Epec Engineered Technologies
Printed Circuit Board Manufacturer Goes Global
Founded in 1952,1 Epec Engineered Technologies grew from being a regional PCB manufacturer to becoming a global business with two operating companies in three countries (US, UK, and China). They do mechanical, industrial, electrical, software, and user experience design and manufacturing of highly engineered, customized products including: PCBs, battery packs, user interface modules, RF (radio frequency) devices, motors, and cable assemblies. Epec has about 5,000 customers, over 120 employees, and manufacturing plants in the US, Asia, and UK. The main industries they serve are industrial, medical, and military.
Growing via Acquisitions and Partnerships/Outsourcing
Epec has grown organically and by several acquisitions. Epec’s key differentiators are a high level of inhouse technical expertise and their supply chain and manufacturing capabilities. Epec does about 10% of the manufacturing in their own plants. For the rest, they have a network of outsourced factories with deep longstanding relationships and quality control honed over time.
Epec China, formed in 2005, has about 30 employees whose full‐time job is managing their Asian manufactur‐ ing partners.2 They have a hub with UPS in Hong Kong, consolidating shipments daily into a single shipment. This lowers shipping costs and gives them a later cutoff time for when shipments must arrive at the airport.
Outgrowing Their Existing ERP System
Between 2002 and 2006, Epec made several acquisitions, expanded globally, and expanded the footprint of their service offering. During that time, they experienced the limitations of their existing ERP system,3 hampering their growth. They found it difficult to customize—even little things like adding a field into screens required engaging professional services. That was a big problem, since their business was changing a lot. It was challenging to open up new locations and/or integrate acquisitions. They had to buy new hardware and run a VPN for remote connections, and everyone had to use the same client operating system. This led to connectivity issues, downtime, a lot of IT headaches, and delays in integrating acquisitions.
1 Epec is the oldest production Printed Circuit Board (PCB) manufacturer in North America.
2 Epec likes to say “we have the right factory for each order.”
3 They were running on Epicor Vantage at the time.
Integration of Best‐of‐breed Applications
They decided to look for a new ERP system that would help them grow. At the time, Epec was using two key best‐of‐breed systems: Selectica Configurator let their customers configure the printed circuit boards and place orders online. Autodesk PLM 3604> is a product lifecycle management (PLM) system that helped them manage all of the documentation, design, release process, engineering changes, traceability, and end‐of‐life processes5 for each product and its components. Epec had narrowed the ERP selection down to three contenders, including NetSuite. The other two had built‐in PLM and product configurators, but the functionality was not sufficient for Epec’s needs. NetSuite was the only one of the three willing to integrate Epec’s best‐of‐breed applications. NetSuite was proactive in taking responsibility for making it all work together.
To Cloud or Not to Cloud
Running on the cloud was still a relatively new concept at the time, so Epec was somewhat wary of it. A number of factors convinced them this was the right path. First was the ease of bringing a new employee or facility onto the system. All that was needed was a browser and an internet connection and they were on. It has allowed Epec to hire the best talent, wherever they lived. Now they have employees all over the world. Even more important was how simple it was for their outsourced factory partners to connect. Those factories log into NetSuite with a role‐based view where they see all their orders, update the status of WIP,6> attach various documents (such as test results) to each order, create shipments, and so on. NetSuite’s integration with FedEx and UPS makes shipping and tracking completely integrated into the system.
Rapid Implementation, Scaling the Business
Epec spent about three months refining their business processes before beginning implementation. The actual implementation took about 90 days. The company has grown from manufacturing PCBs only, to having seven different product lines, largely through acquisitions. Speed to market is critical for them. When they acquire a new company or put out new product, they need to tweak some of their processes. Prior to implementing NetSuite, it would take a couple of months to come up with a new manufacturing or business process. Now it takes a couple of weeks.
4 Autodesk PLM 360 was renamed Autodesk Fusion Lifecycle in 2016.
5 For example, it could provide a complete list of all products that would be impacted when a specific component was going to be discontinued, so they could plan their response.
6 WIP = Work‐in‐progress
One of the main factors enabling this speed is being able to customize workflows. They can start with an existing workflow and just make the changes they need. The ability to quickly add linkable fields helped them achieve and maintain certifications required for their military business. Some of their military projects require over 500 documents7 attached to a single project. They don’t have to maintain hard copies, since they store and can quickly retrieve all documents electronically. It has helped them with ITAR8 certification, which mandates that only US citizens can access certain information. NetSuite enforces that access control.
Results and Lessons Learned
Epec credits their NetSuite system with helping them grow from $20M in revenue to $50M without having to add any customer service headcount, largely because of increased automation and process improvements. In addition, they realized the following improvements by implementing NetSuite:
• Order process efficiencies—40%‐60% decrease in time per order.
• IT resource costs—decreased 40%‐65% by eliminating hardware costs and labor (support FTEs).
• Reporting time—decreased by 40%‐55% the time it took to generate internal reports.
• Faster financial close—reduced the elapsed time to close the books by 45%‐70%.
• Audit completion time—decreased 25%‐40%.
