Success Story

HVAC Distributors

HVAC Distributors

How LBMX bolstered one entrepreneur's EDI efforts

When Dave McIlwaine, the president of HVAC Distributors
(HVAC), says, "I enjoy the challenge of growing a business," he means it. When he opened the doors of his heating and air conditioning equipment business with one location in Mount Joy, Pennsylvania in 1987, he had three full time employees and a handful of customers.

Today, with 14 locations in the northeastern United States, and an employee count nearing 150, the number of HVAC customers hovers around 3,500. They are primarily contractors hired to install furnaces and air conditioners in homes or businesses, and mechanical contractors who oversee large commercial projects.

Dave balances his entrepreneurial drive with a certain pragmatism that has zero tolerance for inefficiency, "and there's nothing efficient about mountains of paper invoices."

That operational approach is what set HVAC on a path to EDI in 2004. Potential increases in productivity (automatic integration with AP/AR software) and accuracy (no manual rekeying) spurred Dave to delve into the technology platform on his own.

He made some headway. Though the process wasn't smooth, years later HVAC would be electronically exchanging documents with 20 vendors. But that wasn't even half of his purchasing volume. Overall, the results were mediocre.

Of course, this self-described competitor didn't stop growing his business. When the opportunity for explosive expansion came knocking, he knew he needed help to dramatically increase his number of EDI vendors, and here's why: the pending acquisition meant considerable accounts payable work. His choices were either hire an additional AP staff member, or get more vendors utilizing EDI.

Fortunately, the board of directors at Blue Hawk, the Arizona-based buying group to which HVAC belongs, was considering an EDI platform and happened to be interviewing technology providers - LBMX was one of them. Dave, also a member of the group's board, immediately recognized the benefits the team could deliver to Blue Hawk and HVAC: they understood his business, knew his supply chain, appreciated his entrepreneurial spirit, and had the platform to support all three, seamlessly.

This is his journey to EDI with LBMX.

Where he was - Before EDI with LBMX

Along with the mountains of paper invoices, Dave describes operational headaches like buyers wasting time tracking down lost POs, confirming whether they were even sent or received, the hours spent manually rekeying paperwork and the ensuing inaccuracies caused by human error.

In 2004, this entrepreneur who loves a challenge and loathes inefficiency, sought to implement EDI though many of his vendors didn't have turnkey capabilities, or - and more importantly - the resources, wherewithal, or desire to engage the platform with smaller customers.

"You have to fight with every vendor," is how he sums up the experience, echoing that of other independent entrepreneurs who have tried the same thing.

Assuming the vendor actually has interest and there is qualified technical expertise on hand, a typical entrepreneur-driven conversation about EDI goes something like this: Determine the vendor's file format, map the fields to their own; establish and ensure the right connection to send/receive files; analyze hundreds of them for accuracy and certify the end result. That done, now comes the ongoing maintenance to find, flag and troubleshoot errors. (If paying hourly for the external technical support, fingers crossed for a short list.) Rinse and repeat with the next vendor.

"But the gains to be had in productivity and accuracy." Dave reassures, "that's why we embraced EDI wholeheartedly."

Arduous and complex, the process will test the tenacity of any business owner, maybe leave them questioning whether the EDI juice is worth the squeeze. "But the gains to be had in productivity and accuracy." Dave reassures, "that's why we embraced EDI wholeheartedly."

Though up and running, the EDI platform was far from maximizing its potential. Ten years later (pre-LBMX), only 20 of HVAC vendors would be on EDI, representing about 45 percent of the purchase volume.

He needed a better way, and not just because the process was chipping away at the goal of efficiency, either - growth opportunity was knocking. At the best of times, integrating acquisitions can have management mired in complexity, deciphering legacy software, practices and procedures, establishing new ones, while attempting to keep the business running hitch-free. In Dave's view, part of what would make the impending acquisition a successful one was flowing 85% of his purchase volume through EDI.

Making the right choice - Why EDI with LBMX

Choosing an EDI technology partner meant examining their technical expertise along with their business acumen. In early 2014, Dave found both in LBMX.

