Moving Parts, Losing Paper

Outside it's another sizzling day in Phoenix, with triple digits in the shade, and CSK Auto Inc. CIO Larry Buresh wishes it were hotter. "Extremes break cars," he says. "Extreme heat, extreme cold. In this business, you hate moderate weather."

CSK is one of the largest auto parts retailers in the country, a publicly traded company that grossed $1.6 billion last year from its three brands: Checker Auto Parts, Schuck's Auto Supply and Kragen Auto Parts. The automotive aftermarket is a $110-billion-a-year business -- a tough, low-margin space dominated by a few midmarket firms and a larger rival, AutoZone Inc. Last year, CSK's sales were essentially flat; in the company's annual report, CEO Maynard Jenkins admitted that 2004 had been "a challenging year" for CSK. Since Henry Ford began rolling out the Model T in 1908, not much has changed in the automotive aftermarket. With practices such as generating four copies of a delivery notice and using vendor-specific parts catalogs that are the size of the Yellow Pages, the parts business lives on paper. But not, Buresh hopes, for long; he's trying to reinvent the business by going paperless.

"We have a long-term goal of eliminating all the paper from stores to corporate," he says. "There are improvements in efficiencies every time you eliminate a form. If you create paper, someone has to do something with it, whether it is file it, send it, find it, shred it, etc. When the information can be electronically encrypted, sent, stored, searched and deleted with a minimum of labor, you have improved your efficiency as well as established a more secure environment."

The proving ground for CSK's technology is a small room in corporate headquarters that looks like a tiny auto parts store. There are a couple of checkout lines and shelves stocked with trailer hitches and car bras. Here is where the company's 120-person IT staff tests new technology before rolling it out to its more than 1,100 retail outlets in 19 Western states.

"We bring field people in here and beat on stuff," Buresh says.

The average CSK store is about 7,200 square feet and is stuffed with 17,500 items, but a network of supply depots and online links to dozens of vendors put a million parts within a day's delivery -- a cat's cradle of logistical challenges and paper trails that IT is helping the company untangle. The company, for example, is two years into a three-year, $15-million-to-$20-million upgrade of its decade-old retail store hardware, which has helped speed up transactions.

But the biggest innovations are going on behind the scenes. Michael Marshall, an applications development manager, shows off a black pistol-like device, which looks more like a Star Trek phaser than one of those bulky scanners that United Parcel Service of America drivers carry: the front end to a new paperless proof-of-delivery system that was rolled out last year. (Like many midmarket firms, CSK is adopting technologies that, while cool and brand-new for the company, have been used by bigger companies for several years.)

A fifth of the company's sales -- and its fastest growth area -- is the wholesale business, whereby the company sells and delivers parts to garages and mechanics, in most cases within 30 to 45 minutes of receiving an order. Until last year, a delivery required four paper copies of a signed delivery receipt: one for the recipient, another mailed to the recipient's corporate office, a third for the branch store and a fourth sent to CSK's headquarters for scanning into a database. The signature scanner, which mixes an off-the-shelf handheld unit with in-house written software, cut that to a single piece: the buyer's receipt.

When the delivery person returns to the store, the data is sent to an optical storage drive in the company's data center, which allows, among other things, the customer to track orders on the Web. The system eliminated 600,000 paper invoices a year.

"That was one of the biggest wins for us," Buresh beams. "This had a less than one-year ROI. One of the biggest paper generators was delivery notices."

Marshall zaps a signature with a flash of green and red light.

"I'm getting pretty good at this," he says.

"Pretty soon we'll let you deliver parts," Buresh jokes.

"If they'd trust me with a car," Marshall says.

Back of the Pack
The automotive aftermarket has been one of the retail segments slowest to embrace paperless technology. "It's a 100-year-old industry where the margins are tight and efficiencies are the last hurdle," says Dan Jondron, an automotive aftermarket analyst who is president of Advanced Digital Strategies LLC, a consulting firm in Trinidad, Colo. He notes that bad data, much of it attributable to lost or out-of-date paperwork, costs the industry $7 billion a year.