Epec said one of the biggest lessons they learned was before you implement, get your business processes in line. Second is the importance of an internal champion to ensure adequate internal resources are committed. They felt a full‐time person was needed to really get it done right.
7 For example, Certificates of Conformance from manufacturers. 8 ITAR = International Traffic in Arms Regulations, US regulations intended to prevent munitions, weapon systems, and sensitive intellectual property from falling into the wrong hands.
Blue Microphones makes studio grade and consumer grade microphones, headphones, recording tools, signal processors, and music accessories. They were founded in 1995 by a jazz musician and engineer. They focused initially on making studio grade microphones. Around 2014, they developed one of the first USB microphones and continue to create other USB mics for the consumer market. Blue Microphone has seen consistent rapid growth year after year. They have been in the Inc. 5000 Fastest Growing Companies for eight years in a row and anticipate further healthy growth for the foreseeable future.
They were running on QuickBooks Enterprise, but were outgrowing the system. The system would bog down and crash often. They were unable to slice and dice the data the way they wanted. They also were concerned about the lack of internal controls. QuickBooks let them easily go in and change or delete an accounting entry without leaving any audit trail. They needed support for more users and missing functionality that they needed to grow their business further, such as a warehouse management system, customer service, ecommerce and other functionality.
Finding a New System
In 2014, around the time they were expanding their product line, Blue Microphones started looking for a new ERP system to run their business and enable their continued growth. They had a preference for a cloud‐based system, but also included some on‐ premise systems in their evaluation. The ended up selecting NetSuite by a wide margin (see sidebar, Blue Microphones’ ERP Selection Process). Blue Microphones is a technology company and wanted a solution provider that was forward thinking, with cutting edge technology. The only one that fit that bill was NetSuite. In hindsight, they firmly believe they made the right decision. In their words, “fast forward to today and NetSuite is still very innovative, on the cutting edge, and continues to enhance their technology.” Blue Microphones continues taking advantage of those innovations—they recently started using Bronto (marketing automation that NetSuite acquired in 2015) and SuiteCommerce Advanced for their ecommerce site.
Blue Microphones’ ERP Selection Process
Blue Microphones brought in vendors for nine different ERP systems; narrowed it to five; brought those in to give a demo and answer more direct questions; and then narrowed it to three vendors who they brought in for the third time. This time, they specified exactly what they wanted to see. They had assembled a steering committee of eight people representing all areas of the company. The steering committee jointly developed their own internal scoring system for ranking vendors on various criteria. As each vendor came in, each person on the committee independently created their own score. They added the scores up and got together to talk about it. NetSuite came out on top significantly. In the end, it was a clear choice for the team.
Blue Microphones was also striving to get all their data into one database. At the time, they had multiple disparate databases for ecommerce, marketing, financial ledger, MRP, and other functions. Since implementing NetSuite, they have been able to gradually bring those multiple databases into the core system. They expect that process to be completed by mid‐2018. They are excited about having one consistent database, eliminating all of the merging, synchronizing, and cleaning up required in the past.
Scalability for the Long Run
One of their biggest criterion was scalability. They didn’t want to have to convert to another system yet again in a couple of years. So far, they have been able to grow considerably with minimal impact on headcount by automating a lot of the processes that they were not able to automate using QuickBooks. With their old system, they had to print out sales orders and send them over to the warehouse. The warehouse personnel would then print out a pick ticket to pick the order. Shipment logs were printed out and brought over to the accounting department to do billing. With NetSuite, the warehouse automatically pulls the tickets electronically, fulfills the orders, and invoices are generated automatically.
This automation was just as vital for interactions with Blue Microphones’ third‐party logistics (3PL) partners in Hong Kong and Amsterdam that they used for shipping orders to the Far East and Europe respectively. Prior to implementing NetSuite, they relied on emails back and forth to the 3PLs, with .PDF files, instructions, and status attached. This caused delays and errors and a lot of extra work. Now employees at those same 3PLs login to the NetSuite portal, and are able to directly and instantly access their queue of pick tickets and fulfill the orders, which automatically triggers the invoice. NetSuite has also enabled Blue Microphones to implement EDI with many trading partners, further automating interactions. They are confident that with NetSuite they have lots of headroom to grow for many, many years to come.
Enabling International Growth
The 3PL portal has been a key enabler of international growth. When working with overseas retailers and distributors, Blue Microphones has very little lead time. Orders have to flow through and get delivered on time. The portal allows the 3PL’s warehouse to operate as if it were one of Blue Microphones’ own warehouses, greatly speeding up processes. It also gives Blue Microphones visibility into inventory to ensure orders are sent to the right warehouse that has the right inventory to fulfill the order. NetSuite’s automated multi‐currency handling makes it easier to do business in foreign currencies and deal with exchange rates smoothly.
The system also helps Blue Microphones executives to work effectively while traveling overseas. For example, a sales executive meeting with one of their retailer or distributor customers in Europe or China can pull up the client’s PO right there in the meeting and make any needed adjustments together with the customer. Execu‐ tives and managers can at any time or place pull up a report to check on production status or fulfillment status and run different reports to ensure the business is running smoothly. They especially appreciate that NetSuite does not require VPN connections, which are blocked in China.
