By Allan Maurer
DURHAM, NC—The Japanese pioneered the kanban system in which cards signaled the need for materials in a just-in-time lean manufacturing process such as that used by Toyota to achieve dominance over U.S. automotive makers. By automating a digital kanban system and selling it as software as a service, Durham-based Datacraft Solutions has produced dramatic inventory management cost reductions for its clients.
Founded in 2004, the company has raised a $3 million Series A round from True Ventures, based in Palo Alto, CA, and Northern VA. John Burke, a True Ventures partner, sits on the company’s board. It is currently “entertaining” a Series B round of from $4 million to $10 million, depending on how rapidly it decides it wants to expand globally.
Datacraft CEO and Chairman Stephen Parker tells TechJournal South, “I’ve been in the software business for 25 years and never saw return-on-investment that hits as big and as quickly as this does. It’s a simple concept. Supply chain management works on the theory of forecasting based on historical demand, customer surveys, and focus groups. But it’s a guess.”
Parker says the difference between the Datacraft solution and those of other supply chain management solutions is that most of the others focus on planning. Pitching the solution to major equipment manufacturer, Parker says that as he explained what Datacraft does, “You could see a light bulb come on. ‘You execute the supply chain, you don’t plan for it,’ the exec said.”
The Datacraft solution orders materials based on actual need rather than forecasts. That can slash inventory management costs by 50 percent immediately and produce a continuing cost savings, freeing up cash a company can use for other operating expenses.
Timothy Briggs, CFO and COO at 12-employee Datacraft, which is obviously running lean itself, says, “We’re solving a real problem. Being able to run lean is necessary to competiveness in manufacturing. Companies carry much real money in inventory. Enabling them to run at a lower level of inventory frees cash flow so they can do other things without a capital infusion.”
Carrying inventory means dealing with spoilage, lost parts, warehousing, moving products around and inventory taxes, Briggs explains. Instituting a digital kanban system saves some companies a measurable 600 percent to 800 percent on those and other inventory-related costs in six months, he says.
And, he points out, “Capital is a big issue in today’s economy. Even if interest rates are low, the availability of cash is constrained.”
That, says Parker, actually resulted in a change of attitude in one potential customer. While originally impressed by the way Datacraft’s software could produce a substantial cash savings in six months, they were more interested in the recurring savings year after year.
“Now they’re really interested in the immediate cash savings,” Parker says.
Datacraft says it saved one automotive client $1 million in three months with a single supplier. A Fortune 500 industrial equipment client saved $35,000 in five weeks on one supplier of a single part. A Tier One international transportation component leader saw an $8 million inventory reduction in less than six months and a 1,000 percent increase in turns.
Parker suggests that if GM could gain the same percentage of efficiency using a system such as Datacraft’s that a Toyota supplier did, it would save about the amount of cash it asked the government to supply in a bailout. And, he adds, GM is probably not as efficient as the Toyota supplier was before implementing the Datacraft software, which means it could likely save even more.
The company posts a number of impressive case studies on its Web site, some including detailed narratives of installing and using the software by clients. They praise its ease of use, which reduces training required to a minimum, many-layered security, reliable, no-downtime operation, and its effectiveness.
Some even pinpoint minor problems, such as the need to clean and enter data properly for the system to work most effectively.
Advantages cited include reduced lead times, improvement in customer response time, improved on-time delivery, increased manufacturing productivity, and eliminated waste.
Datacraft charges a small upfront activation, training and integration fee and a monthly subscription fee based on the number of seats and software feature set. A typical factory installation ranges from $800 to $10,000 a month.
Briggs says the company has an outstanding pipeline of potential new clients, but deals are taking longer in this environment.
While the current economic environment does not make him happy personally or professionally, Parker recalls, the adage, “Great times of diversity are also great times of opportunity. I don’t like what’s going on, but once people get over their nervousness about the economy, it’s going to be one of the best things that ever happened to us.”
Online: www.datacraftsolutions.com
© 2009, TechJournal South. All rights reserved.