"All the major players are very focused on fixing this issue. It's become a competitive advantage," he says. "But some of these companies have systems that have been running for 50, 60 years, and the idea of jumping into something new makes them reluctant to change the system. I talked to one gentleman who said, 'I hope I retire before all this technology changes.'"

"There's a huge ROI to be gained," agrees Jesus Arriaga, CIO at Keystone Automotive Industries Inc., a $558-million-a-year parts distributor in Pomona, Calif. "The aftermarket is finally embracing technology as a tool it needs, but most of the industry is barely scratching the surface. CSK and AutoZone are on the forefront, but most of the aftermarket is talking about technology that has been around for years as if it were brand-new. The roots of the business are mom-and-pop shops, but you can't operate that way anymore." CSK has no choice but to try to use technology to enter into a paperless workplace. While the long-term trend of aging SUVs bodes well for the industry, record gas prices have meant that people are driving less and needing fewer auto parts. CSK's same-store sales fell 0.7% in 2004, a bad year for the whole industry. Rival AutoZone Inc., for example, posted zero growth on same stores.

"We're a low-cost operator," Buresh says. "That's our credo. We have to find efficiencies and effective ways to run the business."

This fall, CSK is deploying another new (for it) technology to cut its dependence on paper: personal digital assistants. The company is arming all its district managers, each of whom is responsible for up to 15 stores, with the devices to give them instant access to an ocean of sales data.

Instead of paging through large binders searching for store arcana, managers will be able to tap into the company's 15-terabyte data warehouse and sort figures by all sorts of metrics.

"It arms our district managers with a tremendous amount of resources and data they didn't have before," Buresh says. "We're giving them very useful information in an easy-to-access way. We spent as much time on drilldown and display techniques as we did writing the whole system. Graphics make concepts and trends much more visible."

By Popular Demand

The sun dips below Phoenix's rocky horizon, but the temperature barely falls at the Firebird International Raceway on the outskirts of town, where it's a Dantesque scene of burning sky, noise and smoke. It's a Saturday night display of technology gone wild at a funny-car-versus-jet-car race sponsored by CSK.

A four-story, remote-controlled, fire-breathing, 60,000-pound metallic monster called Robosaurus attacks a line of cars. The machine grabs a car in its forklift-like arms, sprays it with fire, rips the vehicle in half and then hurls the flaming wreckage to the ground. The crowd loves it. "Robosaurus rocks!" shouts one young fan.

Robosaurus might have its own ideas about cutting through waste, but at CSK Buresh believes in a more orderly approach. "We don't want to do technology for technology's sake, but there are a lot of options to use tech effectively," Buresh says.

The company was founded as Checker Auto Parts in 1969 and acquired two other Western chains, Schuck's Auto Supply and Kragen Auto Parts. In 1998, Buresh joined. A 16-year veteran of retail giant Sears, Buresh has also worked stints in the furniture and nursery businesses. In 1995 he moved into the automotive aftermarket industry, joining Chief Auto Parts as its CIO before the company was acquired by AutoZone. Three years later, he jumped to AutoZone's competitor, CSK.

"Automotive aftermarket was probably behind general retailing in technology," Buresh says. "No one was doing data warehousing. Now it's an essential tool and growing. Over the last five years, the industry as a whole has moved ahead pretty quickly. I've watched IT go from a necessary evil for operations to a strategic tool."

The company's 2,800-square-foot data center includes AS/400s, 100 servers, four Hewlett-Packard Unix boxes running PeopleSoft software. The most powerful box hosts a data warehouse. A single AS/400 handles store transactions and communications, processing payments and updating inventory in real time. But the company spends only 1.1% of its revenue on IT, less than the retail average of about 2% or 3%, which means that each technology buck has to be stretched as far as it will go.

