Lean in Distribution (Part 1 of 3): Lean Principles

by Stuart Maxel

Imagine a distributorship in which all employees took responsibility for improving the business. A business that continuously worked at eliminating waste and, more importantly, satisfying customers each day. Technology linked into business processes to simplify, automate and implement strategic goals management.

Lean can be the vehicle to unlock profitability, growth, and customer and employee satisfaction for distributors. It is a collection of simple, easy-to-understand concepts that can be applied by any size distributor. Lean is not just a tool, but instead, a culture, philosophy, process and methodology. In its simplest form, it means turning waste into value. More importantly, it involves getting employees thinking and motivated to make processes better. Lean analyzes end-to-end processes and determines how to deliver more to the customer with much less.

Typical improved results from lean distribution include:

• Increased profits
  
• Higher sales revenues
  
• Improved delivery performance
  
• Lower operating costs
  
• Better customer satisfaction
  
• Better supplier relations
  
• Decreased purchasing costs
  
• Shorter lead times
  
• Inventory reductions
  
• Higher inventory turns
  
• Increased working capital for new projects
  
• Increased space capacity
  
• Greater employee morale

Implementing lean requires clarity of principles, so that all decisions made by the distributor favor a lean value stream. Let’s discuss the five lean principles as laid out by Womack and Jones in the book Lean Thinking, and how they fit into distribution.

Value – This involves identifying what customers see as value. For distributors, the value that they provide is having the right items, at the right time (often now), at the right price. Increasing anything that customers see as important will increase value. For example, if a distributor added an extra morning delivery, customers may see that as value because they may be receiving their items faster ‒ which could be a competitive advantage over other distributors.

Value Stream – The value stream includes the activities that a customer would be willing to pay for. For example, picking, packing or order entry are parts of a distributor’s value stream. The value stream is important because it can identify potential waste. The most common and powerful tool for identifying value in processes is a “value stream map.”

Flow – Flow is a logical but slightly less relevant concept for distribution. Flow really refers to continuous flow in very small, or ideally, single piece flow ‒ which means in general, batching should be avoided when possible. A lean flow means orders should be received, picked, packed and shipped all day long, as opposed to having large batches of picks, items for packing and single large shipments. In general, a lean distribution flow would purchase smaller quantities, and receive, put away, pick, pack and ship with such efficiency that batching does not save significant time.

Pull – Pull is a simple but key concept for distribution and supply chain management, outlining how distributors need to plan their inventory and order processing. Pull refers to actual customer usage and replenishing exactly what was ordered by customers. This stands in contrast to most push-type forecasting models. Obviously, this can be problematic with minimum buys, quantity discounts and relatively inexpensive items. Inventory levels, safety stock or buffer stock are reviewed periodically (about every 3-6 months) but, except in rare instances, not changed by actual usage until the regular review cycle.

Perfection – Perfection refers to driving waste out of every process and meeting customer expectations in every way. Perfection is elimination of mistakes in every shipment. It would equate to zero late orders, and having every item that customers need, at a price they are happy with, in stock. Obviously, it is not attainable on every order, but it should be the goal of every distributor. Trying to achieve perfection requires metrics to track the journey, such as fill rates, shipping performance to customer promise dates, wrong shipments and lost orders.

Lean is a never-ending journey ‒ it gets better, but no business can ever be completely lean. Lean becomes a way of life, striving for perfection in every process, customer order, and dollar invested in the business. In our next blog, we’ll discuss tools that can be applied in this journey toward lean.

Stuart Maxel is Continuous Improvement Manager at Epicor Software Corporation (formerly Activant Solutions). Find out more at www.epicor.com/distribution or call 1-800-776-7438.

Extensibility: DIY to Insert Unique Functionality into Your Distribution ERP Software

by Dave Getty and Steve Heister

In the world of Enterprise Resource Planning (ERP) software, extensibility is a virtual toolkit that allows you to take your unique business processes and insert them within your existing ERP system.

Every distributor has specific needs, or their own way of doing things that differentiates them from competitors. With extensibility tools, you can build user-defined fields, portals, personal workspaces or business rules, or integrate into external systems, to round out your processes, cut your costs, and improve efficiency. And when you want to change a process in response to a vendor request, a new business opportunity, changes in the industry, etc., extensibility provides a way to adapt to these business drivers with maximum speed and minimum cost.

The key to extensibility is that the user can develop pieces of code that best fit their company’s business process and create the necessary functionality for themselves without altering the underlying system code. Here are some examples.

At virtually any distributorship, you are likely to see standard process documents, laminated checklists posted on walls and desks, sticky notes on computer terminals about dealing with specific customers, and so on. Extensibility allows distributors to create business rules and decision making tools capturing all of those details that employees need to remember to do their jobs, and engineer them into the ERP system.

