The 65th Annual Survey: Tech Usage & Investments

Based on the data from respondents, in the coming year we can expect to see internet sales rise in a conservative manner, and technology to become even more important in managing the supply chain and sales strategies in the everyday lives of distributors and their businesses . . .

This article originally appeared in the May/June 2012 issue of Industrial Distribution. To view it in its original format, click here.

In the 2012 survey we asked our readers several questions about technology and how they incorporate it into their day-to-day business activities. The answers varied widely just as the demographic profiles of the respondents did, but there was an overwhelming response that technology does indeed play a part in the world of distribution.

Figure 1: Of the following technologies, which do you use currentl

We asked readers which technologies that have in use currently, and encouraged them to check all that apply. The majority of respondents (73 percent) marked wireless email and internet access, not surprisingly. What was surprising, however, was that the number was four percent less than last year’s 77 percent. Perhaps some companies have abandoned wireless in favor of the 3G and 4G mobile data offerings of wireless companies, or perhaps smart phones and other mobile forms of communication didn’t make the budget this year. Either way, the decline is interesting to note.

Following closely behind wireless email and internet access was online web ordering. Sixty percent of respondents employ web ordering for their business, a trend up two percent from last year. Interestingly enough, 33 percent of last year’s respondents reported that they will likely adopt web ordering in the next two years. It looks like 31 percent still have some implementation to do, and only a year left to make it happen. The same number, 33 percent, of this year’s respondents indicated it as a plan for the coming two years as well. In line with this figure, 77 percent of respondents said that they regard their website as vital to the future success of their business, that number remaining the same from last year, after a jump of 25 percent from 2009 to 2011. And, in response to whether or not e-Commerce was a priority for the company, only 59 percent said yes, down two percent from last year’s survey results, but still up a full ten percent from 2009.

It seems that the trend in internet sales is leveling out among distributors, but this is probably not a good thing. In the March/April issue, an article on e-Commerce highlighted how important it is for distributors to open themselves up to this opportunity. According to the article, “Customers have grown to expect the online convenience of ordering anytime from anywhere, options for ordering on mobile devices.” Mick Mountz, founder and CEO of Kiva Systems, adds that “if you aren’t looking at e-Commerce as a growth strategy, you are leaving money on the table.”

Figure 3: Which have had the greatest impact on your business?

Wireless internet and email access remains the most-used technology, but this year the surveyed respondents indicated that online web ordering has the greatest impact on distributors and their businesses, beating out wireless by six percent. Out of all survey respondents, only 57 percent are currently generating web-based revenue, meaning a large group could be missing out on some added value. The respondents themselves reported that 86 percent buy products using the internet, but only 57 are selling their products via this resource. Thirty percent of people that purchase online themselves don’t make that option available to their customers. These numbers are surprisingly in line with last year’s data after jumping twenty percent since 2009, begging the questions of why individuals who buy online consistently, taking advantage of extended hours and potential bargains, do not also feel the need to sell online on a consistent basis. As Mountz mentioned, online web ordering is a constant source of revenue for your business, and the ability for customers to place orders around the clock makes your profits available around the clock and keeps your company and brand visible at all times, even when the employees are absent.

Coming in third on the survey for a second year is Customer Relationship Management (CRM) software, with 45 percent of readers employing this technology, only one percent more using this software than last year. For a second year in a row there has been significant data in the number of respondents utilizing Enterprise Resource Planning software. This year 30 percent said they currently utilize ERP software, as opposed to 28 percent last year and 40 percent the year before. However, of those that use it, its impact on their business is dwindling from 2009 at 26 percent to this year’s results at 18 percent. Fewer companies are using it and of those companies fewer perceive a high level of value from the software.

Figure 6: In the next year, where do you expect your internet sales to be compared to now?

These numbers are in stark opposition to those for CRM software, which have remained overall extremely steady. In 2009 CRM was cited as having the greatest impact on business by 36 percent of survey respondents. In 2011, that number dropped slightly to 30 percent and in 2012, rose again to 33 percent. This unchanging figure indicates that CRM software may just be more deeply ingrained in the world of business than ERP, since more small business utilize it that aren’t yet large enough to incorporate an extensive ERP package. It is also possible that this decline in perceived value reflects not on the software itself, but on distributors’ adoption of the software. Perhaps busy distributors facing staffing reductions and time shortages haven’t been made fully aware of the technological advances to ERP in recent years, or haven’t had the time to train themselves and their employees properly to achieve a high level of ROI on them. Another thing to note: with more and more CRM and ERP solutions being housed on the cloud interface, they are getting more and more affordable — even for smaller businesses — making them possibly more valuable from the beginning and without months of set-up time.

