Executive Briefings

SPECIAL ISSUE: 100 Great Supply Chain Partners

Mercedes Partners with Connextions to Meet the e-Commerce Supply-chain Challenge

One of the fastest growing business segments for Mercedes-Benz USA (MBUSA), is its division that provides a wide variety of ancillary products and high-end accessories. According to Ed Piehler, supervisor of accessories marketing for MBUSA, much of this success is due to its partnership with Connextions, an e-commerce technology company that now provides web-based fulfillment and related supply-chain management services for the accessories division.

"For a top brand like Mercedes-Benz, it is important for the whole supply chain to be world class," says Piehler, who nominated Connextions. "Connextions has achieved the level of excellence we needed to fulfill orders from customers and our nationwide network of dealers."

In 1999, MBUSA was faced with a variety of challenges that led the company to seek outsourcing assistance to improve its accessories fulfillment:

• Products were not shipping to dealers and consumers in a timely manner, and a high percentage of orders were picked and shipped incorrectly

• The backorder rate on accessories was very high, and negatively impacted sales because it discouraged dealers from placing additional orders

• Monthly inventory and sales reports were too infrequent to provide accurate, useful business intelligence; as a result, accessories division buyers were purchasing products in larger quantities than necessary.

To meet this supply-chain challenge, MBUSA selected Connextions in 2000. They jointly embarked on a complex systems integration project incorporating supply-chain management, vendor management, inventory handling, a retail web site, corporate financial management systems, a special dealer web site and the automotive company's New Jersey-based customer assistance center. The result was an information technology infrastructure that connected and integrated the Mercedes web site, print catalog, internal customer care operations and nationwide retailer dealers network with Connextions' web-enabled fulfillment facility in Orlando. From that location, Connextions fulfills orders for automotive accessories, gifts, collectibles and apparel placed through Mercedes-Benz's web site, catalog and corporate intranet. Fulfillment services encompass receiving, inventory management, warehousing, order fulfillment, packaging and shipping for more than 1,800 different products.

Connextions manages a central data repository for the integrated system, enabling real-time access to information on all inventory, sales, order entry, fulfillment, customer relationship and shipping information for Mercedes customer care and dealership personnel. Connextions also provides supply-chain management for the accessories division, creating an integrated information system in which minimum inventory levels trigger the production of automatic purchase orders to vendors.

Every MBUSA dealer is connected to this powerfully effective system. Within a few months, back-order rates plunged. While 56 percent of orders had been on back order before the Connextions system, that number dropped to 15 percent shortly after the system was launched in 2000. The back-order rate has since been pared to just 7.5 percent.

Since the new system launched, revenue from the sale of accessories has increased annually by 30 percent, while the cost of carrying inventory has decreased by half. Obsolescent inventory is down to one fourth the level it was in 2000. Vendor compliance, which stood at 19 percent in 2000, is now at 93 percent. Lastly, because of better back-order management and freight management, freight costs have been reduced by 25 percent.

"We talked with a lot of companies before selecting Connextions for this initiative," says Piehler. "Connextions' sophisticated systems technology and futuristic thinking are what made them stand out in a crowded field and won them our business."

One of the fastest growing business segments for Mercedes-Benz USA (MBUSA), is its division that provides a wide variety of ancillary products and high-end accessories. According to Ed Piehler, supervisor of accessories marketing for MBUSA, much of this success is due to its partnership with Connextions, an e-commerce technology company that now provides web-based fulfillment and related supply-chain management services for the accessories division.

"For a top brand like Mercedes-Benz, it is important for the whole supply chain to be world class," says Piehler, who nominated Connextions. "Connextions has achieved the level of excellence we needed to fulfill orders from customers and our nationwide network of dealers."

In 1999, MBUSA was faced with a variety of challenges that led the company to seek outsourcing assistance to improve its accessories fulfillment:

• Products were not shipping to dealers and consumers in a timely manner, and a high percentage of orders were picked and shipped incorrectly

• The backorder rate on accessories was very high, and negatively impacted sales because it discouraged dealers from placing additional orders

• Monthly inventory and sales reports were too infrequent to provide accurate, useful business intelligence; as a result, accessories division buyers were purchasing products in larger quantities than necessary.

To meet this supply-chain challenge, MBUSA selected Connextions in 2000. They jointly embarked on a complex systems integration project incorporating supply-chain management, vendor management, inventory handling, a retail web site, corporate financial management systems, a special dealer web site and the automotive company's New Jersey-based customer assistance center. The result was an information technology infrastructure that connected and integrated the Mercedes web site, print catalog, internal customer care operations and nationwide retailer dealers network with Connextions' web-enabled fulfillment facility in Orlando. From that location, Connextions fulfills orders for automotive accessories, gifts, collectibles and apparel placed through Mercedes-Benz's web site, catalog and corporate intranet. Fulfillment services encompass receiving, inventory management, warehousing, order fulfillment, packaging and shipping for more than 1,800 different products.

Connextions manages a central data repository for the integrated system, enabling real-time access to information on all inventory, sales, order entry, fulfillment, customer relationship and shipping information for Mercedes customer care and dealership personnel. Connextions also provides supply-chain management for the accessories division, creating an integrated information system in which minimum inventory levels trigger the production of automatic purchase orders to vendors.

Every MBUSA dealer is connected to this powerfully effective system. Within a few months, back-order rates plunged. While 56 percent of orders had been on back order before the Connextions system, that number dropped to 15 percent shortly after the system was launched in 2000. The back-order rate has since been pared to just 7.5 percent.

Since the new system launched, revenue from the sale of accessories has increased annually by 30 percent, while the cost of carrying inventory has decreased by half. Obsolescent inventory is down to one fourth the level it was in 2000. Vendor compliance, which stood at 19 percent in 2000, is now at 93 percent. Lastly, because of better back-order management and freight management, freight costs have been reduced by 25 percent.

"We talked with a lot of companies before selecting Connextions for this initiative," says Piehler. "Connextions' sophisticated systems technology and futuristic thinking are what made them stand out in a crowded field and won them our business."