Opportunity Wales Objective 2

eCommerce Case Study Publication

Discount Tyres

Document Change Control

State Registered Draft Final Approved Version 0.1 0.2 0.3 1.0 4th December 4th December 2006 12th January 2006 Reviewed by James Willatts, amendments made. Sent to Gareth White for approval. Approved by Gareth White from Discount Tyres. Date Comments

Possible values for State are: Draft, Final and Approved

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Case Study Overview Discount Tyres, Newport Investing in software connected to suppliers stock databases has increased our product range and saved us significant time when ordering items
Discount Tyres is the largest independent tyre retailer in Newport. As well as stocking a large range of tyres, they also offer laser tracking, brakes and exhaust systems. Within the last five years, Discount Tyres have seen its business expand due to good service and word of mouth. Some customers are willing to travel from London in order to buy their tyres due to the competitive cost and while-you-wait service. This Case Study addresses how this South Wales SME uses software and the Internet to connect to suppliers live databases. Discount Tyres can access the database within seconds of customer queries and give a guaranteed price and delivery time over the next 24 hours. This system also expands their product range from 4,000 items held at the fitting yard to 200,000 items, providing a service which brings customers in from far and wide. This Case Study also shows how using Sage software to file tax returns via a broadband connection to the Government has benefited the business in terms of cost and time. The movement of Government services to the on-line arena has provided Discount Tyres with a more efficient system for submitting their PAYE Tax returns within minutes. Discount Tyres can be found at: - www.discount-tyres.co.uk

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eCommerce Case Study

Discount Tyres
Investing in software connected to suppliers stock databases has increased our product range and saved us significant time when ordering items

Author: - Mandeep Kaler eCommerce Innovation Centre

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Introduction
This Case Study is based on an SME that was discovered as part of research activities of the Opportunity Wales Objective 2 programme. All information is published with the full approval of the SME concerned and this particular Case Study was written by Mandeep Kaler from the eCommerce Innovation Centre at Cardiff University, the Centre of Excellence for Opportunity Wales who worked with Discount Tyres. Opportunity Wales Case Studies provide detailed descriptions from a wide range of small businesses in the Objective 2 and Transitional areas of Wales. They cover not only success stories from eCommerce but also the trials and tribulations and the hard work which successful SMEs often have to face.

The Business
Discount Tyres is the largest independent tyre retailer in Newport. As well as stocking a large range of tyres, they also offer laser tracking, brakes and exhaust systems. The business started as a sole trader in 2001 with Mr. Gareth White trading from an old garage using mainly paper based systems. For the first financial year which consisted of only 6 months, their turnover was approximately 60,000. Discount Tyres quickly grew and in 2003 become a limited company which is now run by Gareth with help from his wife Mrs. Adele White and his brother Mr. Stephen White. They employ 9 full time tyre fitters and one part time office administrator. With the business doing very well and turning over 1.2 million in the last financial year, they are considering hiring new staff for sales roles within the office and are currently looking into the possibility of additional outlets in order to expand the business into other locations. Within the last few years their competitors in Newport have decreased and those who are still in the market need to gain an advantage by embracing technology or risk seeing their customers decline. Currently, Discount Tyres identifies their main competitors as the local chain of Kwik-Fit stores and the German based Internet company My Tyres (www.mytyres.co.uk). Whereas My Tyres operate from Germany and deliver products by courier, customers still need the tyres fitted. On occasion, Gareth has found customers are willing to pay for this service. He estimates that the combined cost of buying the tyres, having them delivered from abroad and paying for their fitting, is a similar amount compared to ordering them from his company. Discount Tyres sales are made up of 20% business to business sales and around 80% business to consumer sales. Gareth recognises that the business sales are a minority, however by having big trade names on his books it gives his business more credibility. Word of mouth has helped attract customers from outside Newport. Due to the competitive pricing offered, customers are willing to travel from areas such as Bristol, Slough and London. Gareth recognises the importance of giving back to the community and this year Discount tyres organised a Charity Golf Day. Suppliers and customers had to donate 100 to a specified charity to attend and Discount Tyres covered the expenses of the day.

