of items, including point-of-purchase
materials, for the client.
Schoettmer
entered the relationship focused
on two goals. First, he wanted
to manage his company’s
inventory in a non-complex, cost-saving
way. Second, he wanted a solid
accounting system that would provide
seamless invoicing and little
manual upkeep. Schoettmer met
with FSi to discuss and implement
a business plan, and his goals
were met within 90 days. “I
can already see the difference
and how it’s going to be
very beneficial for my company,”
he says.
Investing
in E-Commerce? 3 Tips
1.
Talk to others who have been there.
Learn about pitfalls and how to
avoid them. Get inspired by firms
who use e-commerce as a tool for
growth and customer loyalty.
2.
Plan and research. Determine your
objectives, assess your resources,
evaluate your risk, and document
and communicate your plan. “One
of our objectives at the start
was to give customers an easier
way to order so our customer service
people didn’t have to enter
them. The goals changed and became
more involved,” says Joel
M. Chyke, CPA, CFO and owner of
Nashville, Tenn., distributorship
FSi and a DMIA Board member. Also,
research e-commerce software options.
“When you have thousands
of users on your site, they’re
going to be married to you. You’re
going to be married to your software
provider,” he says. (For
a list of companies offering e-commerce
services, turn to page 86 of the
2005 Buyers’ Guide. DMIA
members can access the Source
Hotline Online at www.DMIA.org.)
3.
Find a willing subject. Pick a
trusted customer that will help
you implement e-commerce and provide
regular feedback.
“Our
customers now are loyal to the
company as well as the salesperson.
That’s huge.”
Joel
M. Chyke, CPA
CFO
and Owner
FSi,
Nashville, Tenn.
