December 2007 | Case Studies | I.T. Toolkit

Big Makeover for Littlearth

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Fun fashion accessory firm wraps its data in a sharp new software ensemble.

Whether it's a belt studded with vintage bottle caps, a purse made of license plates and hubcaps, an Elvis evening bag adorned with Swarovski crystals, or a tote sewn from authentic Denver Broncos jersey fabric, when you spot a fashion accessory from Littlearth, you're bound to take notice.

Littlearth is turning out those accessories more efficiently, and more accurately matching them to customer demand, thanks to a Web-based business suite that integrates all the company's operations and provides new inventory management tools.

Throw Nothing Away

With 50 employees and about $4.5 million in annual sales, Littlearth assembles most of its products at its Pittsburgh headquarters, wholesaling them mainly to boutiques. Overseas distributors take the products into the United Kingdom, Japan, and Australia. A Web site offers products to retail customers who can't find them locally.

Littlearth makes those products from a combination of manufactured materials—many with recycled content—and found objects. For license plates, it relies on a network of collectors who comb junkyards, motor vehicle departments, and dealerships looking for discards. It makes team-branded products under licensing agreements with the National Football League and National Hockey League.

When Littlearth started in 1993, it wasn't hard to run the company with paper-based processes or track inventory by eye. By the late 1990s, though, it had outgrown that business strategy. So out went the paper and in came the software - one package to manage accounting and another to manage sales.

But three years ago, it again became clear that Littlearth's business processes weren't keeping up with its needs. The biggest problem was that the software applications weren't integrated.

"We would have to key in information three times to get an order into the system," says Ava DeMarco, co-founder and chief executive officer of Littlearth.

First, a salesperson entered account information in the sales package. Then, as a customer placed an order with a sales rep or through the Web site, an employee entered those details in the accounting package. Finally, when it came time to ship, someone else entered data in a FedEx shipping system.

"We were doing a lot of redundant work, which resulted in the expected problems," DeMarco says.

Other problems stemmed from the fact that Littlearth did not use inventory management software. Employees relied on what they saw in the warehouse to keep track of both materials and finished goods.

On the manufacturing side, they sometimes ran out of materials they needed to assemble products for current orders, or ordered fresh materials then found a supply tucked away in a corner.

On the fulfillment side, without a good view of finished goods, Littlearth sometimes took too long to fill orders, filled them incorrectly, or promised product to one customer then shipped it to another.

With a few thousand SKUs, custom-made products, and at least $100,000 worth of Swarovski crystals on hand at any time, inventory management was turning into a serious pain point.

"It became impossible to keep track of inventory, and we found we were running short of products," DeMarco says.

One-Month Lag

To make matters worse, the reports the accounting system produced weren't useful enough. "We wouldn't know the financial results of a certain month until one month later," she recalls.

The application was also hard to maintain. Each time the developer revised the software, someone had to load the new version onto each of the company's PCs. "We were usually down for three days during the upgrade," she recalls.

The prospect of yet another costly, time-consuming upgrade motivated DeMarco and Rob Brandegee, her husband and co-founder, to look for another solution. After investigating many products, they chose NetSuite, a package that integrates enterprise resource planning (ERP), customer relationship management (CRM), and e-commerce.

NetSuite appealed to DeMarco in part because Littlearth employees working on both Windows PCs and Macs could use it. In fact, because NetSuite is a vendor-hosted product accessed through the Internet, an employee can use the software from any computer, in any location.

At first, DeMarco was leery of signing on with an application service provider (ASP). "I had a lot of concerns about data security," she says. "But now I'm glad we did it."

Watch Your Backup

The advantage of letting the vendor host the business applications became clear when a tornado blew through Littlearth's neighborhood and computers crashed. "We didn't have to worry about our data because it was backed up on NetSuite's server," she says.

Because NetSuite hosts the solution, Littlearth doesn't miss a beat when it's time for an upgrade. "We are notified of an upgrade, wake up the next morning, and there it is," DeMarco says.

Another benefit of the ASP model is that small and medium-sized businesses can start with just a few modules, then scale up later, says Malin Huffman, senior product manager at NetSuite. This lets them get their feet wet without making a large initial technology investment.

"For small WD (wholesale and distribution) and inventory-based businesses such as Littlearth, margin is a big deal," he says. "They don't have a lot of cash to throw in up front."

NetSuite charges a subscription fee based on the number of users. Rates vary depending on the version of the software and modules the company uses.

NetSuite offers a lower-end product, NetSuite Small Business, for companies that previously used programs such as QuickBooks for accounting, but want to add some CRM and e-commerce functionality. Larger companies such as Littlearth usually opt for the full version of NetSuite.

Although NetSuite's customers come from a wide range of industries, wholesale and distribution is its largest vertical market. "Our sweet spot tends to be companies with between 20 and 100 employees, although larger organizations, both in WD and outside, use the product," Huffman says.

Once DeMarco and Brandegee decided to implement NetSuite, the biggest challenge was configuring the software. Company officials wrestled with decisions such as how to name and number products in the system and whether to make picking, packing, and shipping a single function or three separate steps.

Although it was difficult, this exercise forced them to reevaluate Littlearth's business processes. "It was a good opportunity to tweak practices that weren't working well," DeMarco says.

Done with Redundancy

Since Littlearth started operating on NetSuite in August 2004, the system has brought numerous benefits. "The biggest improvements are that information throughout the company is linked together, and we have eliminated redundancy," DeMarco says.

The sales, inventory management, and accounts receivable functions all now draw from the same customer records, for example. Online orders show up in the system automatically. A dashboard gives users real-time access to the information they need, with the display tailored to each person's role. The system also provides numerous customized reports.

On the purchasing side, NetSuite's real-time view of inventory keeps purchasing agents from ordering materials until they're needed.
One thing that NetSuite doesn't currently provide, but that DeMarco hopes it will offer in the future, is a way to pull components out of inventory as soon as an order comes in for products that require those parts.

Right now, for example, if a customer orders 250 handbags that aren't yet assembled, and that will require 500 Pennsylvania license plates, NetSuite shows those plates as available in inventory until the finished handbags move into the warehouse.

"I'm trying to determine a better way to do that," DeMarco says. "Could we figure out the usage of the parts before the finished products are made?"

This year, Littlearth started using NetSuite to develop just-in-time manufacturing for some of its pricier products - the sort it might only sell four times a year, and that it doesn't want to carry in inventory longer than necessary.

Each day, the production manager runs a report listing all open orders and back orders. "He knows all the products he has to build daily to fill these specific orders," DeMarco says. "If a product is on the shelf, then NetSuite tells him he doesn't have to build it. This has enabled us to dramatically reduce finished goods inventory."

This technique also has helped Littlearth cut down on the five weeks it used to take to fill a wholesale order. "Now, it's typically a one-week turnaround, unless we get a big order," says DeMarco.

With the benefits of its integrated Web-based solution still emerging, the sky's the limit for Littlearth.

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