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Existing Technology
After their successful first year, a PC was purchased which used simple Excel type spreadsheets for basic accounting purposes. This was followed by free accounting software provided by their high street bank, which had limited use. When ordering products, employees mainly contacted and conducted business with suppliers using the telephone, so Gareth decided to expand from one phone line to six. One line would be used for the fax machine, one would be used for the PDQ (Process Data Quickly) system for processing credit or debit cards and four dedicated lines for phone calls. When a customer called about a product, an employee could put the customer on hold and phone the supplier on another phone line which would give the customer a quick response regarding product availability and price. The fitting yard originally held an account with a large phone company, who were asked to change the office phone system. However, after waiting for this company to start work for sometime, the services of phone provider Eurotel were employed. They immediately sent out a sales representative and identified Discount Tyres needs. Eurotel provided the service and in the first quarter, Gareth saw his bills cut by 40%. Impressed with this good service, Gareth also signed up to their broadband package. Gareth currently operates two PCs at the fitting yard and one PC at his home office.

eCommerce Solutions
For accounting purposes, Gareth now uses Sage Instant Accounts and Sage Payroll which is aimed at businesses with ten employees or less. The Sage Instant Accounts initially cost 260 with support and upgrades costing 150 per year. Sage Payroll originally cost 225 with support and upgrades costing 84 a year. Both pieces of software are run on his home PC as it is never used within the busy sales environment of the yard. From this software, Gareth and/or Adele can conduct payroll duties. A feature of Sage allows them to submit his Pay As You Earn (PAYE) on-line. This is an improvement on the old paper based returns as when they are ready to send the information to HM Revenues and Customs, Sage collates the information, checks the data for errors and sends it on-line via broadband within a few minutes. As Discount Tyres run a bonus scheme for employees, wages can vary. For this system, Gareth employs Internet Banking from his home office, which gives him full control of who gets paid, when they get paid and how much. Whereas Sage is useful, it can be difficult and time consuming to correct errors. However the telephone help desk support offered by Sage has been very useful in correcting any problems in the past. In December 2003, Gareth purchased a stock control system which was bespoke to the automotive parts industry. Before the purchase, enquires were made with several different providers including Sage Line 100 which offers stock control. When choosing the software the prime consideration was ease of use as staff had to be able to use this system quickly if customers were waiting on the phone or within the premises. After several demonstrations of software from various companies, the most impressive was Team Systems. The Team Systems software cost 2000 with a 750 annual maintenance fee.

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We needed a system which could be used by all staff and didnt require an IT expert to run it, Team Systems provided the best solution for an affordable amount. Team provides information on stock, daily transactions reports, account customers and suppliers. Any employees who are familiar with PCs will be able to use the system effectively after one day of watch and learn training. Figure 1: Team System

The stock system which is shown above in Figure 1 is a considerable asset when combined with the suppliers live databases as shown in Figure 2 below. If a customer were to phone up requiring a part, an employee using Team can look up the part in their warehouse. In the event that Discount Tyres did not have the part, they could enquire at several of their suppliers warehouses using the Internet. Four of the main suppliers have live databases which are accessible via a Web browser. Once an employee has logged into the Web site, the databases provide up to date information on quantity and availability. Many of the suppliers guarantee same day delivery if parts are ordered before 12pm, or next day delivery if ordered later.

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Figure 2: Suppliers Live Database

When checking the suppliers databases, an employee can order items on-line using their facilities. However, the order system has failed in the past and Gareth prefers to order via the telephone.

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Figure 3: Discount Tyres Old System Customer

1. Customer Query 3. Respond to query and take order

Discount Tyres Supplier 1 Supplier 2 Supplier 3 Supplier 4

4. Phone relevant supplier to place order

2. Phone each supplier for stock and price

Supplier X

Approximate Time: 10 minutes

Figure 3 above illustrates the old order system. After receiving a query from a customer who may be on the premises or enquiring over the phone, staff would check their own stock by looking for it in the store room. If they didnt have the item in stock, staff would phone a number of different suppliers. They would then get back to the customer with prices and delivery times. If the customer wanted the item, staff will phone the supplier and place the order. The average time for each order is ten minutes.

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Figure 4: Discount Tyres New System Customer

1. Customer Query 3. Respond to query and take order

Discount Tyres Supplier 1 Supplier 2 Supplier 3 Supplier 4

2. Check for stock and price on suppliers databases over the Internet

4. Phone or order on-line with relevant supplier

Supplier X

Approximate Time: 2 minutes

Figure 4 illustrates the new order system. After receiving a query from a customer, who may be on the premises or enquiring over the phone, staff can check the TEAM system to see if they have the item in stock. If the item is not held in stock, staff use the Internet to check the databases of suppliers. They would then get back to the customer with prices and delivery times. If the customer wanted the item, staff will phone the supplier and place the order. The average time for each order is two minutes.

