That was a little rich for the Smiths, who prefer to pour their money and energy into developing new products and marketing the ones they have. Everything pointed to one strategy: hire someone else to handle fulfillment. The brothers did some perfunctory vendor shopping, but they liked Insight, which already had much of the infrastructure in place. So in 1994 they signed a three-year contract awarding Insight 4% to 8% of each sale in exchange for its services. The system Insight developed would belong to the vendor, which could adapt parts of it for use by other clients. The brothers would have access to 10,000 feet of warehouse space at Insight and to the machinery and people they need to move their product.
Over the next several months, customer and vendor labored together on the antifelon identification (AFID) tracking program. The idea is to mark each kit's registration card, cartridges, and handle with serial numbers that are automatically recorded in a customized fulfillment package running at Insight. Whenever a kit is sold through a store, the retailer sends Air Taser a postage-paid registration card with the customer's name, driver's license information, and phone number. Those data are matched with the product information recorded in the database and can be retrieved as they're needed. Occasionally, it's the police that do the needing.
At the outset the only technology the Smiths had to buy was three networked Pentium PCs connected to Insight's computers via phone lines. Using Windows-based software supplied by Insight, Air Taser's staffers type in shipping orders and transmit them to Insight's data-processing center over leased lines. To get into the AFID program, they click on an icon that gives them instant read-only access to the database.
By December 1994, the system was ready and the Smiths started shipping. Since then they've sold about 250,000 of the $250 devices in more than 50 countries, earning revenues over $7 million.
The outsourcing arrangement has proceeded smoothly. Air Taser gets tech support from one dedicated Insight programmer; for special projects, Insight assigns more. The geographic proximity of the two companies has also been a boon: one of Air Taser's systems people swings by Insight every week to check in, and Tom meets with the vendor's management team every two months. Logistics are squared away in a daily get-together between Air Taser's information manager and Insight's warehouse manager.
The ability to offload such a consuming task has allowed Air Taser to move on without burning out. Recently, it introduced a new product: a steering wheel lock with built-in alarm. "Before the first shipment, we were here until 7 a.m.," says Rick. "If we'd also had to worry about shipping, it would have been too much."
Now that they've been around for a few years, would the Smiths consider building their own fulfillment capability? Rick ticks off the list of headaches concealed in that Trojan horse: "Do we need a bigger warehouse? How are we going to track the parts? Do we need a new inventory-control system?" By outsourcing, "all that is somebody else's problem," he says. "And we can focus on the next nifty new product."
The Vendor
Niches, the more mundane the better. That's where W. Harwood "Woody" Runner and his business partner, Gary Miller, saw their future. "We wanted to focus on something customers see as a nuisance, and really raise the level of play," says Runner.
Runner and Miller had founded a private investment firm, Cumberland Capital Corp., in 1989. In 1992 they acquired a wholesale office-products business and outsourced the IS operations. The next year a consultant involved in that outsourcing arrangement passed on some interesting information: Southland Corp., the parent company of 7-Eleven, was divesting itself of noncore businesses. Runner and Miller pounced on Southland's check-authorization and collection division, buying the unit for an undisclosed sum. "We had been on the other side of the table, as a customer, so we understood the benefits of outsourcing," says Runner.
Miller and Runner agreed to continue servicing 7-Eleven stores through their new company, CFData Corp. But juicier possibilities lay elsewhere. Most retailers, they knew, don't consider approving checks and collecting late payments as part of their core business. "It's just one of a hundred dogs barking at their door," says Runner.
The partners' idea was to collect customer-transaction information for retailers and then analyze it to reduce the incidence of bad checks. But that meant an overhaul of all of Southland's systems, right down to the postage meters. Fortunately Peter Bendor-Samuel, the consultant who had turned them on to Southland, had come on board as a partner. His expertise gave Runner and Miller, who two years before had been offloading their own IS work, the confidence to become a technology resource for others.
Just deciding what technology to buy ate up a year. The centerpiece would be software for using, storing, categorizing, and examining data. The partners eventually chose SAS, a database-management program from SAS Institute in Cary, N.C. To manage the collection process they went with an off-the-shelf program called Flexible Automated Collection System, from Ontario Systems Corp., in Muncie, Ind. Using its own programmers, CFData installed everything on a networked system of 60 IBM-compatible PCs. Total cost of the software and equipment: $2 million.
CFData's eight employees spent the next year making sure all the software and hardware pieces played well together. Finally, they had an effective system -- and a process for using it. First CFData works with retailers to identify what check information the system should capture. Whenever a customer makes a purchase, the sales clerk transmits that information electronically to CFData's central server or, if the customer has one, to its own network. Using the Geryon Verification System, a check-authorization program from Magic Software Development, in Albuquerque, the computer looks for any past problems with that customer. If it finds something, the clerk gets a message nixing the purchase.
