Fender Aims for Consolidation with SAP

From Jimi Hendrix to Sheryl Crow, rockers have been electrifying audiences for almost 60 years using guitars from Fender Musical Instruments Corp. (FMIC). Founded in 1946 by innovator Leo Fender, the eponymous company has grown to become a beloved American icon. Today it counts the world’s greatest musicians from every genre, jazz, rock, blues and country alike, as loyal customers.
Fender broke new ground with Broadcaster, the first-ever electric guitar, which morphed into the famed solid-body Telecaster and a complete line of guitars, amplifiers, electric basses, mandolins, banjos and violins and other musical gear. With products of cutting-edge form and function, the company is a trendsetter and the undisputed No. 1 electric guitar maker in the world. Its headquarters are in Scottsdale, Ariz., and it has three manufacturing facilities, two custom design shops and operations in nine countries.

An Eric Clapton Stratocaster guitar
An Eric Clapton Stratocaster guitar

FMIC’s array of high-quality products includes the Stratocaster guitar, the Jag-Stang, Muddy Waters Telecaster guitar, and the Acoustasonic SFX II amplifier, as well as strings, parts, cases and sportswear. FMIC also manufactures handcrafted custom guitars, each with frets and woodwork created to exact, unique specifications. Fender’s custom shops are havens in Corona, Calif. and Nashville, Tenn., where experienced designers work in state-of-the-art facilities. In addition to the Fender brand, FMIC is renowned for its Manuel Rodriguez brand of Spanish-made classical guitars, and its Squier, Benedetto, SWR, Jackson, Charvel, Gretsch and Guild brand instruments.

FMIC builds on its proud history

Known as a company of true music lovers, FMIC prides itself on making instruments that create powerful, unforgettable sounds, distinctive enough for Eric Clapton, Tom Petty, Pete Townsend and John Mayer. Hendrix’s hair-raising, electrified rendition of “The Star-Spangled Banner” is just one classic moment where history was made with a Fender guitar. In June 2003, another small piece of history was made when FMIC presented SAP founder Hasso Plattner with his own custom Fender guitar.

Fender guitar for SAP founder Hasso Plattner
Fender guitar for SAP founder Hasso Plattner

That exchange marked the beginning of new relationship between FMIC and SAP. The two companies on June 16 announced that FMIC will implement the mySAP Business Suite as part of an overall upgrade to its manufacturing, supply chain, customer service and financial systems. FMIC, says Patti Walker, the company’s chief information officer, has recognized that the time has come to replace its 20-year-old legacy applications.
“I do believe this will differentiate us in our market,” says Walker. During the next nine months a team of FMIC and SAP Systems Integration (SAP SI) America staff will consolidate and streamline crucial business processes with SAP solutions. As a growing mid-size company, FMIC joins the other 5,500 firms to adopt SAP enterprise resource planning (ERP) software designed specifically for the small- and mid-size market.
Over its half-decade in business, FMIC has made a series of acquisitions to bolster its product line and grow its manufacturing and distribution capabilities. As the company took aim and succeeded in becoming the preferred full-service guitar manufacturer and distributor for all users, from the seasoned professional to the hobbyist, its customer base and global reach expanded.
By early 2003, the company was a world leader, but it also had some unintegrated computer systems that had sprung up over time as FMIC added individual users and units in disparate locations. With FMIC’s new SAP system, its enterprise-wide processes will be integrated and optimized.
“The whole idea of the SAP integration is to consolidate and simplify,” says Walker. FMIC will install mySAP Customer Relationship Management (mySAP CRM), mySAP Supply Chain Management (mySAP SCM) and mySAP Financials. By April 1, 2004, Fender’s new SAP system is expected to be up and running, she says.

SAP hits a high-quality note to win FMIC’s confidence

Before selecting SAP, FMIC did a structured request for proposals (RFP) over three months. That process included representatives from all FMIC business units. Customer service, manufacturing and other key groups gave input to ensure that the final vendor decision was not only information technology-driven, but a true business process collaboration. “We put a steering committee in place and a functional committee in place and the entire enterprise was part of the process,” says Walker.
FMIC turned to data from researcher Gartner Inc. to narrow contenders down to the top four vendors in the ERP market. The final choice would have to meet six specific criteria, says Walker:

  1. The new system had to be a single, fully integrated ERP system.
  2. It had to offer a total cost of ownership that was affordable not only to buy and to implement but to maintain.
  3. It had to meet music industry-specific needs in manufacturing, billing and customer service processes.
  4. The vendor had to be financially solvent, so FMIC had assurance it would be responsive to future service needs and committed to a long-term relationship.
  5. It had to have open system architecture, so that Web-based services and partners or suppliers could be integrated over time as needed.
  6. The vendor had to be a proven international business with the ability to handle multiple currencies, multiple countries and a global supply chain.

