Chicago--Once upon a time, manufactured housing was a booming industry, with some 372,843 home shipments a year. In 1998, Cavalier Homes Inc. was riding that wave. In 1999, the company shipped 22,377 homes -- a respectable number by any standard. In 2001, just two years later, the numbers had fallen to 12,669 for Cavalier -- and 193,229 for the industry.
The pain that companies were feeling as a result of plenty of default loans was made worse by the hopelessly backward business processes that permeated the industry. A mess of redundant raw material orders, wasted labor and missed service calls contributed to the headaches of Addison, Ala.-based Cavalier Homes.
With 11 home-building facilities around the country, two housing supply companies, a mortgage banking subsidiary and a retail insurance agency, there was also widely distributed, valuable customer data that was going unused.
Cavalier Homes CIO Jay Wilson realized something drastic needed to be done, and he eventually found a solution in SAP R/3. Wilson outlined his decision to take on SAP as an ERP provider at SearchSAP.com's recent user conference. The three-day event featured leading industry analysts, peer-to-peer workshops and presentations from executives like Wilson, who shared their corporate case studies.
Wilson's IT team examined several major issues before deciding on SAP. First, manufacturing plants did not communicate, and even if they did, there were no common standards. At one point, Cavalier sales data was spread across seven separate systems.
To price a home, dealers had to call a Cavalier plant and, using customer preferences, manually piece together the price of the home -- option by option, home by home, month after month.
Also, Wilson needed to improve customer service and streamline sales processes. If Cavalier was to turn around, it had to embrace a modern ERP solution that could seamlessly handle sales, manufacturing, service and financials.
Today, Cavalier runs SAP R/3 v.4.0B with FI/CO, MM, PP, SD and SM modules on Microsoft NT 4 with SQL 7.0. The company launched a massive standardization initiative for communication among facilities.
The process was painful, Wilson told attendees, but the benefits were sweet enough. For example, the number of raw material SKUs dropped from 15,000 to 1,300. Overall, the raw material inventory was slashed in half, freeing up capital, inventory space and resources.
Another benefit of the SAP solution was enterprise-wide transparency. That enabled the builder of custom-made, prefabricated homes to dramatically slash options that were rarely requested.
Cavalier discovered it could narrow its selection of deck boards from 300 to the two most popular. The same sort of streamlining carried through to most other parts of the homes, saving Cavalier considerable hassle and inventory.
Today, Cavalier is a profitable company. The SAP implementation is a little more than halfway complete. An estimated 60% of production capacity has been implemented, and the financial side is 100% online. The implementations are currently stalled, though, due to Cavalier budget cuts, Wilson said.
Still, the production cost of a home made at a Cavalier SAP-enabled facility is $1,600 lower than cost of the same home made at a non-SAP one, Wilson said. Wilson readily gave the new "digital nature" of the company full credit for its regained profitability.
Conference attendee David Nestingen, president and CEO of New Berlin, Wis.–based Industrial Electric, considered the Cavalier Homes case study among the most valuable presentations at the SearchSAP.com event.
"We did a Big Bang implementation of SAP 4.6C just two weeks ago, where we went from a homegrown legacy system to SAP overnight," Nestingen said. "This presentation was a terrific reality check, enabling us to get a better idea of what lies ahead."
FOR MORE INFORMATION:Exclusive coverage of the SearchSAP.com conference