For Distributors, It's Succession of the Fittest

Succession planning goes well beyond having the right leaders in place. It requires state-of-the-art management and succession planning tools, along with the latest technology available to assure business growth and future success. New technology with cloud computing capability, integrated connectivity, artificial intelligence, business intelligence, and business management software set the stage for future success in the changing distribution environment, even in the face of inevitable top-level executive retirements and potential mergers, acquisitions, and divestitures.

Id 38843 Succession Portal
Brought to you by: PAGE 2 | EPICOR FOR DISTRIBUTORS, IT’S SUCCESSION OF THE FITTEST Succession planning used to be a straightforward process of finding and developing new leadership talent to quickly take the helm when current leaders leave for other opportunities, retire after many years of guiding the company growth, or pass away suddenly. The idea always has been to keep the upward momentum progressing without a break in company mission and focus, assuring staff and customers that it will be business as usual from day one. Often succession planning became a family affair, with a daughter, son, or multiple relatives taking over key leadership roles as an older parent or relative stepped aside after decades of building a successful business. But, that was so 20 years ago. Baby Boomers are at or nearing retirement, Generation Xers and Millennials are more inclined to leave for new employment in a healthier economy, and the up-and-coming newest generation of workers are driven by technology, but less likely to embrace the hands-on knowledge of managing a supply chain. Today, succession planning goes well beyond having the right leaders in place. It requires state-of-the-art management and succession planning tools, along with the latest technology available to assure business growth and future success. New technology with cloud computing capability, integrated connectivity, artificial intelligence, business intelligence, and business management software set the stage for future success in the changing distribution environment, even in the face of inevitable top-level executive retirements and potential mergers, acquisitions, and divestitures. POTHOLES ALONG THE ROAD Without proper succession planning, numerous potential pitfalls and potholes line the road ahead. According to Todd Feuerman, director of audit & accounting at Baltimore-based Ellin & Tucker and an expert on succession planning who participated in a recent Industrial Distribution webinar, points out several of those possible pitfalls: • Most transitions of family-owned companies are not successful; • There often is a lack of trust and communication between the current owners and the future successors/owners; • Often times, the successors are ill-equipped to handle the transition due to a lack of understanding of what is needed to succeed and a lack of management, financial, sales, leadership, and entrepreneurship skills; • A study performed by PWC revealed that more than 33 percent of all privately held businesses will be sold or transitioned in the next five years; • Banks are very cautious about providing financing in equity sale transactions. Feuerman says a good succession plan starts with those you know and trust, like professional advisors, financial partners, key family members, and key employees. He also suggests a series of considerations that should be evaluated during any succession process, including: determining the value and certainty of realizing value from the company; assessing the management capability of the next-generation leadership; identifying gaps in required talent; and workflow continuation during the transition process. PROTECTING DISTRIBUTOR VALUE For successful transitions, distributors need to take advantage of the increasing advances in technology in order to maintain company value, keep their businesses growing, and remain focused on the future when faced with a sudden loss in top leadership, passing a family owned business over to the next generation, or deciding to take advantage of a potentially lucrative offer to sell the operation. The problem is that many distributors fail to consider the critical importance of the technology back-end in their succession planning strategies until it’s too late and they’re forced to make hasty decisions that affect day-to- day operations, lose focus on company value, and cause long-term harm to the business. Today’s advanced technology systems are designed to optimize distributor inventory, drive employee productivity, turn manual functions into highly efficient automated processes, streamline all operations, anticipate upcoming business opportunities, build revenues, and boost the bottom line. PAGE 3 | EPICOR “When I talk about infrastructure and technology as the major part of succession planning, I’m talking soup to nuts,” says Epicor Software Vice President of Sales Frank Heenan, “meaning their web presence, their back-end ERP, their phone systems, their desktop applications, what the back strategies look like, whether their ‘iron’—or hardware—is onsite or offsite, what their disaster recovery strategies look like, really buttoning up the technology driving the organization for that next generation of ownership.” FINDING CLARITY IN THE CLOUD In such a rapidly changing environment, one huge leap distributors should consider taking is fully utilizing cloud computing and the benefits of Software-as-a-Service (SaaS), essentially a subscription-based system for ERP and other software rather than maintaining time-intensive and costly resources to maintain the hardware and software on-site. With SaaS in the cloud, software providers like Epicor can remove the burden of updating hardware and software from the distributor, assuring that equipment and programs continually are up-to-date; allowing the internal IT department to focus attention on other critical programs; and giving sales and support staff access to the same data and information across all channels, departments, and locations. As cloud computing rapidly becomes the norm in industrial circles, the question for distributors is when, not if they will adopt the efficiency and cost effectiveness of the cloud in their operations, including the ERP software they use for managing inventory. With more than 75 percent of prospects inquiring about cloud ERP today, Epicor has expanded its strategic partnership with Microsoft to launch cloud deployment of its ERP product suite on Microsoft Azure, a highly acclaimed platform noted for the reliability, security, and scalability that allows distributors to make the cloud transition with confidence. In the cloud, everyone in the organization sees the same information and operates according to one version of data, empowering faster collaboration among