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.

Strategic Pricing Helps Distributors Increase Gross Margins

By Dan Kaminstein

For every product, for every customer, there is a price that produces an optimal gross margin. Until now, determining that price had been an extremely complex task. Technology has streamlined that process by adding strategic pricing functionality to ERP solutions.

Strategic pricing modules analyze distributors' databases for customer and order information and then classify a) customers by type and size, and b) items by relative sensitivity. The module then recommends how to best price items based on the combination of these factors.

Features, such as Pricing Structure and Customer SKU services, further enhance the pricing optimization functionality and help enable distributors to more tightly control pricing schedules. In addition to enabling optimal pricing, the strategic pricing modules also allow distributors to better manage freight recovery within their business to further ensure that they do not leave money on the table.

Distributors who have implemented a strategic pricing module report increases in their gross margins from two to four percentage points in the first year alone. For many distributors, that would mean a quick return on their investment in a strategic pricing module – for some in as little as three months.

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Dan Kaminstein is a product manager of Activant. Find out more about Activant at distribution.activant.com or call 1-800-776-7438.

Move over Gordon Graham

by Neil Van Walbeck

Advanced demand forecasting is quickly becoming the standard for forecasting item usage for inventory management.

While Gordon Graham's inventory management concepts and practices revolutionized distribution, distributors using his methods have a much higher percent error rate when compared to system generated forecasts, often 200 to 600 percent off. Advanced demand forecasting takes forecasting to a whole new level by including item trends and more complete forecasting formulas. Together with real time processing and advanced concepts, advanced demand forecasting can reduce the error percentage to 30 to 60 percent, lowering inventories and increasing customer service levels.

Utilizing such features as trend percentages, advance demand forecasting patterns your items using demand categories, identifying them as level, slow, seasonal, trend, or erratic. The system then applies best fit algorithms in real time to formulate a demand forecast based on the item's demand category.

Earlier versions of seasonal set-ups only looked at year-old data. Current advanced demand forecasting tools look back to at least three years of history to better predict upward or downward swings.

The real benefit is that buyers can now focus on inventory that needs attention and better manage items as they see fit; such as following items that have been identified with a demand category trend, or setting those items identified as erratic with a fixed purchase method.

Other features of advanced demand forecasting allow buyers to set safety stock for an item using that item's service level, which results in lower inventory values, lower safety stock numbers, and better service levels for the customer.

More accurate forecasting can result in savings from lower inventory levels, reduced time spent on analyzing inventories by buyers, and a better understanding of inventories overall, that are staggering and can lead to significant competitive advantages for distributors.

Neil Van Walbeck is an application consultant for Activant. Find out more about Activant at http://distribution.activant.com/ or call 1-800-776-7438.

Lean for Wholesale Distribution

by Kevin Roach

Lean is quickly becoming the next significant improvement initiative for manufacturing and distribution.

As major manufacturing companies move to lean systems, it will require that wholesale distributors follow to achieve manufacturers' requirements. Adopting lean processes in their own businesses will also benefit distributors through significant improvements in asset utilization, cost savings, and profitability.

The good news for distributors is that lean is relatively easy, fast, and inexpensive to deploy with quick and high payoffs. The bad news is that it takes tremendous discipline, rigor, and cultural change to succeed.

Distributors have to be careful, older ERP systems can inhibit lean activities through wasteful and tedious processes. Newer ERP systems are designed to support lean practices to enable pull and continuous flow for driving out waste.

At its most basic, a lean-focused ERP system provides business intelligence tools capable of providing graphical key statistics on orders, inventory, and costs. ERP systems are the visual source for driving and identifying where distributors are lean or need to be leaned out. This data is absolutely essential for continuous improvement initiatives such as improving workflow, minimizing variation, and improving quality.

ERP systems can also streamline processes. For example, a solution integrated with wireless handheld guns assure correct inventory items are selected and more importantly reduce the steps to pull, pick, or put away inventory by automating once manual processes. Among the hundreds of small processes modern ERP systems can streamline for distributors are automated faxing and e-mailing, receiving confirmations, making collection calls, and generating purchase orders.

They can also assist in minimizing variation and reduction in lead times. This reduction is the key to decreasing inventory while increasing customer service levels. Lean teaches that inventory should be treated like a precious resource, something that wholesalers know instinctively. Great ERP systems optimize inventory levels and drive down replenishment times though effective processes and reporting.

The savings obtainable through lean distribution is staggering. Entire tasks and processes can be eliminated with the resulting revenue used for expansion or taken as straight profit. The right ERP system can provide wholesalers with the tools they need to embrace lean practices and strengthen their businesses. Lean combined with and an effective ERP system, can lead to significant competitive advantages for distributors.

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Kevin Roach is executive vice president and general manager of Activant®. He is currently leading the company in implementing lean practices. Find out more about Activant at distribution.activant.com or call 1-800-776-7438.