Expansion into international markets has required changes to many distributors’ business processes. Customers outside the U.S. may need to be set up differently within your system; e.g., with different currency codes. That’s just one more thing for your employees to remember. Why not help them adapt with a rule that automatically changes the currency to euros if a European country code is entered in the system?

Extensibility can help bridge the information gap between new and experienced employees — reducing the learning curve when you’re onboarding new hires, and getting them up to speed in understanding the different scenarios that your experienced people are used to handling. This also gives you more flexibility in reassigning people to deal with vacations, sickness, resignation and retirement, etc. With business rules, you can ensure that policies are followed, and reduce the potential for mistakes in your business processes, by placing restrictions and approvals in the system that help to enforce correct procedures.

Personal workspaces can be created for each individual employee in the company, for certain tasks they do on a regular basis (e.g., tracking shipments or expediting orders). A personalized dashboard can reach into various areas of the system and bring together all of the relevant information that that person needs to do their job — a single point of reference.

For real-time, on-demand data access, you can turn spreadsheets or reports into portals using extensibility tools. The portal can display information from the report on a screen, but make it interactive. Likewise, if employees are receiving too many automated alerts that clog up their in-boxes and don’t get acted upon, you can build a portal that turns the alerts into actionable “To Do” lists assigned to specific employees.

You can also empower employees by providing rules in the ERP system that give them guidance for handling common business situations. For example, if an employee attempts to negotiate freight with a customer, a business rule would be a great way to invoke the “voice of ownership” by providing parameters that encourage a negotiation that satisfies your customer but maintains profitability.

Obviously, distributors don’t want to spend lots of time designing their systems; they need to focus on building their businesses. But if you want to preserve processes that differentiate your business from competitors, rise to challenges and new opportunities, and respond quickly to market drivers without having to build everything from the ground up, extensibility puts the power in your hands.

Dave Getty is Vice President of Product Development, and Steve Heister is a Product Manager at Epicor Software Corporation (formerly Activant Solutions). Find out more at http://distribution.activant.com or call 1-800-776-7438.

CRM Is Here to Stay: Evaluating Its Use with ERP

by Trevor B. Cain

The debate over whether the recession has ended may continue, but most industry watchers agree that conditions over the past two years have created a new climate in business – a climate where caution reigns, and increased customer service will be a key differentiator between competitors.

I hear almost every day from Activant clients and prospects that they need better tools and access to more accurate, real-time information in order to provide the increased level of service required to keep their current customers and attract new business. Competition is tough: a quote from one rep today could easily turn into an order for a competitor tomorrow.

The businesses I work with are distributors of wholesale durable goods. Wholesale distributors often run lean and mean – many times, without an outside sales force or the ability to be in front of every customer all the time. This does not exempt them from needing to create a competitive edge, however. Their field sales force has to be more proactive than reactive. They need to walk into a customer meeting armed with information: Quotes and invoices based on the last visit. Were there any new quotes? Any outstanding orders? Credit issues? Other problems?

Being aware of what is going on with an account has always been basic to customer relationship management (CRM), but in today’s climate, it’s a critical factor. As a result, wholesale distributors are looking for a better approach to CRM as they evaluate Enterprise Resource Planning (ERP) systems to run their business. For some, this is their first look at CRM, but others may be seeking to consolidate systems, searching for a more efficient alternative to maintaining two or more databases of information that often don't communicate with each other.

These stand-alone CRM applications can be quite costly to the midsize family-owned distributor. The functionality may be robust, but is it tailored to the specific demands of the distributor? Often, the investment has more function than needed.

When considering ERP systems for distribution, the question to ask in reviewing CRM functionality is: What does CRM mean to my business? Determining what CRM means to a distributor involves evaluating all areas of the business and their needs. CRM isn't just the customer relationship as it pertains to sales, but also accounting and value-added services, if they exist. Outside of sales, distributors also maintain relationships with their vendors. Without inventory and knowledge of availability, distributors would be dead in the water.

One approach to evaluating these areas of the business is to empower key employees from various departments to have a voice in what is important.

• Does the company have an outside sales staff? If so, enhanced CRM functionality could greatly increase their efficiency. This usually goes to their bottom line, which is what they are always watching.


• Do these field sales reps have laptops, smartphones, iPads? What tools do they need to have access to and from a system?


• Can your company automate workflow not only within the business, but also out to those reps in the field?


• Can the system generate automated tasks based on those important transactions that often require follow-up, such as quotes to the customer?


• Does your company get involved in larger bids with customers (i.e., it's not just a single quote, but multiple quotes under a larger opportunity that may linger on for months)? Is the company able to track these opportunities in order to generate a pipeline of what is to come in future months?