Benefits
Team systems combined with the suppliers live databases can be seen as a just in time management system. Instead of tying up money in stock and having to pay for the warehouse to store them, employees can order an item and have it delivered to the fitting yard and sell it on to the customer within several hours of the customer enquiring. The order system also allows Discount Tyres to be seen as a more professional organisation. The stock system allows quick lookup of stock amongst the suppliers warehouses and a guaranteed delivery time within a few minutes of the customers initial query. This also helps with customer retention as they know that difficult to find products are available soon after they order them. Team is installed on a PC at the fitting yard which only allows one employee to login at any one time. This software and the suppliers live databases have helped reduce the amount of time and phone calls needed when looking for stock.

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Instead of Gareth phoning five suppliers for a customer query, he can check the stock and price on the system or over the Internet and make one phone call to place the order. Discount Tyres currently has ten suppliers with four using a virtual warehouse system. We can check a suppliers database and have the items with us before the end of the day. To the customer, this appears as if we have the items in stock

New System Time Saving

600 500 400 Hours 300 200 100 New System 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 Week Number Old System

The Graph above shows the time saving directly associated with the new system. The grey area indicates the time saving made when comparing the new system to the old system. Out of an average of ninety orders a day, ten will have to be ordered in. With the old system, this took an average of ten minutes an order. With the new system these orders now average two minutes. In one year of trading using the new system, Discount Tyres saved 416 working hours (or 17.33 full working days) compared to using the old system. However this only illustrates the order process and does not take into consideration the time saved during stock taking and automated billing. Most of these were paper based systems and invoices were written by hand which would be time consuming and could lead to errors. Now the invoices are produced quickly with all costs automatically calculated. The timesaving which can be measured is significant, but there are a lot of other benefits which are difficult to measure. The use of stock system technology has improved many aspects of the business. This new system stops the need to phone a customer back or have the customer wait for a long period on the phone. Being able to give a price and expected delivery time during the initial query conveys a professional service and helps retain customers. Since using the new system, average daily orders have increased by 30%. The time saving allows employees to focus on fitting tyres and fulfilling the increase in orders as well as allowing management to concentrate on more strategic matters such as growth and expansion.

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Team are also credited for listening to their customers. If users want added functionality, Team will try to fit that into the latest version they are developing. However, as Gareth is thinking of expanding to other sites where he would require networked software. Team does offer this feature but it has limited functionality. Gareth estimates that he has reduced the amount of time he would spend on filing his PAYE information. The collating and dispatch of PAYE information would take a day to complete, using on-line submission this now takes approximately 30 minutes. Not only does this save a great deal of time in terms of printing the information, checking it and posting it; the government is encouraging businesses with less than 50 employees during the 2005 to 2006 period to use the online filing system by offering a cash incentive of a 250 tax free payment which will be credited to Gareths PAYE payment record. When sending information to the accountant, Gareth backs up his Sage files onto a memory stick and hands them over so they can be accessed on Sage software at the accountants. This reduces the amount of work required in terms of collating information and time spent in terms of meeting with accountant to pass on relevant information as the accountant should have all the information required in the Sage files. Being able to send PAYE information through Sage over broadband has halved the amount of time compared to the old way of printing and posting the return in. Sage has also reduced the amount of preparation and time we spend at the accountants. Gareth currently has two PDQ machines. One of which is fixed to a line in the office and one which is mobile and connected to a mobile phone line. This allows Gareth to take the PDQ machine outside to disabled customers who have trouble accessing the office, or in the event of the phone lines going down at the fitting yard, which has happened before, he can still take payment. As the majority (66%) of the payment from consumers are via credit card, having this facility available during trading hours is paramount.