A trend on the rise is warehouse management software. In 2009, survey respondents noted that 31 percent of them used WMS, and 23 percent intended to integrate it in the next two years, but only eight percent felt that it had an intense impact on their day-to-day business. In 2012, 31 percent of users still utilize WMS, and only 19 percent more plan to adopt it in the next two years. However, 14 percent feel that it is integral to their daily activity. This could be attributed to many factors, including the need for companies to operate as lean as possible during the downturn in the economy, demanding a need for optimization of the warehouse and its functions. It could also indicate or reinforce the trend toward globalization and supply chain integration and automation. Many distributors say they are working with an ever increasing number of suppliers and customers and a greater number of products every day. With all of those factors increasing rapidly, it is possible that warehouse management software will continue to play a major role in the life of every distribution company.

Another category that saw a decline in use among survey respondents was sales force automation. In 2009, 34 percent of respondents were utilizing some form of SFA, with another 34 percent answering that they were hoping to adopt it in the next two years. In 2011, those numbers dropped to 22 percent and 26 percent, respectively, and in 2012 they dropped again. According to the latest survey results, only 17 percent of respondents currently use SFA software, and only 21 percent indicated that they would likely adopt the technology in the future. Although it is unclear what this trend indicates exactly, it could be that other software systems like CRM or ERP are becoming more comprehensive and are bridging some of the technology gaps that used to be covered with SFA software. Or as mentioned earlier in discussing the decline in ERP usage, it could be that respondents aren’t fully aware of all the technical advantages of SFA software, or haven’t invested enough time in getting to know their current system.

At the bottom of list of technologies with the greatest impact is RFID technology, with only two percent of respondents noting it as crucial to their business. However, seventeen percent of respondents said that they will be likely to adopt the technology in the near future. It is possible that when thinking of technology that is “critical” to business operations, that offsite technologies life RFID driven automated vending get left out of the equation in favor of more immediate options like email and CRM software. These disparate numbers might indicate that distributors believe RFID technology will become more universal and more affordable in the coming years, or more necessary based on the increasing globalization of the supply chain. It will be interesting to see if this trend will be on the rise as predicted by survey responses.

As noted earlier, website use among distributors keeps rising, but for what is that website being used? The responses can be boiled down to two different categories: sales and support.
Given the chance to select up to three responses, almost 50 percent of respondents said that they use their website to house technical and product information, making it accessible to customers around the clock. This segment of the responses falls under both categories, serving to educate customers and give information on products that may lead to additional sales.

On the sales side, 39 percent of distributor respondents use it to generate sales leads directly and 37 percent say that it helps them to find new customers. In addition, websites help distributors to generate orders (29 percent). Thirty-two percent of respondents also mention that their site is used primarily for e-Commerce.

On the technical side, 22 percent said that their website houses direct technical support, and 11 percent note that they utilize their site for training, possibly both in-house and customer training. And nine percent of survey respondents use their websites to update customers on the status of their order, automating some of the responsibilities of the sales team and freeing them up to sell more.

For respondents that do use the web to generate sales, we asked what percentage of their total sales came through the internet. The overwhelming majority of survey respondents, 77 percent, said that between one and ten percent of their sales came from web-generated sources. Fourteen percent said that between 11 and 20 percent of their sales were from the web, and less than ten percent responded that 20 percent or more of their total sales were generated online. It appears that a few companies are extremely successful in their web-based sales initiatives, and that for the rest of respondents tapping into the online sales market, it is at least adding to their bottom line in a recordable fashion.

These same respondents commented on whether or not web-based sales would increase, decrease, or stay the same over the next year. Sixty-nine percent of respondents believe that they will increase, a number that is down slightly from last year’s survey results of 75 percent. Last year, less than one percent of respondents believe that internet sales would decrease, and this year one percent postulate that their web-based sales will decrease in the next year. Thirty percent of readers think that their internet sales will stay the same in the coming months, up five percent from the results of last year.

The results overall in the last decade indicate that technology becomes more and more important every year for distributors and their bottom line. In addition to boosting sales, it also indicates that most distributors are taking advantage of some of the time-saving and convenience features of technology as well, utilizing smart phones and wireless capabilities to keep their sales force, warehouse, and decision making departments in sync and as efficient as possible. Based on the data from respondents, in the coming year we can expect to see internet sales rise in a conservative manner, and technology to become even more important in managing the supply chain and sales strategies in the everyday lives of distributors and their businesses.

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