These small pieces of functionality will make the difference between being proactive or reactive. The bottom line is, to see both immediate and long-term effects of CRM, you should get buy-in from employees. Determining needs, uncovering key functionality and implementing are only half the battle. No matter what CRM system you choose, the ROI will come only if it is put to use.

Trevor B. Cain is an Industry Segment Manager at Activant Solutions Inc. Find out more about Activant at distribution.activant.com or call 1-800-776-7438.

Appearance Does Count: The Importance of User Interfaces for ERP Systems

by Steve Krok

A distributor’s ERP software is a treasure trove of data. As a system of record, it serves as an electronic file repository, historically tracking business events in great detail. Distributors have seen those systems of record go through many makeovers over the past 30 years. But as software providers scrambled to create new systems and improve on their existing platforms, they often created functionality with a clunky front end that had good data, but was difficult to interact with.

What the user interacts with is commonly called the user interface or UI. While UIs have recently taken leaps in making a user more efficient, if you look back to when many distributors last made an ERP system upgrade, this was not the case. The old systems of record had solid business rules for archiving data, but the UI suffered.

The resulting frustration of the employees was obvious, as the UI forced them to learn an entirely new language to communicate with the system in order to do their jobs. Repetitious tasks like Sales Order Entry, Cash Receipts and Stock Receipts had a flow to them that, on the face of it, was very cumbersome to the actual user. Getting employees to learn and use the interface was often a major milestone in the implementation of the ERP solution.

In more recent times, the technology world moved rapidly to create interfaces that were easy to understand and mirrored the lifestyle of the end user. Graphical UIs are getting better, faster and more intuitive. These days, a new hire is more likely to be familiar with the look and feel of a Windows-style graphical interface than traditional character-based screens. What young employee hasn’t seen or even played with graphical applications from Apple, Google, and Verizon?

The question falls to the IT manager within a distribution company using an older UI (whether or not the actual ERP is updated): does a graphical interface really make a difference? Based on our experience working with existing and potential customers, it absolutely does. According to one longtime customer who recently upgraded to a graphical interface, his new hires are trained more quickly and on the floor sooner than ever. They make fewer mistakes, as the newer UI is more intuitive as to how they do their jobs. They ask fewer questions about how to perform tasks, and expect the software to tell them what to do next.

Since the supply chain directly links the distributor to vendors and customers, the UI needs to touch these parties, as well. You wouldn’t expect a customer who’s surfing a Web site researching material and ordering product to interface differently than your employees do. Web sites that customers must interact with should have that same look, feel and ease of use that they expect from the Internet. Keeping the minds of your employees and customers “on the same page” by using similar tools also enhances the bond between them.

There is no doubt that having a robust system of record is paramount to ensure the archived data is recorded and stored properly. But without an equally good user interface to engage your audiences, that database is like a buried treasure chest. It’s just not being used to its fullest potential.

Steve Krok is an Industry Segment Manager at Activant. Find out more about Activant at distribution.activant.com or call 1-800-776-7438.

Efficiency Gains with Mobile Computing and Proof of Delivery

by Mike Mazzoni and Diane Dunbar

As business enterprise technology is constantly changing, distributors are faced with the challenge of understanding the range of available tools, and more importantly, determining how they can leverage them to help increase operational efficiencies.

One of the hottest technology trends today is the idea of utilizing mobile computing to improve an end user’s capabilities outside the four walls of the distributor. Specifically, many companies are looking for ways to incorporate Smartphone and iPad technologies into their daily operations, for better communication and workflow.

High on the list of opportunities for using mobile devices is tracking and capturing information as product is delivered to the customer; more specifically, obtaining an electronic proof of delivery (POD) as material changes hands. Capturing an electronic signature immediately improves efficiency: not only does it replace the need for multiple pieces of documentation (which inevitably fall between the seats of the truck), but it can also generate a real-time delivery confirmation by communicating wirelessly with a distributor’s Enterprise Resource Planning (ERP) software system.

This signature is then stored in the ERP, and printed on the customer’s invoice. In addition, the signature can be quickly recalled through a customer inquiry window, showing not only who signed, but other important information like date, time, and driver details.

Distributors can also take advantage of the additional features and functionality that mobile devices already offer. For example, Global Positioning System (GPS) capabilities allow the driver to call up turn-by-turn directions from one stop to the next, and give the distributor visibility into specific route details, such as distance travelled, time spent, and current position. This information could easily be compiled to help the distributor reorganize their truck routes, potentially reducing the overall cost of delivery.

Features like the built-in camera can help to answer questions about damaged or defective materials, potentially alleviating drawn-out disputes with the customer. Finally, customer contact information delivered directly from the distributor’s ERP can aid the driver in quickly communicating with the customer when an issue does arise.