Issues
The prime reason for staff ordering over the phone and not on-line is the ability to negotiate over price. Due to market fluctuations, tyre price varies from day to day giving room for cost price and quantity negotiation. When ordering on-line, the price is fixed and therefore may not provide the best deal. If Gareth can get a discount of 1 on a particular type of tyre and he sells 500 of these units a month, then Gareth can save himself 500. Even though the stock system and the suppliers live databases have greatly reduced the need for phone calls to suppliers, it cannot replace the ability to negotiate over price and quantity. That being said, the time saving provided by this system is invaluable. The system has greatly reduced the number of phone calls as good as the system is, it leaves no room to discuss prices or quantity and cannot replace ordering from a person Knowing how to use software is important as Gareth experienced with his former accountant. When Gareth starting producing his accounts via Sage, he handed them onto the accountant who failed to tell him that he did not have any knowledge of the software.

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After a period of no work or news concerning the accounts, Gareth discovered the problem and had to find a new accountant. His paramount criterion for the new accountant was a comfortable working knowledge of Sage. When using the remote connection services with Team, a broadband connection with a static IP address is needed. However, despite requesting one from his current Internet Service Provider several months ago for his home office, they have still not changed his dynamic address to a static one. If Gareth wants to access Team from his home office, he can remotely login. This means that when he wants to logon to Team, he must find his current IP address, and change the appropriate settings of Team and then logon. For this reason, Gareth is considering a change from his current broadband supplier to Eurotel who hold their contract at the fitting yard and have proved reliable in the past. Broadband is essential in using this system from my home office or at the yard. Its unfortunate that my current ISP has been very slow in switching us from a dynamic IP to a static IP address. Although it is possible for them to easily provide this service, doing so has been a problem. Before Gareth can login to Team, he needs to make sure no one else is logged in at the fitting yard first and despite having access to the information, the Team system is only configured to print reports at the fitting yard office and at no other location. It has been identified that the business may expand to other locations and that he may need networked software to carry out similar functions. Unfortunately, Team Systems networked between different locations, does not update stock in real time. It updates stock once a day during non working hours. This means that when looking up stock at another branch, employees may be led to believe that there might be an item in stock. However that item may have been sold earlier and the database is now several hours out of date. This could lead to an awkward situation of promising customer goods which are unavailable. For this reason, Gareth understands that he may have to look elsewhere for software if and when the business expands to multiple locations.

Future
For future software, Gareth notes that having a system such as Team running on a PDA when talking to customers at the fitting yard (which could check stock, prices and print out job sheets) could help his business become more efficient. He also makes a point that he would much rather deal with suppliers using the virtual warehouse type system compared to a paper catalogue system as it benefits his business and appears more professional to customers. Gareth has had the foresight to purchase a domain name and Web space for Discount tyres. The Web site name www.discount-tyres.co.uk as shown below in Figure 5 below, was well chosen and if submitted properly to search engines could receive many visitors. The site was developed at a cost of approximately 200 and only provides basic product information, company information and a contact form. The site generates two eMail queries a day on average and Gareth recognises that the Web site could be further developed in the future but does not want to go into Web sales at this time for fear of fraud as well as the extra time and effort involved. Much of Gareths time is already spent on chasing established clients to pay their outstanding accounts and direct debit errors from suppliers taking too much money by mistake.
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Figure 5: Discount Tyres Web site www.discount-tyres.co.uk

I see there is a possibility of using the Web-site to increase sales in the future, but it is not something I can focus on at the moment

Summary
Discount Tyres has demonstrated that a traditional business can use eCommerce to benefit their supply chain system and their reputation. The company is still a young business with less than six years trading history, but has seen its turnover and reputation increase considerably. By selecting an easy to use stock management system which can provide instant information, Discount Tyres appears to have increased the amount of stock they keep on site. In reality, they have a link to the suppliers stock database and a quick delivery system which can deliver products to the fitting yard in less than 24 hours. The amount of time saved by using Team and the suppliers virtual warehouses has allowed employees to focus on fulfilling new orders which has increased by a daily average of 30%. The amount of time spent on paperwork has also been reduced as invoices are now automated. To the customer, the competitive price and speedy ordering system provides a professional service which is worth revisiting. The idea of phoning Discount Tyres for a tyre and ordering it within two minutes represents the instant attitude of the modern consumer. With the increase in Government systems going on-line, Discount Tyres has benefited in both time and cost by uploading their PAYE data via their Sage software programme. With an eye on geographical expansion new software may be required to link locations together. Technology has helped us increase sales at Discount Tyres and Im sure it will play an important part in our future expansion Discount Tyres can be found at: www.discount-tyres.co.uk
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