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Tech time at Higginbotham’s

TEXAS DEALER Higginbotham Bros. has 45 hardware stores and home...
TEAM WORK CEO Rufus Higginbotham Duncan Jr. hoped the company...
Mike Young, head of the IT department, helped make that...

COMANCHE, TEXAS —Every big company has its own corporate identity, and Higginbotham Bros. is no exception. The Texas dealer has 45 hardware stores and home centers spread throughout the state, mostly in rural locations. Sales in 2006 reached $79.8 million, placing Higginbotham’s at the top of Do it Best’s annual member purchases chart last year.

But in Higginbotham’s main office in Comanche, Texas, corporate structure takes a backseat to camaraderie. For instance, owner Rufus Higginbotham Duncan Jr., great grandson of founder R.W. Higginbotham, is simply referred to as “Rufus.” The ladies in accounting pooled their money and turned an empty storage room into a day spa, complete with a tanning bed, to use on their lunch hour. And no, they didn’t ask first.

This kind of informality created the teamwork necessary for a major IT overhaul at Higginbotham’s, one that changed the way business was done in every department and location. Earlier this year, the company switched to a new business management system, Activant’s Eagle for Windows, a process that meant retraining everyone from Duncan on down to the store cashiers.

The company operates under three retail banners—Higginbotham’s, Higginbotham-Bartlett and Big Tin Barn—and several formats, including hardware stores, lumberyards, home centers, and farm and ranch. The largest location, in Big Spring, Texas, is 20,000 square feet. The smallest is a one-employee store in Earth, Texas, population 800.

Being a native Texan, Duncan is given over to colorful phrases, especially when talking about his company. One of his favorite chaos analogies is “kittens in a box.” Higginbotham’s had added 42 stores since 1999, not all the same format. To complicate matters further, Duncan purchased an Ace Hardware store in 2006, which ran on a different system, and had his eye on several more.

With the exception of the Ace store, all of Higginbotham’s stores were using a CS2000 system obtained through Do it Best. But the co-op was phasing out support for that system. Higginbotham’s had to make a change, and Duncan was aware of the risks.

“If there’s a train wreck coming, I want to know before it hits,” Duncan said.

Herding kittens

Higginbotham’s started shopping around for a new software provider in 2005 and evaluated several vendors. By 2006, Duncan and his executive team had settled on Activant’s Eagle solution, which ran on a Windows platform. “It integrated accounting and general ledger [functions] with the point of sale, and not all the systems we looked at had that capability,” recalled Mike Young, head of the IT department.

If Higginbotham’s was going to endure the disruption of a business system conversion, Duncan hoped to see some operational paybacks. He put together a short wish list of desired improvements like “consistent practices across locations” and “better inventory control.” Then he called in Connie Houston.

Houston spent eight years working in a True Value home center and another eight years at a lumberyard chain in suburban Chicago before going to work for Activant. She joined Activant’s business services division in 1996. Houston serves as a consultant who comes in and scrutinizes a client’s operations, looking for places to improve efficiency and increase profitability. Houston met with Duncan and upper management, then spent time in several Higginbotham’s stores.

“Each location had its own identity, and that was important to the company,” Houston said. “But it was [just as] important to take Higginbotham’s to the next level.”

Houston’s comprehensive report, delivered in October 2006, covered purchasing, receiving, management, paperwork processes, accounts payable and receivable, and everything in between. She and Duncan went over the report page by page, prioritizing recommendations. Houston was pleased that the executive zeroed in on inventory control.

“Inventory is the largest asset in a business and often the one most overlooked,” Houston noted. By moving each location’s inventory into one centralized database, Eagle would enable Higginbotham’s to keep better tabs on its inventory levels, margins and shrinkage. Employees could also check individual yards to see if a certain product was in stock.

Of course, an up-to-date centralized inventory meant sales-people had to process customer orders through the computer. No more writing out an order slip and carrying it out to the yard to pull a few studs. In fact, “studs” was no longer an operative word, at least not when keying in an order. Houston found that each store had its own set of one-word abbreviations for dimensional lumber or sheet goods, but these weren’t consistent across locations. Employees also used different units of measurements in other product categories. If Higginbotham’s was going to have a centralized inventory system, everyone has to be trained to use the same terminology at the point of sale.

Throwing the switch

Duncan had one simple request for the “go live” date—Feb. 5—when all of Higginbotham’s computers would start running on Activant’s Eagle system.

“I wanted to throw a switch on Monday morning and have it work,” he said.

