Creating a smooth ordering process for customers is so important to the folks at John Henry Foster that before any new computer equipment or software programs are installed and implemented, the distributor hands them over to 13 inside salespeople who test them out and either give their seal of approval, or toss them out as unusable.

"They're on the phone with the customer, which is the exact point where we want to have the fastest, greatest and best possible systems in place," says Chris Rutz, information technology manager for the St. Louis-based distributor of pneumatic and hydraulic equipment. "Since the majority of our orders come through our inside sales department, we need everything to go as smooth as possible for the customers, and for the reps themselves."

John Henry Foster's last major order process change took place five years ago, when it purchased Aperum's Takestock distribution management system, which handles the company's customer service and inventory management processes. The system also makes it easy for John Henry Foster to create drop shipments from within a sales order to a supplier, and to do business via electronic data interchange.

The system hasn't solved all of John Henry Foster's ordering challenges, according to Rutz, who says creating multi-level bill materials can be "a little tricky." When a box of hoses contains various hose sub-assemblies, for example, inside reps have to put more time into creating and pricing the order.

"We get through it with a lot of employee training," says Rutz, adding that inside sales reps are not only technically trained, but they also visit factory schools every year to learn how to solve customer problems quickly and efficiently via the telephone.

In return for its investment in technology, and the time spent training employees on the fine points of the system, Rutz says the company has gained a competitive edge in an industry where knowledgeable inside sales reps with information at their fingertips can mean the difference between a sale and a "no, thank you."

"We invest continually in hardware and software to make the ordering process as painless as possible," says Rutz. "That definitely separates us from our competition."

Not all industrial distributors are as dedicated to their ordering processes as John Henry Foster. In fact, Danna Nelson, FACTS product manager at Aperum in Duluth, Ga., points out that although distributors often excel at front-end customer service, their best intentions can be spoiled by events that take place in the warehouse, such as stock-outs or misplaced products.

"If a stocking product is out-of-stock, the order may be canceled by the customer who 'just can't wait,'" says Nelson. "Further, frustrations by the order picker— 'I know it's here, I just can't find it!'—can delay orders and cause them to miss their promise date." Nelson says the bottom line is simple: everything past the order being taken depends on the product being located according to its shown availability in the computer system.

By implementing improved inventory practices, Nelson says distributor order fill rates will increase, resulting in happier customers. The same goes for a distributor's vendor-related ordering processes, which, when streamlined, result in fewer rush orders for the vendor and better negotiating leverage for the distributor.

"Vendors consider those customers that aren't high maintenance deserving of better discounts," says Nelson. "Distributors may also save on the higher freight costs associated with rush or under-minimum orders."

Distributors run into stumbling blocks, says Mark Dancer of Pembroke Consulting in Philadelphia, in finding ways to pass orders they receive from their customers through to their suppliers without manually handling the order.

"This is highly inefficient, and it also shows that most distributors lack the ability to truly leverage their customer order base with their best suppliers," says Dancer.

To avoid that trap, he says distributors must electronically aggregate orders by customer and supplier, then mine the data for information that can illuminate market share and competitive conditions. That means creating state-of-the-art supply chains that find customer orders being passed onto suppliers in an electronic format. Such systems range from EDI to comprehensive enterprise resource planning.

So what's in it for the distributor who invests time and money in such systems? As the folks at John Henry Foster found out, the benefits include increased productivity, because fewer hands are touching orders— which, in turn, are getting out the door much faster than with a manual system.

"Customers who are engaged in strategic sourcing want distributors to share information that can help them with detailed spend analysis," says Dancer, who adds that distributors can also help customers who can't meet their strategic sourcing objectives with their own stand-alone systems. "These customers need detailed analysis and proactive recommendations. Who better than the distributor to provide such information?"

No development has changed the ordering process quite like the Internet has. And though not all customers have embraced it as their ordering system of choice, the numbers of adopters are growing, as Richards Equipment Co. of Waco, Texas, recently discovered.

Two-and-a-half years ago, this general-line distributor and contractor supply house polled its customers, only to find that 90 percent of them had little interest in doing business via the Internet. Within a year, customers began asking for Web ordering, according to Steve Wessinger, CEO. To meet those demands, the distributor purchased Prophet 21's B2B Seller and began using it in January 2004.

Wessinger estimates that the 35-employee company invested about $175,000 in its ordering process, which includes Web ordering, a virtual private network and a system for doing business with its vendors. It took about six months to load all of Richards Equipment's product descriptions and data into the system, though the investment is already paying off. In February alone, 75 new customers registered to start ordering online.

For distributors, Wessinger says a streamlined ordering process—be it by phone, fax, Web or a mix of all three—is vital. And the more automated the system is, the better.

"It really has to be easy for everyone to use," says Wessinger, "with everything centered around the customers getting their products on time."

It sounds simple enough in theory, but distributors have faced challenges in creating a consistent transaction across the various ordering channels. W.W. Grainger, Inc., of Lake Forest, Ill., for example, has focused on building a system that allows customers to come in through its Grainger.com Web site, local branches, catalog, fax or telephone in a consistent manner, according to Patrick H. Davidson, vice president, branch services.

Davidson says Grainger makes it happen by working continuously to upgrade and modify its order management systems, including its Web site, which brought in more than $470 million in sales last year. He calls a streamlined ordering process "particularly important" for distributors who handle MRO products, since 60 percent of the total cost is product-related, while the remaining 40 percent comprises the process costs involved with acquiring those products.

"Our Web site has helped customers reduce their acquisition costs by consolidating the number of suppliers they work with and the number of products that they have to source," says Davidson. "At the same time, we still have many customers who value picking up the telephone and calling us while looking in the catalog. To cater to all of them, we've built a multi-channel sales and service strategy that serves customers in the way they want to be served."

Denny St. Denis, TakeStock product manager at Aperum, compares industrial distribution to the retail marketplace, where the phrase "3-dimensional marketing" is used to describe the retailer's ability to take orders from customers in their stores, over the phone using catalogs or via a Web site. The goal is not to force customers to use any particular method, he says, but rather to make it easy for them to use whichever method they prefer.

"It's all about convenience, and distributors are doing the same thing," says St. Denis, who has picked up on an increase in the volume of distributors deploying the firm's customer Web-based storefront application. That's because end users enjoy the convenience of using the Web to check pricing and availability, item specifications, and the status of open orders; review past invoices; check the status of their accounts; and place new orders.

As market pressures continue to squeeze margins, Nelson expects the most successful companies to seek out competitive advantages by keeping customers happy with fewer resources expended.

"This will undoubtedly mean that some distributors will be examining their costs to serve the customer," she says, "and drill down on those areas that need improvement."

If Pembroke Consulting's recent Facing the Forces of Change: The Road to Opportunity study is any indication, distributors will look to new technologies to increase those operational efficiencies and deepen customer relationships. The study found that over the next four years, distribution executives plan to expand purchases most quickly in the areas of online ordering, customer relationship management, salesforce automation and warehouse management systems.

Doug Levin, executive vice president of Prophet 21 in Yardley, Pa., says those distributors who allocate the time and money to improving ordering processes will benefit from improved customer service levels and fewer man-hours spent correcting errors introduced through manual systems.

"Distributors are realizing that they have to do more with less," says Levin, "and that even a 10 or 20 percent efficiency gain in the order processing area will result in lower costs and/or increased sales without having to add people."