A revamped IT infrastructure lets the New York-based bag manufacturing company rev up its sales, relocate its warehouse, integrate its processes, and get into outsourcing
It was the yak herders in China who inspired Steve Holt to start his own business.
But it was the installation of a completely new IT system based around SAP Business One that enabled Yak Pak to become the company he always envisioned.
Today, the maker of backpacks, messenger bags, handbags, and other luggage is on track to hit $50 million in retail sales this year -- while relocating its warehouse from an expensive, cramped location in Brooklyn, N.Y.; building a Web site that could quickly process orders; growing sales without adding costs; and outsourcing manufacturing and some sales to lower expenses.
An IT System That Needed to Be Fixed
Before, "technology was always working against us," says Holt, CEO of Yak Pak. "We had dreams, but we couldn't fulfill them." A series of meetings five years ago between Yak Pak's IT group and management -- which then consisted of Holt, CFO Rolando Cohen, and COO Richard Haugen -- made it clear that changes had to be made. "We talked about the fact that we weren't moving a system forward, we were keeping a jalopy moving," Haugen remembers.
Information technology was the last thing on Holt's mind in 1988 when as a junior in college on a year abroad in China, he plunked down $4,000 with a manufacturing company there to make 400 bags. The bags were eventually shipped to Holt's dorm room, and his then roommate, Rolando Cohen, realized his friend might be onto something. By the time the two graduated from Georgetown University in 1989 and moved to New York, Cohen had convinced Holt to take him on as a partner. "Neither of us had any experience, so it was a hands-on learning experience," Holt says.
Through trade shows and sales calls on store after store, by 1995 the company was doing $1.6 million in sales and had hired some 14 employees. It was all running on a FoxPro-based accounting system, AMAS, which was initially all Yak Pak needed.
"It did the job we asked it to do very well," says Haugen. But, as the company grew, it became "quickly apparent that the systems we were on wouldn't take us where we wanted to be."
Executives found it difficult to drill down and get reports to see what was selling and where. "We couldn't get information to make decisions," says Holt. "Who's buying it? What's selling? Frequency of orders?"
Moreover, any reports that they did get cost thousands of dollars because they had to be customized. "It had a crummy warehouse model, accounting system, and nothing was integrated," complains Holt. "Haugen had clever patches, but it was still a Rube Goldberg system."
For example, it took salespeople 40 minutes to manually enter each order and the system couldn't handle all "ship to" locations for the new customers they were landing. The Web site was running on Microsoft Commerce Server and as the company's Internet retail business grew, the system couldn't keep up. The EDI requirements of major retailers were cumbersome to manage, and the need to constantly move data from one system to another was time-consuming.
Next Page: Changes Have to Be Made -- But How?
