Better Safe Than Sorry: Blue Rhino Corp. - ' Page 5 '
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Speed to Market
Of course, information transparency is the central tenet of Sarbanes-Oxley, so it's not completely surprising that complying with the legislation is making Blue Rhino much less opaque. Thanks in part to Sarbanes-Oxley, Blue Rhino will be a very different organization by this summer, after its auditor Ernst & Young has (the company hopes) signed off on its compliance with Section 404. When CIO Insight last spoke with Blue Rhino's management, in January, there were initiatives underway to redesign the purchasing system, a manual process in which distributors filled out order forms for propane cylinders and faxed or e-mailed them to headquarters. Often, it would be days before these orders were completed. The new system will let distributors enter their requests in online forms that will automatically be sent to central purchasing. If the order is approved, based on spending limits and other criteria, it will be instantly filled and the data pertaining to the order will be shared with accounting, inventory, supply-chain management and the company's executives. The change will cut days out of the order cycle.
A similar upgrade is planned for Blue Rhino's customer-service system. An automated work-flow application is being developed to handle requests from consumers, such as ordering and shipping replacement parts, checking on warranty information and supplying repair instructions.
In all, more than two-dozen technology efforts are underway at Blue Rhino that have grown directly out of the Sarbanes-Oxley initiative—including key supply chain and accounting initiatives. By automating work flow and business processes, Blue Rhino hopes to keep both the cost of sales and administration—10.9 percent of revenues in fiscal 2003—and personnel levels flat while annual revenues are expected to grow at a double-digit rate. That, says CEO Prim, could improve net earnings by about 25 percent a year for the next three to five years.
With so many new, streamlined systems attributable to Sarbanes-Oxley, is the act the evil force acting as a dead weight on the company's fast-growth culture that executives make it out to be? Or is it a catalyst for positive change? Despite what Blue Rhino has gained, its managers won't budge on their assessment. "Sometimes it sucks being a public company," says Travatello. "A few bad apples have forced everybody to jump through hoops. Look, complying with Sarbanes-Oxley is making us a better company, no doubt about it. But we were already in the middle of business-process re-engineering. We would've gotten to where we'll be anyway, without having to add so many layers of bureaucracy, or change the way we like to do business."
That's not true for all companies, says Gartner's Mogull. Many of them have been ignoring desperately needed streamlining for many years, he notes, "and Sarbanes-Oxley was a perfect wake-up call for them. Business-process management was the furthest thing from their minds, and frankly, they'll be struggling with it for a while because they don't have the organizations in place to take advantage of all of its potential benefits."
Good news for Billy Prim. Sarbanes-Oxley may have made his company a step or two slower. But some of his rivals may not even be at the starting gate. (In early February, as CIO Insight was going to press, Blue Rhino agreed to be acquired by Ferrellgas Partners LP, a seller of propane, for $340 million, or $17 a share, a premium of 22 percent above Blue Rhino's stock price at the time. According to Travatello, the deal will not alter Blue Rhino's Sarbanes-Oxley effort, because as a significant independent unit of the merged company, Blue Rhino will still be required to comply separately.)
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