Working smarter, serving better

Distribution industry experts explore the problems and potentials of the latest information technology

By -- Industrial Distribution, 5/1/2000

What follows are excerpts from a roundtable discussion with Peter Atkins of 3M Co.; Marc Beerman, Beerman Precision; Sam Grooms of Hy-Tek Material Handling, Inc.; Jerry Nichter, Orr Safety Corp.; John Post of TSI Solutions, Inc.; Kevin Queenin, Specialty Bolt & Screw, Inc.; and Anna Riveros of Bearing Service, Inc.

ID: What are the most significant changes you've seen in IT management over the last two to three years?

POST: The most significant and dramatic change has been the Internet, which has given us a broader range of information transfer and the ability to exchange information among different platforms. But e-mail, which preceded the Internet, has also had a considerable impact and has achieved widespread acceptance over the past few years.

GROOMS: From a hardware standpoint, increased speed and decreasing costs have been quite significant. The speed of IT in bringing a concept from the drawing board to actual application has allowed our process times to be reduced dramatically. Jim Ripkey, our vice president, general manager and in-house IT specialist, says that we're now looking at management reports daily that we used to look at monthly, and then only after they were run over a weekend so that our system would not have to be down. Today, we can push a button and blink and we have enough data to run our business for quite some time.

NICHTER: The most significant changes entail the emerging opportunities for changing computing platforms and application software, which is helping facilitate the integration of all areas of our business. A few years ago, the manufacturing sector began a process of taking segmented, often disjointed, "islands" of information that existed in their businesses and moving them closer together for the sake of integration and uniformity. We see the same thing beginning to happen now on the distribution side of the industry.

The other major trend involves the transition in associate skill sets - particularly in the technical arena-and the learning curves that exist for managing the different platforms, both in terms of hardware and software. The boom in this industry and the exploding information revolution itself have created real shortages of IT talent in certain areas of the country, and this continues to be a major management challenge and planning consideration.

RIVEROS: From an independent distributor's point of view, there is an increasing need for technological expertise that is at times difficult to implement, as well as the need to attract skilled people into the industry and the responsibility to train them in the new technologies that are continually changing. There is also a critical need for greater interconnectivity among distributors, vendors and customers. And there is the ever-increasing focus on the Internet. The independent distributor needs to keep up with all of these developments, and this is a challenge due to the investment requirements and limited resources. Overall, the fast availability of information has greatly benefited our business and has allowed us to better support our customers.

BEERMAN: The most significant change I have seen is the movement to open systems. Many companies have recognized, especially because of the Internet, that proprietary systems are obsolete. People are moving toward open platforms that allow others to integrate with their systems and access data - and vice versa. And of course, there's the Internet itself, which allows us to pull up knowledge in seconds rather than minutes. Then there is the rapid growth in third-party software, which goes back to the open system concept. With all the software that's being written and systems becoming open, a lot more information tools are becoming available than would have been thought possible in the past.

And finally, there is a convergence taking place in telephone and computer technologies that is going to change the way we work. I'm talking about truly interactive phone systems linked to the computer so that when a customer calls, a screen pops up with information on him and detailed notes about whatever you're working on with him. This kind of product is now available and very affordable.

QUEENIN: Over the past few years, IT has provided a vehicle for us to reduce the transactional costs and redundancies in the supply chain. In this regard, distributors have done a lot for the end user, but there's a lot that needs to be done by the manufacturer for the distributor. Some manufacturers are working hard at this; many others need to work harder.

And the Internet has been a tremendous agent of change. The challenge for all of us - manufacturers and distributors - is how quickly we can keep responding and changing as technology continues to evolve so quickly. If you feel comfortable and content, then something must be wrong.

ATKINS: Before discussing changes, I think it's important to note that the industrial distribution channels with which we work have been relatively slow adopting technology, and a relatively low percentage of our orders are via EDI. We don't use EDI with some of our biggest distributors, and a lot of small distributors don't have EDI at all.

