Founded in 1953 and headquartered in Newport News, Va., Ferguson is owned by UK-based Wolseley plc. Ferguson is North America's largest distributor of plumbing supplies and pipes, valves, and fittings and is the third largest distributor of heating and cooling equipment (HVAC). With annual sales over $7 billion and over 900 service centers located in 50 states, Ferguson is focused on growth through acquisition, and also places a strong emphasis on customer relationships.

"We were experiencing double-digit growth in new customer acquisition," said Ken Ford, Director of Credit Services, CDW. "Each new customer required credit approval, so we knew we needed to make fast, accurate credit decisions in order to quickly service our customers and to expedite the sales process and manage operational costs."

The old credit approval process at CDW required the company's analysts to manually review credit information received daily from information bureaus. The information could have been as much as three months old, and the process was often time-consuming. By using older data, the company was not certain it was providing the most accurate credit limit to new customers. It was possible that CDW was missing sales opportunities because it was not allotting a large enough credit limit to low-risk customers. In addition, older data meant that CDW might not be immediately aware of negative changes in a company's credit rating, or if the customer was declared fraudulent.

The credit management structure at Ferguson is decentralized, with credit managers in local branches and regional credit staff covering specific geographies and working with the branch credit managers. Before implementing eCredit, this decentralization led to inconsistencies in the decision-making process, with some information being available in some branches but not in others. There were no tools to manage systematic file updates and when there was turnover in a branch, the branch suffered from the poor credit decisions that were made or when there were no decisions made at all. This situation worked to complicate Ferguson's mission of providing superior customer service.

CDW chose eCredit to make credit decisions more accurate, efficient and consistent, and to manage risk more closely. The eCredit solution offered real-time access to bureau data and scores, to ensure decisions were based on the most up-to-date information. In addition, eCredit software took CDW's existing credit decision process-which involved gathering information manually and applying a credit limit based on the resulting customer score-and automated it from start to finish. This dramatically reduced the time and effort needed to process a single transaction, and improved consistency of credit decisions. "With eCredit, we built our own credit line assignment model in the system," said Ford. "This means we are issuing credit based on our own perception of risk, and we've ensured continuity in our credit portfolio." The flexibility of the eCredit software also meant CDW could change credit decision rules, data elements used to assign credit limits, and scorecard thresholds as needed-such as with a change in economic conditions-with little delay.

In addition, during busy times, credit applications would be put aside for collections-oriented work and subsequently weren't getting the attention they deserved. On the other hand, many decisions were "slam dunks" that could have been easily automated. There was no system to effectively prioritize credit applications requiring more attention. For example, before implementing eCredit, a sample of 60 applications had a 95% acceptance rate. Many of these decisions could have been rendered automatically, with very little attention from an analyst. On the other hand, the average processing time was a lengthy 2.5 days, with 20% of the applications taking 3 days for a decision to be returned. "Ferguson needed to create efficiencies by automating a scoring process to handle the 'no-brainers' and route the heavier lifting to the credit analyst for deeper analysis," said Len Brown, Regional Credit Manager, Ferguson Enterprises. "eCredit was not only the system that could most effectively meet these needs but its built in multi-bureau access could help us achieve an extra level of cost savings."

In 2004, Ferguson selected eCredit to enhance its credit and collections operations. There were many project objectives; these included centralizing credit application processing in order to gain economies of scale, developing an automated decision process using an effective scoring model, creating master electronic credit files that are available across the company and establishing a file update process that will keep the information of all customers, especially the most critical, up-to-date.

The use of automated scoring from eCredit means that a credit decision can be rendered within minutes of submission and that the branch is freed from the burden of time-consuming manual processes. However, the branch does maintain all of the flexibility and power it needs. The branch edits and activates accounts. Local staff can view the customer's file on-line to analyze the credit decision and scoring while the customer waits if a decision is needed immediately. Centralized file processing alleviates the pains of inconsistent data, and credit managers can now be confident that an account's information is current and accurate. With eCredit, the credit manager can concentrate on marginal decisions and on identifying undersold accounts. Best of all, eCredit lets Ferguson carry out its corporate mission by leaving more time for relationship building and personal visits and freeing up certain staff to be re-deployed to more customer-oriented duties.

The automated credit scoring process implemented via eCredit has helped Ferguson greatly reduce its credit data bureau costs by setting up a process to access the least expensive data on an account first while the virtually instant credit approval captures sales and customers that were lost with the old system. The consistent, accurate credit decisioning identifies undersold sales opportunities and reduces credit losses. In addition, all transactions are time and date stamped and consistently documented for Sarbanes-Oxley reporting. eCredit has also helped foster a portfolio approach, rather than an individual account approach, to credit. "With eCredit, we have been able to centralize credit data from a large number of common but individual systems," said Brown. "Now we can view the entire portfolio of accounts together, more effectively manage those accounts and work to lower our overall risk."