A history of working exclusively with independents and groups has afforded LBMX a unique behind-the-curtain view of how groups run. They understand the supply chain and apply that insight to the EDI onboarding process, and as a result, can integrate high volumes of vendors quickly, easily, and accurately. "In the coop realm, they are the ones to talk to," confirms Dave.

Giving technical expertise and business acumen their due, he points out that scalability was the biggest benefit with LBMX. "The beauty of what they brought to the table is single mapping. You don't have to reinvent the wheel every time with every vendor."

Mapping is the process of decoding the format or 'language' of a document. Each requires translation and can vary from vendor to vendor. Working with 20 vendors meant HVAC was managing an equal number of maps, if not more. Multiply that time consuming, labour intensive process by an untold number of vendors, and for many entrepreneurs, the juice + squeeze = not worth it EDI equation rears its head.

LBMX's one-to-many map technology eliminated all of that, saving time and certainly money. Not only did Dave and his team benefit, but vendors did as well. From his perspective, it removed a big barrier to entry: "By us working with LBMX, the vendor only has one map to worry about - their own. That's a big, big deal, and makes it easy for them to do EDI."

The Solution

The LBMX EDI solution for HVAC would ultimately include the capability to exchange four key business documents with vendors: Purchase orders and acknowledgements (POs and POAs, respectively), advance ship notices, and invoices.

What's more is it would fully integrate with their existing enterprise software (ERP), because LBMX applies the customer's system requirements when they create the single in- and out-bound maps.

Tom Jones, Director of E-Business at LBMX and lead on the HVAC project, explains how that approach allows them "to view the supply chain as a whole as opposed to individual segments that each require customization." LBMX easily deals with multi-mapping complexities by accommodating any file format a vendor chooses. EDI reads, translates and integrates it into the customer's ERP, which defined the parameters from the outset. Changing file formats isn't a problem, the system simply adapts. Working with LBMX meant zero maintenance, management and full technical support - from mapping and translation, to connections, certification and troubleshooting.

All of it a far cry from the labour-intensive process Dave and his team had undertaken on their own.

The swift pace with which LBMX integrated HVAC vendors could be attributed to how their implementation team managed the project, as much as it could the technology. "To us, EDI rollouts are a marketing campaign that requires proactive vendor follow up, encouragement and championing. They are never just about software integration," says Tom. To keep things moving with people, LBMX stayed in regular contact with vendors, constantly emphasizing the benefits of EDI; time- tested, perfected technology and expertise took care of the rest.

Where he is now - After EDI with LBMX

From the 1987 beginnings in eastern Pennsylvania, Dave expanded the reach of HVAC Distributors slowly and organically, to the New Jersey border. August 2014, however, marked the end of a period of explosive growth. Over eight intense months, he opened and acquired new locations that added Delaware, Maryland, northern and West Virginia, western Pennsylvania, and upstate New York, to the HVAC service footprint.

LBMX's EDI platform was the perfect vehicle to have on that expansion journey, given that it allowed Dave to integrate large numbers of new vendors, documents and invoices into the business without adding resources in Accounts Payable. "When we acquired a new company, we virtually eliminated all associated back office costs," notes Dave, which taps into his desire to run his business with a lean mentality and a mindset for continuous improvement.

Today, HVAC electronically transacts 85 percent of their purchase volume. Theirs is such a success story that Blue Hawk engaged an LBMX-implemented EDI program for all of their 226 members who operate over 1,200 locations throughout the U.S.

Two years after the implementation, Blue Hawk has fully realized the positive impact of EDI on their group. They have complete, real-time visibility into member purchase information down to the SKU level, and hundreds of thousands of invoices automatically flow through their system, vastly improving accuracy in records and billing which also impacts their rebates. Because it is a group program, Blue Hawk can offer members with smaller operations a turnkey EDI solution.

Where he will go - The future with EDI by LBMX

Implementing EDI wasn't just a savings and efficiencies initiative, Dave sees big potential for otherparts of his business. He wants to do EDI with his customers - not just his vendors - particularly the larger ones. The platform now becomes part of his customer build and retention strategy. "Anything we can do to streamline our operations reduces our costs and makes our customer's lives easier. That's where they will see even more value in doing business with us."

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