Remedy Corporation is a US software developer and manufacturer of adaptable enterprise applications. The solutions are fast-track, in-depth, scalable, easy to modify; and they quickly became very popular. Soon the small company had more than 9,100 customers in 70 countries. Remedy also handled all of its distribution of the products, and therein lies the problem. “As the company grew, to keep in pace with all the development that was coming out of engineering, I just had to keep adding bodies,” recalls Robert Cassese, Manager of Worldwide Logistics for Remedy.
Cassese says it was a lot of work. “We were doing it on the flimflam. For example, I’d go up to the stock room and say ‘take these things, and these things, and this thing, and put them in a box, and put a label on it, and we’ll ship them.’ And if we needed to send a user manual, installation guide, marketing materials, I’d have to go find a printer and some guy to do it. Smart money said others could do it better than we could.”
Remedy had another problem – it wanted to focus on more growth in Europe, but feedback from its customers in Europe, the Middle East and Africa complained it took from a week to two weeks for product delivery. Remedy knew it needed to establish a European presence to be located closer to its customers and deliver products faster.
As Luck Would Have It…
On a mission in Europe to find a supplier to fit the bill, Cassese heard that Ireland’s government offered tax incentives for foreign corporations to do business there. Remedy decided to focus on the Emerald Isle. They found Digital (now Compaq) and liked that fact that it had been doing business for 25 years and had a list of Fortune 500 references. They also found a pot of gold at Digital. Cassese says that one of Remedy’s critical path items in the RFQ was that the supplier also had to have a distribution point in the US – preferably on the west coast. “They said ‘we’ll build you a US distribution point.’ That’s how they opened their Sunnyvale, California operation,” says Cassese.
Remedy established a second headquarters facility outside of London, where orders from Europe, Africa and the Middle East are now processed then sent to the supplier’s distribution facility in Ireland. “As soon as we implemented this process,” Cassese recalls, “our customer satisfaction levels soared and inquiry levels dropped to zero.” Compaq’s services include the entire buy, assembly, warehousing, shipping, exporting and all the reporting for Remedy. Compaq also owns all inventory, and Remedy pays for it only as it’s used. “They have a tremendous amount of money tied up in inventory for us,” says Cassese.
Right in the middle of their blooming relationship, Compaq bought Digital’s service department. But it was handled so well that it was transparent to Remedy. Cassese says Compaq’s performance is now “running at 99.93. But who’s counting? They’re almost four days under the parameters we set in the SLA. They have their own standards, and they keep the bar pretty high.”
At the End of the Rainbow
Their agreement began in October 1998, and there were big challenges at the outset. “Outsourcers are not fly-by-night operations,” Cassese says. “You have to have materials, structures, disciplines to get products out the door – things we didn’t have because we were growing so fast. We didn’t have good documentation of what the product was – we knew what it was but it was on somebody’s yellow pad in their top desk drawer. Compaq educated us on how to establish disciplines and plan ahead.” They also had to accomplish the feat of getting the two companies’ computer systems to talk to each other. They worked together, in teamwork fashion, and their relationship launched successfully.
Cassese admits, “There was a lot of heartache doing it the old way. The arrangement we have now makes our life considerably more comfortable because we know when the deliverables are and we don’t let things slip through the cracks.” His employees are now release managers who spend their days with product marketing teams, putting in the requirements that it takes to build product and making sure deliverables arrive on time.”That’s important, because those deliverables go to Compaq, which has its own time lines in order to produce product,” says Cassese. “So it’s a whole team effort.”
“It’s a give-and-take situation,” says Cassese. “If somebody complains that Compaq screwed up on something, I comment that it wouldn’t surprise me if it had been the other way around. If there is a problem we just talk it through and work it through. They have been very, very good about when addressing issues and not sweeping things under the carpet. We communicate on a continual basis, and we always try to make it a win-win situation.”
It truly is a win-win. When the supplier stepped up to the plate and took Remedy’s requirement to establish a west coast presence, it opened up doors for them, and Compaq has quadrupled since the facility opened. Remedy, which just signed another three-year contract with Compaq, has experienced great savings because of this outsourcing relationship. Cassese says his budget has not increased significantly from two years ago, but the company has doubled and tripled in its product output.
Cassese reports that Compaq also supplies good ideas for process improvements. “And if we come up with an idea,” he adds,” they throw the whole kitchen sink at it and run with it. They have always been very responsive to our needs and requirements.”
At the end of the rainbow, Remedy found a partner, not just a supplier.
Lessons from the Outsourcing Primer:
- To maintain a competitive advantage, logistics outsourcing is a streamlined, cost-effective strategy to handle product distribution.
- Small companies with undocumented processes and few structural disciplines should seek a supplier willing to work with the buyer to establish such matters.
- Because of a supplier’s economies of scale and expertise, outsourcing can enable a buyer to contain costs even when the amount of products being shipped to the buyer’s customers increases.