Skullcandy, Inc. burst onto the scene as an innovative force in the consumer audio electronics space in 2003 when founder Rick Alden, who was riding a chairlift while listening to music on an MP3 player, was interrupted from his tunes by his cellphone buzzing. While struggling to remove his earbuds, pause his MP3 player, and locate his ringing phone deep inside his winter jacket, Alden had a vision to create a device that could control both the phone and the MP3 player with a hassle-free one-touch button built into a set of earbuds — and Skullcandy was born.
By introducing edgy colors and designs, selling directly to ski and skate shops, and later integrating its products directly into helmets and backpacks, Skullcandy quickly carved out a niche as a lifestyle and performance brand that was highly coveted by action sports enthusiasts who were passionate about their music. Rapid growth followed, and within a short time, the company outgrew its distribution model that consisted of Alden making personal deliveries from his basement to ski and skate shops in the Park City, Utah area, where Skullcandy was founded and has its corporate headquarters.
In 2008, the company realized it needed to replace the use of spreadsheets as a system of record and turned to the cloud-based SAP Business ByDesign solution as a single ERP system to run finance, planning, purchasing, inventory management, and order management. As Skullcandy continued to grow, it expanded its use of the solution to include the management of third-party logistics (3PL) providers as well as its robust omnichannel environment and financial processes.
“SAP Business ByDesign is the backbone where we track all the transactions of the company,” says Mark Hopkins, Senior IT Director at Skullcandy. With SAP Business ByDesign running most of the organization’s mission-critical processes, Hopkins is one of just a handful of full-time IT employees. “One of the main selling points of implementing SAP Business ByDesign was that we would not need an IT department,” he says. “No one really knew what the cloud was at that time, but it was very fortuitous we took that direction because it has really supported our growth.”
A Partner for Growth
SAP Business ByDesign aided Skullcandy’s growth trajectory — it is now a $250 million company — with out-of-the-box functionality that helped the business pursue a strategic acquisition, expand internationally, go public, and significantly increase its customer base through electronic data interchange (EDI) integration.
“When we implemented SAP Business ByDesign, we didn’t know we’d be acquiring a company, expanding internationally, or going public,” says Hopkins. “But the features and functionality were there in the system just waiting for us to use them.”
In 2011, Skullcandy acquired Astro Gaming, a premium gaming headset company based in San Francisco, and had questions about moving the acquired finance systems into SAP Business ByDesign as a new and separate legal entity. That gave Skullcandy the first inkling that SAP Business ByDesign could easily enable growth. “It was a pleasant surprise to see how straightforward it was to set up new entities and be up and running transactions quickly with limited resources. You don’t need an army of consultants because SAP Business ByDesign is fairly simple to set up,” Hopkins says. “That was the first time that we experienced the solution supporting our growth.”
And it wouldn’t be the last. Shortly after the acquisition, Skullcandy took steps toward an initial public offering (IPO) and was again pleasantly surprised, this time to find that the solution supports Sarbanes-Oxley (SOX) compliance, which is one of the things auditors look at when a company files for an IPO. “The auditors were very pleased with the way the system was set up from an information security standpoint,” says Hopkins. “If we had still been on spreadsheets, that could have been a big stumbling block for us and made the IPO a non-starter. Instead, we sailed through.”
Skullcandy began its global expansion shortly after the IPO, moving first to Zurich, Switzerland, which now serves as the company’s European headquarters. The global footprint also includes locations in Canada, Mexico, Japan, and China. When Skullcandy explored moving beyond the US, questions abounded: Would it have the resources to begin operations in a new country that had its own rules and regulations, not to mention a different language and currency?
Similar to the Astro Gaming acquisition and IPO, the company was once again impressed with SAP Business ByDesign’s standard functionality. “An out-of-the-box global offering is the biggest area where SAP Business ByDesign helped with our growth trajectory,” says Ana Rodriguez, Enterprise Applications Manager. “Every new entity we roll out, all of those country regulations and laws are already programmed into SAP Business ByDesign, so we simply had to go in and turn on the specific localization we were looking for. We didn’t have to implement another ERP system to start transacting in Euros and dealing with value-added taxes — it is all standard with the solution, so we just learned about the functionality, set it up, and got going.”
An out-of-the-box global offering is the biggest area where SAP Business ByDesign helped with our growth trajectory.
— Ana Rodriguez, Enterprise Applications Manager, Skullcandy
E-Commerce Made Simple
With out-of-the-box web services, SAP Business ByDesign supported Skullcandy’s fourth area of growth: new revenue streams. By the time it implemented the cloud-based solution, Skullcandy’s distribution model had long since expanded beyond local ski shops. Best Buy began selling its products in 2006, with Walmart and Target soon to follow. Today, by connecting its EDI provider to SAP Business ByDesign, nearly 80% of Skullcandy’s transactions are fully automated from point of sale through delivery. This includes transactions from a robust omnichannel environment including non-EDI retailers, an authorized dealer portal, and international distributors as well as various web storefronts. SAP Business ByDesign is the transaction hub, and a middleware solution acts as the information broker, managing the connections to the multiple purchasing options.
“Everything is so interconnected and automated that from the time a customer clicks ‘buy,’ it takes less than a half hour for the transaction to move through the system with a credit check, a check for fraud, interfacing with SAP Business ByDesign, checking availability, and warehouse fulfillment,” Hopkins says. “It is a very efficient, hands-off, and highly automated process.”
Skullcandy is also using the solution’s treasury management functionality, which it implemented in 2014 by integrating with Wells Fargo. Other SAP Business ByDesign functionalities include outbound payment files, inbound bank advices, supplier invoice entry, and open invoices reporting. Outbound payment files are sent via secure file transfer protocol (SFTP) to Wells Fargo, which executes checks, bank transfers, and wire transfers. For inbound payments, SAP Business ByDesign takes the Wells Fargo receivables file and uses it to clear open invoices. Externally, customers can also use a payment portal to pay an invoice, and then the account is automatically cleared against the open invoice in SAP Business ByDesign.
“It drives a lot of efficiencies for accounts payable and accounts receivable teams who have a much better overall view of total cash,” says Rodriguez, who cites improved collections, decreased rate of non-sufficient funds (NSF) and returned items, and improved credit card processing rates among the efficiencies.
“The solution has such a robust footprint of functionality that it was ready for us to grow into it, rather than us having to come up with alternative solutions for managing our business,” says Hopkins.
The solution has such a robust footprint of functionality that it was ready for us to grow into it, rather than us having to come up with alternative solutions for managing our business.
— Mark Hopkins, Senior IT Director, Skullcandy
A Two-Way Partnership
As an early adopter of SAP Business ByDesign, back when cloud computing was virtually unknown and all other headphones were black and gray, Skullcandy also had significant input into the solution’s functionality. This was perhaps most evident in SAP Business ByDesign adding a 3PL warehouse interface as standard functionality, spurred by Skullcandy’s request for a custom interface to integrate the solution with logistics information from UPS, its main 3PL vendor.
“We provided a lot in terms of defining the business case and helping SAP understand how a company uses 3PL, and we received a lot in return on the development side,” Hopkins says. “Now that functionality is part of the standard product, and anyone with SAP Business ByDesign can use it.”
Because of Skullcandy’s strong partnership with SAP and its deep roots to the cloud-based solution, it’s difficult to imagine what the company would look like today without it — almost as impossible as picturing the days when a cellphone couldn’t play music.