The Internet is the most obvious change that people mention, but I think its significance may lie in the fact that it has brought about a much wider recognition that IT is a tool that takes cost out of the supply chain. This tool may involve the Internet, EDI or a combination of both. For now, I think the Internet is a catalyst; eventually, it will be the IT medium of choice for most people.

ID: How has IT helped you become more "customer-obsessive"?

QUEENIN: By reducing the redundancies in the supply chain. IT enables us to control costs in the channel on non-value-added activities. It allows us to plan, order, ship, invoice, acknowledge, and do anything else you can think of, and do it electronically, saving the customer - and all of us - time, money and energy.

POST: The whole idea of distribution is centered on sales and customer service, and selling is basically transferring information back and forth with customers and manufacturers. IT makes that information flow faster and more efficiently; getting answers doesn't take the time it used to. And when you transfer files using EDI, for example, you cut back on the number of potential errors by eliminating the need to keypunch the same information again. Technology provides the opportunity to substantially decrease the volume of errors.

GROOMS: What IT has allowed us to do is build a client management database. For example, one client wants preventive maintenance done only on certain days between certain hours by certain technicians. Our system automatically flags us on that a week in advance of when the work is supposed to be done. All we have to do is make a call to confirm the appointment. The IT client management database gives us the ability to demonstrably provide that critical value-added dimension that differentiates us from our competitors.

BEERMAN: By using various contact management software programs you can access significantly more information about your customer than in the past. You can look at buying patterns, his sales history on particular products, and review the specifics of earlier communications with him. Also, in the case of personnel turnover at a customer's business, the new employee is not always sure of the processes and procedures and may assign the wrong type of purchase order or order the wrong product. With the information about that customer's purchasing idiosyncrasies that you now have at your disposal, you can tell the new employee that this is probably a mistake, which makes his job easier and you've made a friend. IT helps you appear to be - which is important - and actually be much better informed about your customer and much more valuable to him.

One of the most important capabilities IT provides you with is a better understanding of what the customer's goals are. Some want the fastest on-time delivery, others want the absolute lowest price and some will sacrifice quality for price. Knowing this helps you know how to quote or what to quote that customer because you have that profile information readily available thanks to technology. It's a question of ease of access and speed of response.

And if you have a network system with a global database on your customers, anyone in your company can access it. Either a new employee or someone not familiar with that account can provide the help and answers required, which is a huge benefit in terms of customer service.

RIVEROS: Most of our IT initiatives are focused on adding value for our customers, either through reducing the cost of doing business or making it easier for them to do business with us. Examples would include EDI, Internet ordering, bar-coding, and tool crib management. We've really stepped up the amount of consulting we're doing with customers relative to analyzing their purchasing and inventory practices. And we've also increased the use of laptops by our field staff for customer presentations, training and communications available.

ATKINS: One of the most important dimensions of customer service is the flow of information. Our basic product information is now digitized and we can share this with the distributor channel much more speedily than ever before. We have made this information for them to come in and obtain easily. The sharing and accessibility of information is the key to customer service. Our job is really all about managing the relationships among our own people, our customers and our suppliers, because the more we're able to share the data, the better those relationships will be.

NICHTER: The whole purpose of IT connectivity should be serving customers better by melding products and service together to the point that there is virtually no delineation between the two. Product becomes service, and service is the product. The way that we accomplish this is through faster, more efficient management of information. Throughout all of it, the core objective is to enhance customer service.

ID: How has IT enabled you to work smarter in ways that you wouldn't have imagined a few years ago?

NICHTER: I just had a meeting with one of our senior field sales associates. In the course of our conversation, I accessed some information on my computer for us to review and discuss. He laughed and said, "Five years ago when you made me go to those computer classes on Saturdays, I went kicking and screaming. Today, if my computer doesn't work, I don't know what to do." That's probably the best testimonial for IT: somebody who has been working in the field for 25 years, relying on clipboards, day-planners and notes on cocktail napkins, is now making decisions and communicating almost exclusively with his customers and our inside people by electronic means.

