In December of 2012, Modern Distribution Magazine published its report, ”Twelve Trends in Distribution.” Many of the trends discussed in the study are directly or indirectly related to technology's substantial impact on the distribution industry.
One of the most important findings concerns the populating of the B2B marketplace with new generations of workers. As these young workers restructure their work environments to suit their cultural preferences and circumstances, profound changes are occuring.
I would like to share some additional thoughts on this topic. It is evident to me that a new distribution marketplace - one that is very different from the past - is rapdily emerging.
A Generational Shift is Taking Place
To be fair to MDM, the generational shiift is not so much a trend but is more a fact of the human life cycle. It's not just that Gen X and Y have grown up. Baby Boomers are exiting corporate board rooms in large numbers, allowing ample room for new generations of leaders to assume their responsibilities. The significant rotation of executive and management talent is certain to impact the small to medium business (SMB) world, especially with respect to its relationship with technology.
Consider for a moment when the Internet first arrived on the scene and ecommerce began to emerge as a way of doing business. Many SMB distributors believed their customers would not want to use the Internet to do business with them. The thinking was that Boomers would use technology only as their last option. That was then. Today, the outlook has changed dramatically. The new generation is bringing a different perspective to the workplace.
Gen X and Y are all about technology. Just look around and you'll see dozens (if not hundreds) of iPhones, tablets and other mobile devices in public places. Young people want instant access to information. The expectation is that inquiries will be answered on demand (not later). Now back to business!
Ask yourself: how much tolerance will a Gen X buyer have for a sales person who stumbles in the door carrying bulky catalogs and reams of paper? How will the buyer perceive this sales person? Will the buyer have the confidence and the fortitude to go through an awkward sales process and place an order with you on paper? Perhaps the answer is still yes, but it might not be for long. Not when the competition makes a call on that same customer with an iPad that includes the ability to easily review and place orders on the spot.
Put another way, how long will a company buy from you if their purchasers cannot place their orders anytime and anywhere? It should be obvious that these purchasers will expect you to provide their customer-specific pricing, ship-to and related information, as well.
While there are several trends in the MDM report that directly relates to emerging technologies, it should be clear from this discussion that demographics matter a lot. Simply put, the baby boomer way of doing business is on its way out.
Doing things the way they have always been done is no longer what the marketplace wants or what new management teams expect. Today's new generation of leaders are looking to do business with companies that are technologically savvy, competent and progressive. Increasingly, today's decision makers want their professional lives to benefit from ready access to information, just like they have grown accustomed to in their personal lives. These are the customers you need to start reaching out to today if you want to stay in business for the next ten years and beyond.
Are you in a holding pattern?
A few questions for you to consider.
- Have you recognized the impact of the generational shift within your company and your customers?
- What is your customer capture strategy going forward?
- Is your sales team equipped with the tools to compete with technologically-savvy competitors?
- What is the impact of global distributors on your business?
If you need answers to these questions, let E&A help. Using our industry knowledge, our understanding of best practices, our technology management platform, and our ability to apply that knowledge, we will help you to increase your revenues, decrease costs and create opportunities for continuous improvement. We will ensure that your business is ready to compete more effectively in today's new distribution marketplace.
In my experience with past recessions, the three down, seven up theory always seemed to be in play. Three down years would typically be follow by seven pretty good years. Many businesspeople relied on the “wait it out” strategy. Under these rules, you could make small investments in your customer base, exploit operational efficiencies, then sit tight for three years and wait for a robust rebound.
Not this time!
After five long years, the economy is starting to expand but not at a robust pace. The so-called "new normal" posits that growth rates going forward will be a bit lower than the past. But that is not all that is different.
Technology has played a significant role during this past downturn. While many businesses still relied on the old “wait it out” ploy, progressive-minded companies made significant investments in their technology systems. These companies sought to improve their operational efficiencies. These investments not only cut costs and thus allowed these companies to ride out the recession; more importantly, these companies have positioned themselves to become much more aggressive when the recovery eventually gains strength. New customer capture, up-sell/cross-sell strategies with base customers, customer retention programs for first-time customers, and so on - all were successfully implemented using advanced technology management applications and knowledge of industry best practices.