departments, eliminating confusion over separate sets of data, and reducing complexity. That type of system-wide integration of data and connectivity across all systems is of paramount importance in boosting productivity, staying on track for future growth, and preserving company value—critical in succession planning especially in the event of changes in management and/or ownership. DISTRIBUTOR 911: SECURING SUCCESS Another benefit of moving to the cloud involves security and disaster recovery, both of which are maintained by the host provider, not the distributor. “It comes down to whether the distributor is comfortable not having the iron and the database in its facility,” says Heenan. “Once they’re comfortable with that, they have to make the decision whether they want to rent via SaaS subscription in the cloud or own the asset.” From the standpoint of disaster recovery protection and the importance of maintaining systems off-site and in the cloud, it’s influenced somewhat by vulnerabilities in particular pockets of the country. For example, distributors in the West consider the threat caused by earthquakes, in the Southeast it’s hurricanes and flooding, and in the Midwest it’s concern over tornadoes. While the Northeast doesn’t face as much of a threat from those catastrophic events, other factors weigh in to the decision to go cloud-based, including damage caused by an employee, either intentionally or unintentionally, a random lightning strike frying a chip on a server, or a fire at the facility. OPTIMIZATION THROUGH TECHNOLOGY In short, use of cloud computing gives distributors in today’s highly competitive environment heading into the 2020s an opportunity to spend less time searching for answers and more time concentrating on customers, employees, and strategic initiatives aimed at growing the business. Other advancements in technology that continue to disrupt the distribution sector include the increasing use of artificial intelligence, machine learning for analyzing and predicting customer demand, along with optimizing inventory and employing speech recognition for quick, efficient voice-picking techniques. Distributors not yet on the technology train are quickly falling behind their tech savvy competitors, including e-commerce giants like Amazon. Highly sophisticated business intelligence and business management software, along with integrated systems and instant data analysis, helps the smart distributor identify new markets and opportunities well in advance of reactive competitors that continue to struggle with different spreadsheets, conflicting data sets, and manual, customer-unfriendly processes. PAGE 4 | EPICOR PROPHET ECLIPSES COMPETITION Today’s sophisticated business and management software also simplifies workflow, satisfies increasing customer demands, and optimizes virtually every segment of the distribution business. One such system, Epicor’s Prophet 21, integrates a full range of supply chain management capabilities that enable business growth through purchase management, sourcing and procurement, inventory management, advanced material management, and warehouse management features. It’s an intuitive series of high-tech formulas to identify the unique demand patterns of every product in stock; detect seasonal or trending items; centralize the purchasing process to optimize buying power and inventory levels; allow distributors that provide certain value-added services to process raw materials within a production order; provide warehouse management tools for greater control and efficiency; and lower carrying costs while offering customers the added convenience of vendor managed inventory. “We’ve always tried to build our company for the future,” John Wiborg, founder and president of Tacoma, WA- based Stellar Industrial Supply, commented in a case study focused on accuracy and efficiency. “So while it would have been easier to just stay with (an earlier product), we knew that Prophet 21 had a more favorable architecture that made it better suited for evolution and development. We invested in the solution as much for what it could do at the time, as for what it would be able to do down the road.” Looking to gain speed, efficiency, and simplicity in the warehouse, Stellar Industrial also implemented Epicor’s Wireless Warehouse Management Solution (WWMS), a wireless solution that integrates seamlessly with the Prophet 21 system. WWMS streamlines warehouse processes, increases control over warehouse tasks, and improves customer service. The company reported that it shut its old system on a Friday and was up and running with WWMS on Monday with a short learning curve. When asked at the time what aspect of Stellar’s business WWMS has affected the most, Wiborg said, “inventory accuracy.” Meanwhile, Epicor Eclipse is an ERP system that can optimize a distributor’s entire business. The technology is designed for a wide range of suppliers, including those distributing electrical, plumbing, HVAC, and PVF products. It anticipates shifting customer demands and preferences, drives process efficiency and productivity, customizes service and pricing to reduce repetitive reorder costs, and supplies users with tools for growth. The Eclipse program helps optimize job management; e-commerce solutions; access to product and customer information; strategic pricing; business intelligence and analytics; along with customer relationship, sales, supply chain, financial, and wireless warehouse management offerings. It also lets remote employees access and manage data from any mobile device. SUPPLYING THE TOOLS OF COGNIZANCE It all comes down to incorporating a complete succession plan that includes both an executive development strategy and a seamless technology program designed to protect the ongoing business when a sudden change occurs in leadership. “If you have your business affairs in order from top to bottom, and with the proper technology and preparation, someone can step in and continue to operate the business successfully,” says Epicor’s Heenan. It also allows the distributor to maintain top value for the company throughout the transition period and to continue uninterrupted in its mission to serve its customers, secure new business, and seize new opportunities for future development. ABOUT THIS REPORT The information in this iReport was researched and produced by Industrial Distribution (Advantage Business Marketing) in conjunction with Epicor. Epicor Software Corporation (epicor.com) provides industry-specific business software designed around the needs of manufacturing, distribution, retail, and services organizations. Epicor’s more than 40 years of experience with its customers’ unique business processes and operational requirements is built into every solution—in the cloud, hosted, or on premises. CONTACT US FOR MORE INFORMATION ON EPICOR PRODUCTS AND SERVICES: +1.800.776.7438 distributionexperts@epicor.com epicor.com