SAP met and exceeded the guidelines, says Walker, beating out PeopleSoft, J.D. Edwards and Oracle for the FMIC contract. “We were courted very heavily by all of the companies. Everybody recognized the Fender name and wanted the affiliation with the sexy product,” she says.
Worth noting, Walker adds, is that during the extensive RFP process, the other vendors never mentioned pending merger activity. She says she was surprised when possible acquisitions – PeopleSoft of J.D. Edwards and Oracle of PeopleSoft – were made public. Walker says she dodged a bullet by choosing SAP.
“An organizational merge creates internal turmoil at the companies that affects everything, from products, modules, technologies, tools and databases as well as people and organizational hierarchy. SAP doesn’t have any of that noise, so they are going to launch even further ahead as a pioneer,” says Walker.
Walker also credits mySAP Business Suite’s open architecture and Web-capable NetWeaver integration layer as features that clinched the IT vote. “That was one of the major considerations for my technology team and why SAP nudged ahead for our vote,” she says.
And, she was completely sold when she learned that 96 of the top 100 consumer goods companies in the world use SAP software. SAP is the world leader in the ERP market with revenue this year expected to be more than $7.4 billion, according to AMR Research. Its No. 1 status and its 30-year history helped convince Walker and FMIC that the partnership with SAP will stand the test of time.
Walker admits that SAP risked losing the deal early on, because she at first had difficulty getting a response from SAP directly, rather than an SAP partner. That issue was resolved, she says, once she established direct contact with SAP. “My account executive, Kyle Garman, is awesome. He makes things happen,” she says.

On the upgrade path

Now that the SAP integration is in progress, FMIC is looking forward to an all-in-one, fully integrated ERP system. “We’ll have a complete view of enterprise processes from all key business areas,” says Walker. She points to a few specific areas in which FMIC expects to see business process improvements.
In manufacturing, for instance, FMIC maintains the most-rigorous quality standards. A large amount of its business is moving towards custom orders and FMIC’s new mySAP SCM system will enable it to more easily manage production of both standard and custom instruments. The SAP system will provide accurate tracking of engineered-to-order products. It also will let FMIC readily accommodate a flexible manufacturing schedule and respond to the ebb and flow of daily demand patterns.
FMIC expects to see improvements in its already stellar customer service too. “We always expect our customer service to be the best in any industry,” says Walker. mySAP CRM will contribute to keeping its high quality service benchmarks because it provides customer and product data at the fingertips of customer service representatives. Using mySAP CRM, FMIC staff quickly will be able to access warranties, replacement parts research and new product registration.
Finally, mySAP Financials will let FMIC closely track inventory turn time and order shipment time and other relevant metrics. The comprehensive SAP system provides the most accurate budgeting, forecasting and demand planning of any ERP system.
About 25 people from FMIC will devote 25 percent to 30 percent of each workweek to the integration and 10 or so from SAP SI will be part of the team. The integration is expected go live after the first quarter 2004, but that won’t be the end of IT innovation and upgrades at the company.
Walker says it’s probable that FMIC will launch a Web portal so customers can do online purchasing. FMIC serves an array of small mom-and-pop shops as well as large musical instrument superstores. Future plans call for some portion of orders to migrate to a simple, Web-based platform. When the time comes, mySAP Business Suite can seamlessly enable the transition, so FMIC can stay focused on cranking out its top-of-the-line instruments.

SAP supports the future growth

As FMIC’s customer base expands and the company continues to grow from mid-size to a larger enterprise, SAP will be there to support it. FMIC facilities in the U.S., Mexico, UK, France, Germany, Sweden, Belgium, Spain and Japan, as well as its manufacturing partners in Korea and China will continue to be efficiently linked, consolidated and simplified with SAP systems.
The mySAP Business Suite integration is just another bold step for a luminary company with an even brighter future. “We are a leader in our market,” said Walker. “And we remain so through the consistency and quality of our products and our very rich history. We have the name people trust.”

Sarah Z. Sleeper
Sarah Z. Sleeper