Revenue capture was not the only technology investment that provided benefits. The ability to re-evaluate the product mix for margin effectiveness, improve purchasing processes and ensure that the warehouse was a “value add” versus a necessary evil - all of these were all impacted by technology upgrades, too.
How were far-sighted businesses able to do this in the middle of one of the worst recessions the country has ever seen? Easy! Executive management understood that the steps taken to improve these areas represented an investment in both the short- and long-term. That when the smoke cleared, unlike previous recessions, the playing field would not be level. To be successful when the economy inevitably turned around and resumed its growth, these companies took decisive steps to be certain they would be ready.
Remember: Internet and mobile technologies have all but put an end to geographic barriers. Don’t be surprised if your former competitors are joined by many others from around the country and the world. As we exit the recession, time is truly of the essence.
At Earnest & Associates, we are operational improvement specialists. By using our industry knowledge, our understanding of best practices and our ability to apply that knowledge, we will help you increase revenues, decrease costs, create new opportunities and continuously improve your operations.
Best practices in many areas have changed with technology, but you do not have to wait to take the steps needed to improve competitiveness. If you need assistance developing an information technology business plan that is designed to grow you business and profits over the next three years, contact us today. Let us know how we can help.
“Information Technology (IT) has become a major asset for businesses, especially today.” Most, if not all business people would agree with this statement. However, it is generally far less recognized that IT represents an important asset class that is unlike any other.
While most business assets depreciate with time, IT investments actually appreciate in value. This is true because the longer an IT system is in place, the more knowledge is captured by end users. The data in the ERP system provides managers with greater insight and understanding of the key performance indicators (KPI’s) that drive the company’s success. IT can be a real game-changer that allows savvy companies to distance themselves from the competition.
E&A developed the PSA (Professional Service Agreement) to help its customers thrive with technology. When a new system is installed or a new release or upgrade is implemented, the full benefits of the system are yet to be realized. To be sure, the tools are in place in the early stages but in order to gain an advantage with these tools you must tailor them to fit your company’s unique environment. “Go live” is just the beginning of the process, not the end!
Recognize that in today’s world, the amount of features and technology improvements are coming at us fast and furious. However in many cases, utilizing these features is no longer an option but a competitive necessity. The organized, systematic yet economical approach made possible with the PSA ensures that your business gets the most from both its past and future systems investments.
You do not want to be on the wrong side of an industry statistic revealing that far too many small to medium businesses utilize less than 50% of their ERP system’s capabilities. Using your PSA merely as a support vehicle or a way to bank hours for the future can limit your potential growth. I guarantee there is significantly more that your software can do when E&A works together with you as a team!
The PSA is designed to provide a budgeted approach to continuous IT improvement. Regular visits by E&A software consultants can help tailor your IT systems to ensure that your business is gaining the maximum benefit possible. Process improvements, decision support, and growth opportunities can be significant when you choose to work more closely with your E&A business consultants. This is why the PSA is more relevant today than ever!
You know your business. E&A knows the software. Together, we can help you gain advantage and keep the competition on its heels.
Let’s improve your business performance by increasing your software utilization. You have taken the first step, “go live”. Now it’s time to accelerate performance!
Dear Friends,
In April 2012, Amazon.com, who is most noted for selling books and for their online ordering process, made a bold entry into the wholesale marketplace with AmazonSupply (AS).
Offering 500,000 items, 2 day free shipping, and 365 days for return, Amazon’s strategy is to first attack the MRO marketplace and, as they have done in the past, expand into many other segments of the wholesale marketplace. You will see by visiting AmazonSupply.com that they are already carrying many lines of industry products including Hydraulics, Pneumatics & Plumbing, Materials, Lab & Scientific, Fasteners, Power & Hand Tools, Janitorial & Sanitation and Cutting Tools, to name a few. The industry thinking is that Amazon Supply will surely take business away from the current WD marketplace participants; however, who and how much will depend on how individual companies respond and how well they might use technology to offer niche services and combat the competitive price war that will surely arise.