Automating Customer Communications
Key parts of customer communications have also been automated. When an order is shipped, an email is automatically sent, informing the customer. This increases customer satisfaction and reduces inbound calls asking about order status. This is just one of many processes they have automated, resulting in better communications, fewer errors, and higher efficiencies.
Ecommerce—Growing Via Direct‐to‐Consumer Sales
The bulk of Blue Microphones consumer sales goes through major retailers (such as Amazon, Best Buy, and Dixons in the UK) and professional sales goes through dealers and distributors. These are typically bulk orders—each order through these channels usually contains hundreds to thousands of items. Blue Microphones decided to also start selling direct to consumer, going live with SuiteCommerce Advanced last year. NetSuite’s capabilities were instrumental in enabling both the ecommerce front end and radically different backend fulfillment process for picking, packing, and shipping much more numerous smaller orders.
Improving Customer Service
Providing excellent customer service is a critical part of Blue Microphones brand and a key driver of customer loyalty and continued growth. They have had a team in place for a long time to handle the many questions they get from end users. Recently they hired one additional person to answer ecommerce‐related questions. In the past, these calls were responded to manually, mostly using emails, with no central record of what happened. Someone would have to ask multiple people to dig through emails to figure out if anyone responded. Customer issues were sometimes delayed of dropped.
To improve service, Blue Microphones went live with NetSuite’s Customer Service Management which tracks the status of all issues and automatically escalates issues that are not handled within a certain time period. They are now able to measure customer service metrics such as averages and ranges for response times, number of pending calls, and aging of the pending calls. The new system, with its metrics, is helping them to continually improve their customer service performance and drive further growth.
They also are capturing common issues being logged in a standardized way (such as ‘mic doesn’t turn on’ or ‘static noise in mic’), so they can start quantifying the occurrence of those issues for each model of equipment. They will use that information to provide feedback to engineering and product management.
Since they started using NetSuite, Blue Microphones’ revenue has increased by over 100%, while headcount has increased by less than 50% over the same period. The system has saved at least three FTEs9 during that period. A senior executive at Blue Microphones told us, “We absolutely love the system. It has more than met our expectations. We continue to expand our use and feel we haven’t even scratched the surface of its capabilities yet.”
We asked Blue Microphones about key lessons learned:
• Clean up your data—One of the best times to clean up your data is when you are converting to a new system. When they switched to NetSuite, Blue Microphones threw out their old General Ledger chart of accounts and created a new one from scratch, leveraging all the lessons learned to date. It took effort to do all the mapping, but in hindsight was absolutely worth it; the right thing to do. It’s better not to take the expedient way out and migrating existing old ‘garbage data’ into a new system.
• Keep it Simple and Contained—Blue Microphones decided to implement the minimum functionality in NetSuite by only implement the things QuickBooks was doing for them. They just needed functionality to ship products and invoice their customers.10 Management laid out the long‐term roadmap and schedule, but made it clear they wanted to start with this small core and do it with quality, accuracy; no fumbles, disruptions, or blunders. Once that core was live and working well, with all the kinks worked out, they started methodically adding other modules over time as they learned the system and got a better idea of what to do and in what sequence.
• Make Implementers Own the Consequences—The conversion was done quickly, going live 120 days after signing the contract. The eight members of the steering committee were each responsible for their own areas of the conversion: warehouse, finance, supply chain, etc. When they went live, if their area wasn’t working right, they had to live with it and fix it. Nobody wanted to be the one behind schedule or on the hot seat with issues at launch. That created a bit of internal competition for both timeliness and quality. People understood they owned it and would have to live with the results, so they did a much better job, which ultimately helped the implementation go quickly and smoothly.
• Don’t Comprise Quality to Meet the Schedule—Just before the go‐live date, the CFO asked every team member and the NetSuite professional services people, multiple times, in multiple ways if they were comfortable, that everything was ready, everyone trained, all systems go. They weren’t going to launch unless everyone was confident.
• The Executive Champion Should Stay Highly Engaged—The CFO was highly engaged in the process all the way through—there for every update meeting and steering committee meeting, involved in detailed discussions, decisions (e.g. the right way to depreciate, what data structure to use, etc.), and resolving issues. This helped the team understand how important this project was to the success and growth of the company. It also let them know they were being supported by top management.
• Show Tangible Appreciation for Success—The go live went so well, the entire implementation team was taken to Las Vegas for a weekend, to celebrate success and show appreciation.
The Right System Can Enable Growth
As these examples show, a company’s growth may be constrained by their existing system and enabled by implementing the right system. For a look at nine key indicators that your company’s growth is being constrained by its core IT system, and the specific characteristics to look for in a growth enabling system, see the companion research report for these case studies—Unlocking Growth: When a New System is the Key to Unleashing a Business’s True Potential.
10 Even though the target of the initial implementation was parity with their QuickBooks system functionality, Blue Microphones ended up with considerably more than that because of everything that was built‐in with NetSuite.