By providing real-time delivery information, an integrated mobile POD application can have a direct effect on the efficiencies of a distributor. While this visibility supports improved customer service, there will also be efficiency gains in the back office. Time is saved by eliminating the need to manually enter delivery information into the ERP system and file signed shipping tickets at the end of the day. At the same time, paper costs are reduced and accuracy is increased. Because customers have come to expect the use of up-to-the-minute technology, POD is steadily becoming more of a “need to have” than a “nice to have.”

Mike Mazzoni and Diane Dunbar are Industry Segment Managers at Activant. Find out more about Activant at distribution.activant.com or call 1-800-776-7438.

Facing the Challenge of Disparate Systems

by Stuart Scott and Dave Lusk

As Industry Segment Managers with Activant Solutions Inc., we have spent many years observing thousands of companies carve out a place for themselves in the wholesale distribution market space. The industry has evolved from full-line distributors with exclusive rights to a territory, to a global market with intense competition and the need to stand out in a crowd of vendors all vying for a single customer’s loyalty. Adaptation has become the rule, and an ever-heightening level of customer service is necessary in order to thrive.

As a result of this trend, many distributors are incorporating multiple disparate systems into their processes, because it seems implausible for one software system to handle everything that is required to best serve the customer. This leads to costly integrations if those systems are to talk to each other, or costly maintenance of separate programs if they are to remain apart. Many of these systems come with their own databases that are unique to themselves and require double entry to maintain their information separately from the distributor’s enterprise solution.

Some of the disparate systems we see implemented beyond a distributor’s enterprise solution include functions for:

• Service and repair tracking


• Service dispatch


• Customer label production


• Managing customer inventories (either owned or consigned)


• Warehouse solutions (wireless or RF)


• Replenishment and forecasting tools


• Quoting systems


• Strategic pricing cubes


• Robotics and carousel technologies


• Document imaging and management systems


• Job tracking and manufacturing solutions


• BOM configurators


• Proof of delivery systems


• Shipping manifest packages


• Delivery routing devices


• Web commerce and customer self -service solutions


• Mailings and other marketing programs


• Sales force and CRM tools


• And more.

Even internal processes often rely upon separate systems. In a recent customer visit, we encountered a large distributor leveraging five unique solutions to handle service, CRM, labeling, accounting, and inventory management. Their processes included re-entry of data in many steps from Excel to their accounting system in order to produce meaningful financial statements.

In this example, when a customer calls with a question, the customer service representative must first determine which application to open for an answer; invariably, the customer needs to wait on hold or be called back after a time-intensive scrutiny of the data. If key customer accounts or vendors request a meeting, a “fire drill” of updates from all of these systems is required in order to prepare. Management is also unable to determine corporate positioning, monthly standing, customer and sales rep activity, and recent monetary inflows and outflows with any sense of complete accuracy, because the data is not centrally gathered.

What is the true cost of these disparate systems? Is it lost sales? Lower customer satisfaction? Does this lack of efficiency lead to frustrations that damage employee morale? We see these issues as the primary drivers that cause prospective clients of Activant to seek an integrated enterprise solution. Customer demands on the distribution channel are not going to diminish; in fact, they will increase. Are you prepared to take on more challenges with the tools in your current environment? Or are multiple systems creating barriers to your company’s growth?

Stuart Scott and Dave Lusk are Industry Segment Managers at Activant. Find out more about Activant at distribution.activant.com or call 1-800-776-7438.

The Value of Internet Trading Networks

By Russ Mellott

Internet trading networks streamline processes associate with electronic commerce. Information flows through the secure Internet network, increasing collaborative opportunities and streamlining processes, enabling distributors to increase sales and improve customer service while reducing operating costs.

Advanced trading networks synchronize your inventory so you can communicate using your own item codes, yet still be understood by your trading partners. For example, your customer service representative can, from within their order processing screen, query your trading partners in real time to see the availability of the item you sourcing. They can then send a PO using item codes in your business system, and your vendor will receive it in theirs.

You can create trading relationships to extend your distribution network, eliminate your dead stock, and source another distributor’s slow-moving inventory at discount prices.

Beyond sourcing dead stock, establishing trading relationships with other distributors creates new sales opportunities and gives you access to billions of dollars of virtual inventory. Customer service improves too. In the past, sourcing products from other distributors required several lengthy phone conversations or multiple Web queries. With an Internet trading network, you can source items from multiple partners in less than a minute directly from your order entry session, vastly improving your customer service response time.

In this highly digitized world, participating in an Internet trading network makes smart business sense.

Russ Mellott is vice president of Activant. Find out more about Activant at distribution.activant.com or call 1-800-776-7438.