There is one thing for sure: prior to AS’s entry into the market in April, AS owned zero percent of the market. It is now July and AS has processed many thousands of orders and continues to grow. Simple math tells you that these orders would have been filled by the companies that existed prior to AS’ announcement. Might some of your customers be testing the waters and buying from AS today?
We have analyzed our customer base of over 400 distributors and discovered that a very large portion of them are in the crosshairs of AS. On the one hand, a large number of our distributor customers are not currently using eStorefront; which might at least allow their customers to enjoy a level of functionality that is similar to AS. On the other hand, we have customers who have installed online ordering websites but have not directly connected them to their ERP (FACTS, Takestock, and SX.enterprise). The problem with both is that the real service benefits to the customers—such as customer-specific pricing—and the cost savings to the wholesaler are not fully realized. In many ways, e-commerce sites that are not connected to the ERP are not much different than online fax machines. This will no longer do.
The challenge does not end with e-commerce. With AS pressuring the market to drive down the cost-to-serve across the industry, distributors will find that other competitive solutions will soon become essential to their survival. Examples include customer relationship management (CRM), warehousing automation (WMS) and document management (DM), among others. These solutions can help your company control costs while providing the kind of value-added services that AS will find difficult to provide. All of these are easily cost-justified and can provide quick payback to you. Importantly, these technologies will help protect your business from losing share to one of the most formidable new entrants the industry has seen in many years.
In closing I would like to say that the time for action is now. A decision today would still take months to implement but a failure to act could be even more costly. If you would like to discuss the impact of AS further, please call me. E&A will do all we can by providing the most cost-effective and competitive solutions available to you.
Best Regards,
Tim Earnest
Dear Friends,
It’s Spring and the E&A User Group series is in full session. This year we’ve had our best attendance in years. Each meeting provides opportunities for customers to meet and share ideas with E&A business consultants, Infor, invited guests and most importantly fellow end users.
The agenda has been a combination of timely information on such topics as Cloud Computing and Lean Distribution as well as introductions to E&A’s new ROI Cash Conversion Analysis and the latest software releases for FACTS, Takestock, and SX.enterprise. The feedback has been great and the attendees have been enthusiastic!
As I have mentioned many times, the role of “IT” has changed significantly in the past several years. Today, it is all about your ERP system collecting and processing data for easy access to users on the road. Mobility is the key!
Infor is far ahead of its competitors in this regard. Infor is investing significant dollars to ensure that the information you need to service your customers and grow your business is readily available; and more importantly, accessible wherever and whenever you need it. Infor calls its mobility solutions suite, Infor10 Motion. Innovative products like Infor Road Warrior and Infor ION are helping our customers keep their information aligned and presented on the most popular mobile devices available in the marketplace today.
While Infor is addressing the technology, E&A is developing a series of ROI components to help identify areas for improvement at an organizational level. Last year we introduced Pro Decisions for departmental reporting. In 2012, we are pleased to introduce our ROI Cash Conversion Analysis. While similar in format to Pro Decisions, E&A ROI looks at the cash flow across your entire organization in order to identify areas for cash improvement.
We are so confident that E&A ROI will improve your cash position, E&A is offering a 180 day challenge to our customers. Use this tool for a limited time and watch your cash grow!
If you have attended our User Group, we thank you for your time. If you could not make it, please contact your account representatives to learn more about the various topics discussed. For those who plan to attend the remaining meetings we have scheduled for this Spring, we look forward to seeing you and sharing these new and exciting technologies.
As always, we thank you for your confidence in E&A and your business. We look forward to our continuing relationship.
Best Regards,
Tim Earnest