Aviall Inc.:From Failure to Success with Information Technology

When Joe Lacik arrived at Aviall in January 2000 as Chief Information Officer (CIO), the supplier of airplane parts and components had lost control of its inventory.

An installation of Lawson Software to keep track of the availability and prices of the 360,000 parts it buys and then supplies to airplane operators and owners had gotten "ugly," he says.The company couldn't count on the price-tracking software to work with its warehouse management and inventory control software from Catalyst International, or its purchasing-forecasting software from Xelus.

The result?The wrong parts got to the wrong customers.And sometime, not even that---it got so bad that in some instances Aviall sent empty boxes to its customers, Lacik says.

The company's sales fell 8 percent, from $404.2 million in 1998 to $371.09 million in 1999.So when Lacik and new Chief Executive Paul Fulchino arrived in the first month of 2000, the charge was simple:Clean up the mess.

"Aviall didn't have a middleware vision," says Mike Justice, who handled the account for Lawson.Translation:Aviall hadn't figured out what it needed to get all of its new software products to work together.And, yes, the wounds were self-inflicted.Aviall's own technology staff had picked the software and installed it.

Aviall had committed to spending as much as $40 million on overhauling its hardware, software, and facilities.But the overhaul was double-edged.At the same time that Lacik had to come up with a "middleware vision," the company's headquarters and operations were moving to Dallas-Fort Worth International Airport.A new 200,000-sqaure-foot warehouse would replace a 132,000-square-foot facility in Farmers Branch, five miles away.

This was supposed to be a crowning moment.Besides improving operations and lowering cost, the new building would sport "an impressive faade," according to Senior VP of Operations Charles Kienzle.---Lacik's answer?Find a way to get the Lawson, Xelus, and Catalyst software to exchange data.And while tackling that task, make sure the data also could be swapped with other key applications brought in:its new customer services software from Siebel Systems and its Web-commerce software from BroadVision.

Broadly, Lacik had three choices:one, to fix the problem in-house, with existing staff.Not an option.Not an option, really, because once the fix was done, he'd likely have to let folks go.

Two, to use an outside consultant.But then it was only a matter of time before some "very polished, highly paid individuals' would recommend a $1 million fix for the problem.

Three, to hire New Era of Networks, Inc. This company's products simplify the process of integrating multiple supplies' business software and hardware, which were never meant to share the data, with Web-based applications.In this case, Aviall could look over the shoulders of these hired individuals to gain competency in-house to maintain the fix for the long run.This was Lacik's choice.

New Era, acquired subsequently by database pioneer Sybase, created software "adapters" that would let the different pieces of software swap data.Simply put, when two pieces of software call the same piece of data, an adapter figures out what has to be done.The adapter transfers that piece of data between the two programs, making sure it ends up in the right place.Then each program that receives it can process the data further.

With this approach, the various applications don't even have to know the others exist."The edges don't have to aware of each other," says Bob Breton, senior director of product strategy."All the transformation and decisions take place in the middle."

Simple in concept, but a hard sell nonetheless.It was a hard sell to Aviall's finance department because the adapters in place would wind up costing an extra $1 million.

One of the most important connections would be between the Lawson software and the Siebel software, enabling a sales representative to assure a customer that an order could be fulfilled.The Siebel customer service software would have to draw information on the prices and availability of parts from Lawson.

Figuring out how to do that took several years.Lacik pushed Sybase hard to deliver on its promise that it could make the Lawson and Siebel programs talk to each other.But when the moment of truth arrived, nothing much happened.

Eventually, the adapter got fixed.And Lacik would find that "the technology is the easy part" when installing something like Siebel's customer relationship management (CRM) application.

First, he now says, you have to change the sales force....or at least how it conducts business."The vast majority of CRM projects fail; and the reason is you have to change the behavior of the sales force," he says.

In this case, Availl's sales force needed to get used to having their actions measured, Lacik contends.For the first time, the number of sales calls a month, the types of customers called on, and the reasons why, all would be tracked.

But technically hard parts were still to come.When it came to mimicking the system that its 250 inside sales and customer service people used to manage orders, it was not an overnight proposition."We didn't want to re-create the order-entry process," says Lacik.In this case, the technology staff "didn't even know the right questions to ask" in order to create new computer-based system.

And it has taken a great deal of time, because issues as simple as whether a customer has sufficient credit to make a purchase have to be handled deftly.In the past, whether a customer had enough credit to complete the sale wasn't figured out until after all the other details of the transactions were finalized.Now, the customer is first kicked over to the credit department (which also used Siebel) for review and assistance.

But the resuscitation of Aviall's sales didn't depend solely on the launch of the order management system.With adapters in place, salespeople working the Siebel system could immediately check prices and availability of parts by querying the Lawson system.And the combination of Xelus and Catalyst made sure that the right parts got to the right customers at the right time.No empty boxes.

New radio guns help speed up the order-picking inside the warehouse.And as customers visit the distribution facility, the largest in the aviation parts business, it is making the "very strong visual impression" that Kienzle hoped for.

Sales grew at not just the double-digit rates, but almost doubled---to $222 million in the September 2003 quarter, up from $127.8 million the previous year.The biggest impact:A $3 billion, 10-year contract to sell and distribute spare parts for a widely used engine made by rolls-Royce PLC, signed after the building was completed.It was the biggest deal in Aviall history.

Questions:

1. Identify the major business initiatives that Aviall pursued to achieve a competitive advantage?
2. To what degree do you believe that Aviall's IT department consisted of technology-literate knowledge workers?Where did they go wrong?Please explain.
3. Why do you think that Aviall failed in their initial implementation of the various types of software?(you may want to refer to ch. 2 in your text, ERP)What could they have done differently in the beginning?(Please list alternative courses of action)
4. In what ways do you think that Aviall has used IT to achieve a competitive advantage?
5. And, more specifically, what business processes (other than those listed in the case) would more than likely be improved by this newly integrated system?