Laying the groundwork took six weeks and a full-time team of six to eight Activant personnel. A temporary training center was set up in a large conference room at a Higginbotham’s store in Abilene, Texas. A dozen terminals, printers and handheld scanners were brought in, the latter to be used for inventory functions.

Next to arrive were the store managers, in groups of three. “We tried to group the stores by their orientation,” Young explained. “So we had the retail group, the contractor [yard] group and the managers with a 50/50 mix.” The first training session lasted for three days. “We thought it was important to get the store managers out of the stores, so they could concentrate,” Young said.

A former systems engineer with EDS, the world’s second largest IT services company after IBM, Young traded in the corporate life to join Higginbotham’s in 2004. Now he’s a one-man IT department, sometimes driving a couple hundred miles in a day between locations to install software, replace hardware and maintain Higginbotham’s entire network of computers.

After their initial training in Abilene, store managers were asked to return for another session with someone from their store who could help train branch employees on the new system. As extra support, Higginbotham’s set up regional teams of individuals who had been hand-picked for their adeptness with Eagle and their ability to work well with others. These would be the “go to” people whom store managers and employees could call with a question or a crisis.

At company headquarters in Comanche, across the street from a 141-year-old log court-house, the accounting department was poised to take a huge step forward in time. The Eagle system gave Higginbotham’s the ability to do centralized billing, which means individual stores no longer have to send out copies of their customers’ invoices each month. Nor do they have to keep hard copies on file, thanks to electronic document imaging. At one of Higginbotham’s busiest stores, an employee did little else but file customer invoices every day.

Feb. 5 fell on a Monday. An Activant employee was assigned to each of Higginbotham’s individual stores. Another Activant team was stationed at Higginbotham’s headquarters, where a central server received information over a T3 line from Higginbotham’s branches, each with their own high-speed DSL connection.

Although there were no train wrecks on “go live” day, the Activant team hung around Comanche for another week to ensure a smooth transition. Out in the branch stores, the technology provider kept its people on site for another day and a half. “We wanted to gradually pull back the level of support,” recalled Young.

On March 1, Mary Smart, the company controller, watched the new system automatically reconcile customer invoices and statements. This would enable the company to do one mailing per customer—and save $1,000 a month in postage.

It would also spit out page after page of invoices—as many as 10 apiece for Higginbotham’s largest customers. Approximately 15,000 invoices had to be sorted and stuffed into envelopes with the correct bills, something the office hadn’t anticipated.

“Everyone in the office had to help fold statements,” Smart recalled. By the next billing cycle, Higginbotham’s had purchased a Pitney Bowles machine that does the whole process, start to finish, including the postage.

Smart has already heard from customers who do business with several company branches and like getting only one monthly bill. “They can get their statements e-mailed to them, and we’re hoping to get more people online,” she said.

Higginbotham now has greater control over its accounts receivable. Credit limits and past due accounts are now centrally managed, an important safeguard during the current building climate.

The new system also gives Higginbotham’s greater control over accounts payable. Merrie Shannon had a pile of vendor invoices sitting on her desk on “go live” day, waiting to be paid. Without scanned receiving, “there was no way to know if the stores had received the inventory, or if it was correct,” recalled Shannon, who would issue the checks and reconcile the shipment at a later date. Under the new system, store employees unloading orders scan in shipping documents. Any invoice without an electronic confirmation goes into the “exception file”—a place no vendor ever wants to be.

Sure, there’s been some whining. Shannon said. But the amateur rodeo rider—her best event is steer roping—is equipped to handle that. “I’m holding to it,” she said.

One by one, Higginbotham’s employees are learning what the new system has to offer. Gary Penn, a regional manager at Higginbotham’s, said the new system is “all about inventory and inventory control,” which in his opinion, translates into controlling the impulse to overstock the 17 stores he oversees.

“We’re ordering what needs to be ordered now and not relying on judgment calls,” said Penn. Monthly and seasonal sales history for each item takes the guesswork out of replenishment, he explained.

Not to mention drudgery. Mike Harris, Higginbotham’s director of purchasing, used to check inventory needs store by store before he left for Do it Best’s markets. Now, he said, “I can pull up any item, and within about two minutes, tell what every store’s needs are. It’s about 50 times faster.”

Despite the accelerated pace, Higginbotham’s hasn’t lost the parts of the culture that define its identity. “Johnny at Earth,” the lone employee who operates the company’s smallest unit in Earth, Texas, still closes the store when he leaves for lunch. And some of Higginbotham’s other stores have kept their domino tables on the retail floor, just in case a customer wants to visit for a spell.

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