Scmidco Case Study

9-904-080

REV: JUNE 21, 2004

JOHN S. HAMMOND

SchmidtCo (A)

John Schmidt’s project to convert the information system of his automobile parts distribution

business was in real trouble and he knew it.

SchmidtCo distributed nearly 10,000 different items (so-called SKU’s) imported from twenty-one

manufacturers to over a thousand different destinations. The company shipped 20,000,000 pieces a

year ranging from nuts and bolts to radiators. This volume and complexity meant that the information system was literally the backbone of the $40-million, family-owned company.

The project would replace an obsolete, unreliable, 18-year-old system with a state-of-the-art one

that ran under a new operating system on a new server. It would replace and integrate all information systems within the company, some of which were not currently linked. The four-month-old

project was already three months behind schedule and $50,000 over budget. Worse yet, the quality of

the work was far below expectations.

John was well aware that serious problems with such conversions were common. However, when

he heard that one of his customers had just gone through its own conversion and had botched it so

badly that it drove the customer out of business, he became especially uncomfortable. John felt he

had to do something, he had to do it quickly but he didn’t know what.

SchmidtCo

SchmidtCo was a Philadelphia-based importing company that acted as a master distributor in

North America for European industrial and automotive manufacturers. The bulk of SchmidtCo’s

business was importing and distributing automotive replacement parts. The company had 90 employees most of whom worked in its three warehouses: a primary one in Philadelphia, and satellite

ones in Los Angeles and Mexico City.

John Schmidt was the 35-year-old Operations Manager of the company founded by his grandfather in 1950 and currently run by his father. As is the case with many family-owned businesses, he

had literally...