Awarding technology

Livingston & Haven wins the Fluid Power Distributors Assn.'s first Technologist's Award

By -- Industrial Distribution, 10/1/2000

In May, the Fluid Power Distributors Assn. announced its first annual Technologist's Award competition. The award recognizes FPDA member companies that have effectively implemented one or more information management technologies and can show the specific benefits of doing so. According to FPDA, the award is not just intended for "pioneers" or early adopters of technology. Rather, it is meant to recognize companies using well-established technologies-like bar coding, EDI and networking-as well as those successfully using newer tools like the Internet and e-commerce.

In deciding on this year's winner, FPDA's judges looked for successful implementation backed up by business process improvements and quantifiable bottom-line results. In late July, the judges-individuals from FPDA member companies-chose Livingston & Haven, Inc., a distributor based in Charlotte, N.C., as the award winner. Livingston & Haven was recognized for its implementation of Internet technologies to manage internal and external operations.

In addition to Livingston & Haven, there were six other finalists for the Technologist's Award . They were: Action Automation & Controls, North Attleboro, Mass.; Air Hydro Power, Inc., Louisville, Ky.; Airline Hydraulics Corp., Bensalem, Pa.; The FD Johnson Co., Solon, Ohio; Oil-Air Products, Inc., Hamel, Minn.; and Sprague Air Controls, Hingham, Mass.

In early August, ID asked Tod Skinner, chief technology officer at Livingston & Haven, to talk about his company's program and the impact it's had on the business. What follows are excerpts from that conversation.

Q: Livingston & Haven is using Internet technology as a business management tool. Could you please describe the program you've put in place?

A: We're using Internet technology both to offer enhanced service to our customers and also to provide more efficient and effective tools for our associates. We now offer our customers a totally customized "customer room" as we like to call it-their transactions, their part numbers, etc. Anything that is helpful to improving their business processes in working with Livingston & Haven. Internally, we manage sales quotas, customer contact notes, customer-specific catalogs and more, all using our Intranet technology.

Critically, everything we've done is integrated to our ERP (enterprise resource planning) system-it's not an island unto itself.

Q: Why did you decide to put such a system in place, and what do you consider its most beneficial aspect?

A: We began to recognize the value of Internet technologies early on, that is, in the 1997 timeframe. That value is a fundamental shift in how information technology functions as a business tool. Perhaps the two biggest aspects of that is the standard platform that Internet technology provides and the intuitiveness of how it works, i.e. low training costs.

The first means that we can build tools that can run anywhere someone has a browser. You have to contrast that with the very difficult programs that some companies tried to implement in the past like putting their software, terminal and a modem into a customer's facility-every offering was different from every other offering and each one required different technology. The second aspect, lower training costs, is equally critical. When you build these tools, you want to offer them to hundreds, even thousands of customers and you can't possibly provide on-site training for them all. With Internet technologies, every application basically works the same, whether it's from Livingston & Haven or Amazon-you just point and click to either get more information or complete a transaction.

Q: How long did it take to put the program together, from planning to implementation?

A: We began building our Web-based tools in July of 1998. We implemented the first pieces of that tool within three months and began showing it to customers. However, the tool, and more so, the internally used tools, are in continuous development as we speak. We learn constantly from our initial experiences, from associate feedback and, most importantly, from customer feedback, how we need to change and adapt the tools.

Q: How have business processes improved at Livingston & Haven as a result of the new system?

A: Online sales quota management, integrated with contact management and corporate sales information, results in improved and consistent visibility of results, as well as greatly enhanced communications between outside sales, inside sales and corporate regarding any and all issues related to a customer.

Sales order entry can be done via the Web site in approximately one-tenth of the time previously required. Additionally, this can be done either internally by our inside sales force or by the customer themselves via a secure customer room on our Web site.

For the customer especially, information about price and availability of the items they are looking for are presented immediately. This eliminates telephone tag between customer and sales [representatives], and communication difficulties inherent in long, alphanumeric part numbers.

Branch and outside sales communications back to corporate are now done via the Internet, eliminating dial-up problems and associated costs.

Q: How have customers and suppliers benefited?

A: Customer-specific processes such as blanket forecast management and consigned inventory have been moved to Web-based interfaces for the customer. This results in, once again, streamlined, error-free communication about customer needs and product usage allowing L & H to provide better customer service.

Vendors are able to view sales quotas for their product line and contribute contact management notes to the database with information they possess. Again, communication is greatly improved and, in fact, a record is being created of how fervently a vendor's field representative is supporting us as a distributor.

Point of sale information for vendors is published automatically to a secure section of the Web site for each vendor. Delays in printing and distributing this information have been eliminated.

Q: How much money did you invest in the system and what bottom line improvements have you seen to date?

A: We invested about $15,000 in hardware and software, but then we have re-assigned first one and now two programmers so that all they do is Web-based development work. So we have their cost, as well, but we already had that cost.

Cost for branch connection to the Internet via cable modem is one-third of the cost of frame relay service. Savings amount to $350 per month per branch with 10 branches connected.

Consigned inventory programs via the Internet versus the prior method of using a person to visit the customer's site weekly have saved half a day per week, per customer on this program. Currently, [there are] 12 customers on the program.

Elimination of administrative duties to prepare and send monthly point-of-sale information to vendors results in savings of one day per month.

Recovery of business from an integrated supplier due to Internet consignment program. This program provided all of the benefits of the integrator (no inventory management and no purchasing cost for the customer), without the inherent costs that the integrator had, namely personnel. Business at this one site over the last 14 months was $210,000.

Acquisition of a large new customer due to Internet ordering functionality. This is a commodity product that we had never been able to convert for this customer. The ability for the customer to enter orders online caused him to convert to L & H. Resulting sales of $50,000 in the first year, with greater opportunities forthcoming to convert hydraulic components.

Elimination of order entry for over 25 customers that are consistently using the Web site to enter orders. Previously these would have been entered by inside sales [representatives]. Approximate monthly savings of 45 [work] hours.

Q: Are a lot of fluid power distributors using Internet technology in this way? Do you see it catching on in the years ahead?

A: We don't see many fluid power distributors using this technology yet. I think some are quietly hoping the Internet will go away. They see press reports of the demise of companies like E-Toys, etc. and that hope is reinforced, but from our perspective, Internet technologies are here forever. They are more important than technology like the fax machine because it allows business collaboration in ways that were heretofore not possible.

Q: What advice would you give to other distributors looking to put similar technology solutions in place?

A: Start with your ERP software provider, unless you have your own system. Build anything you build or buy anything you buy in a way that it is integrated with your main software system. Otherwise you will offer less than real-time information, which reduces its value and you will add cost to your business instead of removing cost.

Q: What is the next step, in terms of technology improvements, for Livingston & Haven?

A: The next steps for us are really up to our customers. They will drive what we do next. If we've learned one thing, it's that the Field of Dreams "build it and they will come" approach is dead wrong. [We need to] figure out how to make both-ours and the customer's-businesses better and provide that solution.

One thing we are monitoring is how will large e-commerce players impact us and how can we interface with companies like Ariba, Commerce One, etc., when and if our customers desire to go that route. We've also done some exploratory work with XML to be prepared for that eventual requirement, but frankly [we] can't find anyone else who's ready to use it.

Q: How does it feel to be the first winner of FPDA's Technologist's Award ?

A: It's very gratifying and affirming to be recognized as such by one's peers. Of course, our greatest satisfaction comes from our customers as they take advantage of our technology so that we both succeed.

Livingston & Haven, based in Charlotte, N.C, has 194 employees and annual sales of between $50 and $55 million.