St. Paul Plumbing and Heating, Co.

Started in 1918, St. Paul Plumbing and Heating, a fourth generation company, provides plumbing and heating services to St. Paul, Minnesota and the surrounding area. The company was using a RealWorld solution; but they wanted to improve their customer and job tracking abilities. Microsoft reselling partner, NorComp Corporation promised St. Paul Plumbing that Microsoft Business Solutions–Navision (now part of Microsoft Dynamics™) could help stop their profits from draining away. Since implementation, this software has helped St. Paul Plumbing track job costs enabling them to identify unprofitable departments and effectively plug the leaks on company profits. With this assistance, they realized an increase of over eight percent profitability in the first year following implementation. Accounts receivable (AR) decreased by 40 percent and the company has been able to reduce office staff by one-third. While reducing inventory, the company has increased inventory turns from 2 to 12, a 500 percent increase. With improved reporting, St. Paul Plumbing is able to accurately track their customer base. This allows them to better target their advertising dollars to areas where they would like to expand their service.

Situation

With over 85 years in business, St. Paul Plumbing and Heating is a fourth generation company serving residential and commercial customers in, or near, St. Paul, Minnesota. Until about nine years ago, the company serviced plumbing needs only. At that time, owner David Smith decided to expand beyond being the "neighborhood plumber" and "take the company to the next level."

With 22 service units, the company is now one of the largest residential plumbing and heating firms in the Twin Cities. They employ 20 technicians (plumbers, fitters, and sheet metal workers) from three different unions and have a total of 38 employees.

Prior to implementing their new solution, the company was using RealWorld, a Microsoft MS-DOS®-based solution. This software relied on Microsoft Excel and required copies of reports to be moved into spreadsheets. This software often provided inaccurate data and failed to provide timely information.

St. Paul Plumbing wanted a solution that would improve tracking of their customer base and improve their invoicing and billing processes. "We wanted more control of the numbers than we could get from our RealWorld solution," says Dale Ostendorf, Operations Manager for the company.

They also wanted the ability to do job costing to determine which areas of the company were profitable and which areas were losing money. "We had no good method of tracking the hours put into a job," says Wayne Johnson, Controller.

Solution

Microsoft reselling partner, NorComp Corporation, encouraged St. Paul Plumbing and Heating to migrate to Microsoft Business Solutions–Navision® by telling them they would increase profits and be able to reduce accounting time within the first year. With the help of NorComp, St. Paul Plumbing implemented Microsoft Navision in April 2002. Modules implemented include Supply Chain Management, Financial Management, Project Management, and Analytics and Reporting. Field Management has since been added also.

One of the reasons St. Paul Plumbing chose Microsoft Navision was that it could be implemented cost effectively on their existing hardware, Microsoft Networking, with PCs on each desk.

Customizations included service ticket modifications to include customer tracking information. This information has helped the company better target advertising strategies to specific areas of the Twin Cities.

NorComp provided both off-site and on-site training for the employees of St. Paul Plumbing. Since office employees were comfortable with the old software, the initial reaction of these employees was one of resistance. However, within a month this attitude changed. Employees quickly recognized how obsolete the previous solution was; they realized the new solution was far more productive and much easier to use than their previous software.

Benefits

Increased Profitability

Since implementing Microsoft Navision, profits for St. Paul Plumbing have increased more than eight percent over the same time period for the previous year.

Improved cash flow

The improved tracking of receivables has improved cash flow for St. Paul Plumbing

Ability to track job costs

"We had a huge amount of money going out the door," says Johnson. "The ability to track job costs has helped us identify what departments were not making a profit." Following implementation of Microsoft Navision, St. Paul Plumbing recognized that the Mechanical and Remodeling departments lacked profitability; these departments have since been eliminated.

Staff reductions

While increasing business, St. Paul Plumbing was able to reduce staff for service calls, office administration, and collections from a total of 12 to eight staff members. This 33 percent reduction provided savings of over $120,000. These reductions would have been even larger if company sales had not increased significantly. The "look-up" ability of Microsoft Navision allows all staff to easily find customer information as needed. When a customer calls in, information from the call is easily entered into the computer for later reference.

Reduced paper usage

St. Paul Plumbing has reduced their paper usage by "boxes and boxes" of paper since implementing their new solution. "We used to print a 300-page report on a regular basis; now, printing sales slips is our most significant print job," says Johnson.

Reduced Staff Training Time

When employee turnover occurs, the time managers now spend training new staff is significantly less since the implementation of their new solution. "Because receivables and payables are so similar, when a person learns one system, they have essentially learned them both," says Johnson. This software allows management to spend more time building their business and less time training new employees.

Improved Account Receivables

Accounts receivable have been "substantially" reduced by 40 percent following implementation. Microsoft Navision allows St. Paul Plumbing to invoice directly into the job and immediately bill their customers. It also improves their ability to track customers and to identify whether the requested "50 percent up front" has been paid prior to beginning the job.

In a highly mobile community, St. Paul Plumbing previously had problems with home owners who had repairs completed and then sold their home and moved. The company was often unable to follow these customers and collect money due to them. With the immediate billing capability of this software, collections are more timely and problems have been reduced by 50 percent.

Inventory Improvements

St. Paul Plumbing has experienced significant inventory improvements since implementing this solution.

Increased inventory turns

St. Paul Plumbing previously turned inventory about twice a year. Since implementing Microsoft Navision, they are now able to turn inventory over in less than a month for an increase from two to more than twelve turns annually.

Inventory reduced

Improved inventory tracking has allowed St. Paul Plumbing to "definitely" reduce inventory and increase cash flow. "Warehouse managers can see what's in the system and what needs to be ordered," says Ostendorf. This inventory reduction has also resulted in less shrinkage and loss of inventory.

Improved Reporting

Weekly reports are now generated to provide top management with vital information about their customer base including customer location, repeat/return customer data, identification of reasons why customers choose to use St. Paul Plumbing, and the impacts of current advertising dollars. They are now able to view information about the income and expenses for the entire company, as well as for individual departments.

Drill down ability

Improved reporting has provided St. Paul Plumbing the ability to drill down and identify the costs associated with each job. This feature enables them to identify the profitability level of each department of the company and to eliminate unprofitable areas. Previously, they were spending time and money on unprofitable departments without realizing which departments were unprofitable. The software also provides management with the ability to identify which technicians are bidding profitable jobs, and thus helps them easily track job performance of the technicians. Technicians are now rewarded with bonuses for profitable jobs. Since St. Paul Plumbing operates as a COD business, technicians can contact the office to obtain current price information when needed.

Flexibility

Reports in Microsoft Navision are easily modified to provide exactly the information needed.

Easy identification of specific characteristics of the customer base

Improved reporting allows St. Paul Plumbing to easily track the location of their current customer base. "Until we implemented Microsoft Navision, we thought Minneapolis was our main draw," says Johnson. "With improved reporting, we learned that St. Paul was our strongest base and the suburbs of St. Paul were the second strongest area. We learned we weren't reaching Minneapolis as much as we thought we were."

Improved marketing to targeted areas

By accurately identifying their current customer base, St. Paul Plumbing has been able to target advertising dollars to areas where they would like to expand.

"I have worked with a number of different accounting systems. This package has provided me with the absolute most information that I could ever need or want," says Johnson.