"The mandate here is, "Don't do anything without ROI,'" Buresh says. "We don't do things because they are nice to have; we do them because we see a strategic value to them."

If there's a Robosarus in CSK's marketplace, it's AutoZone, a $5.7 billion behemoth with three times the number of retail outlets as was CSK, a national footprint as well as a burgeoning business in Mexico.

The two competitors are racing to make inroads in the $60-billion-a-year professional auto repair market, which increases demands on inventory tracking since both companies promise to find a part and deliver it to a garage in half an hour -- a juggling act sped up through Internet technology and, conversely, slowed by paper and telephone calls.

"These installers have a car on the rack, and they don't want to wait for a part because it's not generating revenue if it's just sitting there," Buresh notes. "We do as much real-time monitoring as we can. It's very important we have surround-store capability. If a store is out of stock or doesn't carry the item, the clerk can check the surrounding stores and find the part for the customer. It's a big feature for us."

Electronic Parts
To understand CSK's dependence on paper, visit one of the company's retail stores. At first glance, it's an overwhelming blur of parts -- everything from alternators to windshield wipers. Until last year, if you wanted to find many parts, you'd have to dig through rows of catalogs or ask a clerk, who'd then look up the item. Now CSK has two electronic aids.

Buresh shows off a computer kiosk in the middle of the store. If you're looking for, say, a starter for a 1986 Alfa Romeo Spider, good luck finding it on the shelves or in a telephone book-sized catalog of parts. "By the time the catalogs get on the shelves, they're probably outdated," Buresh says.

But the kiosk quickly tells you that two vendors in CSK's network do stock the part, which can be delivered the next day for free. And throughout the store, there are small-screen browsers that you can use to find out if the store carries a compatible part, and if so, which aisle it's located in.

Behind the browsers and the kiosk is a new electronic parts catalog (EPC) -- the IT department's magnum opus -- with more than a million items filling a 6-gigabyte SQL database. In the old days (not so long ago), vendors might send CSK catalog corrections that could take two months to finally make it into the store; now corrections appear online in a matter of days. CSK used to purchase a third-party EPC from a company called Wrenchead Inc. in White Plains, N.Y. But Buresh concluded that the company could build a better one in-house, yet another way to differentiate itself from competitors. The EPC went live at the end of 2004.

"There's a lot of systems out there," he says. "We wanted one to be tailored to our industry, and it was cheaper to write it ourselves. A large part of our industry is slow-moving parts. We know that business well. We wanted to make the catalog smarter, faster and easier to use. It's a focal point for us. It's very powerful for the customer; he's got all the information he needs."

CSK is betting that the new EPC and the in-store kiosks and mini-browsers will make the parts-shopping experience easier and more productive and allow the company to devote fewer personnel resources to customer service. But not all the industry's customers are quick to embrace technology.

"The aftermarket has been a very traditional mom-and-pop business," notes Keystone's Arriaga. "The customer base is equally traditional. We still print catalogs. Why? The response I get is that if you take paper catalogs from the customers, they'll hit the roof. They want paper. It's a transition for the customer base as well. We have to forge a path and show them the way."

CSK still maintains a call center for customers who are reluctant to browse the EPC online or use a store kiosk. A decade ago, 120 people worked here; today there are five. With the deployment of catalog technology, thousands of calls a day have dwindled to a couple hundred. When a customer calls the center, a parts specialist looks for the item in the EPC; and if it's not there, he can consult a library of old catalogs from hundreds of vendors going back to the 1940s.

When they aren't answering questions, the call center staffers are working to put digital images into the EPC. The first half-million photos were easy. Tracking down images for the rest of the parts, which go back decades, is much more daunting.

"Our goal is to have a picture of everything," Buresh says. "It will take us some time to go totally paperless, but we're going to get there. Eventually we'll get this into the 21st century."

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