The Future of Wholesaler Technology
By Bob Boyles, Principal
Smarter Distribution

As a wholesaler no one needs to tell you that what direction the competition is headed and where your margins are going.  Everyone can all agree that the competition is howling like a wolf at the front door and the margins are trying to sneak out the back door.  As a result, forced to become more efficient, wholesalers have been steadily replacing inventory with information.  Over the past twenty years the main way that wholesalers have evolved has been through the adoption of computer technology.  By automating paperwork processes the wholesaler has been able to drastically reduce clerical labor.  By automating warehouse processes distributors have been able to reduce manual labor.  Both areas have resulted in improved distributor efficiency.   The cycle was typical.  The president buys some new software, the software company trainer shows up and educates everyone on how to use the software and a few months later Betty Sue who was hand pricing tickets is looking for a new job down at Walmart and the company is pocketing the change.  This is a good thing since Home Depot opened up down the street and lowered the boom on prices.  

The good news is that I believe that we are on the edge of a new area in improved distributor operations and even lower cost computing power.  There are a number of technologies that are making their ways through the development stage that have the power to change the future.  Just a few are:  

Linux replacing proprietary UNIX & OS400:  Database producers like IBM & Oracle have seen this trend coming down the road for a while and have already made their databases compatible with this free operating system.  Those companies that have not made the leap yet are already feeling the pinch and have lowered their operating system license fees over the past several years.  

PostgreSQL replacing proprietary databases: The open-source good news doesn’t stop with the operating systems.  The open-source revolution has begun to shake the whole software tree.  There are a number of free databases on the market that are threatening to take away the per-seat fee you have been paying for so many years.  These databases are fully SQL compliant and have been cutting their teeth servicing your web pages for the past several years.  

Internet & XML replacing EDI:  XML is a user defined HTML format that allows end-users to define the fields that are being transmitted between systems.  This technology has the advantage of being easily understood and manipulated by the end user, unlike EDI that required decades of standards committee meetings to advance.   But this technology doesn’t stop there.  Look for it to become the common interface between complimentary applications.  Need to send information from you bar-coding application to your accounting system?  No need to hire a programmer and pay a zillion dollars to write a custom interface.  You’ll be able to export an XML file and be done with it.  Yes, those companies that have made a significant investment in proprietary EDI systems will continue to use them.  But do not expect to see significant development dollars going into EDI in the future.  

ASP Applications A Future Trend:  ASP stands for application service provider.  The web has enabled software companies to offer their software to you with out you buying and maintaining a central processing unit.  Your data and their software reside on their server and you conduct your business via the Internet.  This idea is not new and goes all the way back to the time-sharing programs of the 1970s.   This trend will grow in the future, particularly for those small companies that do not want to invest in owning and maintaining a complex software system and paying in-house specialist.  Those companies that use their computer system as a competitive advantage will more than likely still maintain their own systems and keep their internal processes a trade secret.  

Wireless Internet:  Broadband speeds with out a cooper wire?  It’s here and coming to your company fast.  Want to have a salesman on the road taking orders.  The first generation of arming the road warrior was giving him a modem and an emulation program and then letting him dial into the central system at night to place orders.  This gave way to giving him a copy of the database and a order taking program on his laptop and uploading the orders when he connected to the central network.   Now with wireless he can be on-line sitting in your customer’s office placing orders directly into your system as if he were back in the office.  Throw in an IP based phone system that’s smart enough to forward calls to cell phones and it’s like he never left the office.  

Explosion Of Technology – Over the past decade there has been an explosion of technology.  From cell phones to PDAs to the Internet.   As computer power has become cheaper and cheaper one of the things you can expect to see are most powerful applications making their way from HQ to the far reaches of your organization.  The analogy to think of here is the transition of warfare from the medieval castle to the marching armies of the 1400s.  Cheap & powerful gunpowder doomed the old castles and moots to being military museums.  No longer could a stone castle stand up to the siege of the mobile cannons.  In the distribution business we have treated MIS resources like a castle fortress.   Lots of computers and hardware clustered around headquarters and the farther you get away from the bosses chair the less likely you are to see a computer.   Stop and look at your company and you’ll see lots of computer in the accounting office and none in the warehouse, lots of nice computers in HQ and then fewer and slower ones in the branches.    

This is just a sampling. There are a dozen other revolutionary standards and ideas out there that are beginning to make their way through the software food chain.  The summary of all this new technology is that wholesalers will have the opportunity to continue to reducing their operating expenses and improving the efficiency of their operations.  

One last word.  Do not assume that the traditional technology providers will be around forever! The software market is changing rapidly.  The market for midrange software providers is a mature market.  Economists will tell you that one of the characteristics of a maturing market is consolidation.   Expect more of this in the market as companies like Microsoft look at companies like Navision and see market share and industry expertise at reasonable prices.  Just the thought of Microsoft coming into the market for business software has begun to change the thinking of a lot of people.  Microsoft’s package “Small business Manager” can handle the books for a small mom & pop retailer.  This package competes with the likes of “Quick Books”.   But Microsoft doesn’t stop there.  Their next level is their Great Plains offering.  That is followed on by the Navision offering targeted to manufacturers and distributors in the $50-$100 million range.  Yes, I know these packages don’t do all the fancy whiz-bang things that the traditional distribution software providers have built into their software.  But Microsoft has proven one thing over the past two decades. Just give them time and they will overwhelm the competition.  They have already created a migration path for companies from $100,000 in sales to $100,000,000 and given time they will only improve and expand their grip on the mid-range market.  Need an example of how they’re going to do this? Take Microsoft’s entry-level package.  It already integrates to Word & Excel and Microsoft’s e-business platform.   Need to run a small business and offer sales on the web?  The price point is very reasonable.  

Given all of these new abilities, there can be no doubt that the trend towards more efficient distribution operations will continue.  Hopefully, some of these tools will evolve and enable the independent distributor to not only survive, but also prosper.  

About Bob Boyles and Smarter Distribution:  

Bob Boyles started his strategic consulting business in 2001 and has focused on the change that technology is forcing in the supply chain and how independent distributors can not only respond to that change but also maximize the return they are seeing on their investment. Bob has spent a significant amount of time as an Installation Consultant for several of the big name software companies in the distribution market. Working with hundreds of distributors across the country on installing, upgrading and utilizing their software.  Bob also worked as Corporate Systems Manager for one of the largest electrical wholesalers in the country as that company moved from a completely manual operation to an on-line real-time system.   

Bob is a graduate of Appalachian State University (BS - 1981) and University of North Carolina at Greensboro Graduate School of Business (MBA - 1985).  

© Copyright 2002, Robert S Boyles, Jr. All rights reserved. This article cannot be reprinted or reproduced in whole or in part, without the express written permission of Robert S Boyles, Jr.