But this evolution also presents a huge challenge for distributors. Customers have begun to expect this level of IT capability in all their suppliers, so it no longer is an option for us - it's a basic requisite for doing business together. The customer himself wants to work smarter and more efficiently, and he wants to know up-front about the IT capabilities we have that will help him grow the bottom right-hand corner number on his income statement.

POST: Working smarter is essentially getting information more quickly and more efficiently than your competitor can. One of the things we can do now, thanks to IT, is get information through computer links without using the phone, either on the Internet through a secure password server or via a dedicated line from the manufacturer whereby we can tap into his mainframe directly. Of course, of the two, the Internet is the more economical since it's virtually free. But in any case, today one of our field salesmen can pull out his laptop at the customer's office, plug into a modem and get the information virtually instantaneously, instead of calling the home office, having someone phone the manufacturer and having to wait for a callback. This would have been unimaginable a few years ago.

RIVEROS: We're working smarter by using IT to do more automated processing in every area. We have better informational tools and better integration with customer data. For example, many of them have standardized Excel formats for quoting. And we've started the integration of Palm Pilot as a time management tool with [Microsoft] Outlook to improve communications. Our use of PCs and office tools has also increased dramatically.

GROOMS: The most evident example is e-mail. When we first heard of e-mail some years back, we didn't consider it. Now, we feel that if that server ever went down, we'd cease operating. This morning we had an e-conference with one of our clients and two of our employees - all of them off-site. E-mail, both external and internal, has allowed us to have complete, thorough, and accurate communication with everybody involved in both the workflow and the marketing chain. And we haven't realized all the benefits of e-mail; we're still learning.

BEERMAN: Specifically, e-mail is a remarkable productivity enhancement tool. We're seeing more and more of our manufacturers supplying us with lists of their inside people's e-mail addresses. We're training all of our purchasing and inside sales staff to use this as a better alternative to phone calls. They can send an e-mail to a vendor to check the status of an order just using a few keystrokes instead of spending 10 minutes on the phone. That's working smarter.

There's also the ability to track shipments online. If your employees have access to the Internet and a customer calls asking the status of a shipment, your employee can access the tracking number and then input it online to UPS and can literally tell the customer where his shipment is without ever getting off the phone. That was a two-minute phone call and the customer is amazed and he has the impression that you're the easiest company to deal with. And that's where a distributor wants to be.

And many computer systems have "smart agents" that help you work smarter. You tell your system that when a shipment hits the door the system should send you an e-mail. This kind of system also provides the ability to send either an e-page or a pager-page to your customers in emergencies. And the smart agent is also an invaluable backup for the credit department in determining whether a customer is over his credit limit.

QUEENIN: The sharing of customer information through the use of IT has greatly improved our planning capabilities, and our forecasting ability now exceeds any expectations we may have had a year or two back. As members of the supply chain have become less obsessed with informational privacy, we have become in many cases the strategic planners for some of our customers.

Also, we've been involved with bar coding for about 10 years, and everything we ship is scanned out of our warehouse. We have inventory managers on the road who go to customer facilities and scan and download information, and in most cases we can provide customers with more accurate documentation on their purchases and where they use them than they can. Since fasteners are a C item, they usually just expense them, so we can offer them some very detailed measurement and reporting.

ATKINS: Sometimes we have to look backwards to realize how far we've come. We certainly have succeeded in taking costs out of the supply chain through the use of EDI. One of the major thrusts within 3M is the achievement of supply chain excellence, and we've demonstrated the ability to take significant inventory out of the system - not only in our own warehouses, but in the warehouses of our suppliers and our distributors. Ultimately, we want to get a direct line of sight to the actual usage of our products through the channel to get a better fix on what the end-user needs.

John Paul Quinn can be reached at 203-323-9850, or by e-mail at mirabel@gateway.net.