Kramp Group, A Million Spare Parts-and Counting
Kramp Group is Europe's largest distributor of accessories and parts for motorized equipment, agriculture, and construction machines. That may not sound glamorous, but as IT manager Robert Varga explains, "Modern agriculture is highly mechanized: it is impossible to run a farm successfully without tractors, harvesters and other machinery. If a critical component fails and puts one of our customers' machines out of action, the loss of productivity can cost them serious amounts of money. We have a catalogue of more than 700,000 spare parts which can be delivered within a single working day from any of our European warehouses to their nearest dealership, helping them get back up and running as quickly as possible."
Kramp Group CEO Eddie Perdok says, "We believe in the future and the power of e-commerce. Compared to other sales channels, the Internet gives us significant cost advantages."
Yet, to Kramp's customers, using the Internet isn't automatic. Kramp takes more than 50,000 customer orders every day from various channels. Prior to 2010, "nearly 40 percent of our customers still placed their orders by phone, which meant that our call center staff had to spend a lot of time on basic order-processing," says Varga. To reduce that figure, Kramp had to make its online store easier to use-but their existing store, which had been developed in-house, did not have the flexibility to achieve this goal.
Kramp turned to software packages from IBM and German software firm Heiler AG to modernize its ecommerce systems. Hans Scholten, a member of Kramp Group's executive board, says, "We deliberately opt for the ‘best of breed' solution for all packages. That means we choose the best available software for different applications." That philosophy helped determine the packages the company chose.
From IBM, the firm obtained WebSphere Commerce for the customer-facing side of its system. This software's multilanguage capability was important: Operating throughout Europe as Kramp does, being able to have one site that can operate in any of 10 languages was crucial. Nevertheless, Kramp had to translate the content into all the languages, because in 2012 even the best automatic translation software couldn't replace a skilled person. However, the advantage was that the company didn't have to develop and support different sites.
Kramp also uses Heiler Software's Product Information Management (PIM) solution. That software manages product data in the catalog behind WebSphere Commerce. Kramp wants to expand its deliverable stock to more than 1 million items and could not do so without PIM. Expanding to more than 1 million stocked items is crucial to Kramp's long tail strategy: the concept that each of the slow-selling items may not account for much revenue but that the total of all slowselling items is large enough to make a difference to Kramp's success
Finally, though Kramp has the in-house capability to manage its e-commerce system, it turned to CDC Software to help integrate the pieces. Doing so itself would have required the company to hire additional staff, which it wouldn't need when the project was done.
The result was that after Kramp's new system had been online, 90 percent of their customers chose to order online via the WebSphere Commerce solution. As a result, the company saw a significant reduction in the average cost per transaction." Varga reported, "Our call center staff now has more time to help customers solve complex problems, which improves customer service. Better service and lower operational costs are helping Kramp Group achieve 10 to 12 percent annual growth, so the solution is making a real contribution to the success of our business."
Discussion Questions
1. How do other types of e-commerce, such as businessto-consumer (B2C), differ from Kramp Group's business-to-business (B2B) e-commerce?
2. Kramp sees ecommerce as a complement to its call center operations. In this light, what risks did Kramp need to accommodate when creating the IT infrastructure they now possess?
Critical Thinking Questions
1. What is Kramp's "long-tail" strategy and why has it been effective?
2. What other types businesses and industries might benefit from the use of a "long-tail" strategy?