The Other World
By Bob Boyles, Principal
Smarter Distribution

I visited recently with a distributor that exists in another world. It had been a long time since I visited a wholesaler that had almost no computer system at all. Sitting down with one of the partners who was hiding behind a catalog rack brought back memories of 20 years ago when it was the standard in the industry.

This company uses their computer system to handle the accounting and that’s it. It is hard for me to believe that wholesalers like this still exist. You get wrapped up in the computer business and forget that there are still a large number of companies out there that are using electricity for lights ONLY. When a customer calls they walk out into the warehouse and check stock. When they want to issue a quote they look every item up in the price book and punch the numbers in a calculator to get their selling price. When the customer wants something they write it up on a hand written multi-part form and walk it out to the warehouse. After they’ve shipped a ticket they look the item up again and punch the numbers in the calculator again to get their cost.

The strange thing about this conversation was that this company was in no hurry to even consider using a computer. They viewed the effort to start using a system not worth the savings they would experience. There was absolutely no urgency in their mind at all. As I pulled out of the parking lot I wandered to myself if all the talk about computers over the past 30 years was really just a lot of hot air? Maybe you don’t need all these machines and maybe you can run a profitable business with out all the hassle. Come to think of it, I guess you could run a distributorship on the back of an envelope if it was small enough.

But what about all of the challenges MIS managers and owners face every day? Were EDI, VMI, XML and JIT just gibberish to this company? It’s true that the need for technology varies from industry to industry but to totally ignore technology and use the same accounting package that is used by the local retail merchant was really an eye opener. But there are lessons to be learned here for each of us that have advanced beyond the horse and buggy days and that is that technology is not an end unto itself that technology is only as useful as the results it can produce.

The real challenge that this frozen-in-time company faces is growth. As long as you’re happy with a half dozen employees you can stay frozen in time. The real benefit to computer technology is that it allows us to be more productive. That productivity pays off in great sales and profits for the owner for each employee man-hour spent. Thinking back to when I installed computer systems for companies that were coming from a manual system there were three levels of benefits.

First there are a number of manual processes that can be automated. This is a straight trade off between computer investment and labor saved. Install an computer system and girl running the Kardex gets to search for a new job. The payback on the investment is clear in the labor saved to perform the same task.

The second level of productivity is of the more long lasting variety. Those companies that went from manual systems to computer systems were in a position that as business increased they were able to handle the work load and not add any people. This is the benefit that we all continually striving for finding a better and faster way to accomplish the same work. This is not just a theory. I’ve seen this happen over and over again in the real world. Using technology allows you to be more flexible in your use and allocation of labor.

The third level was customer related. By providing the sales staff with the tools needed to respond to customer inquiries accurately and quickly. There was an increasing effect on the sales ledger. As I drove down the road and reflected on it, this was the real problem that a wholesaler faces in today’s world. How was a company such as this going to go out and compete for business in today’s marketplace? My suspicions were if you looked through their credit applications you would see a look of signatures from the 1970s and 1980s. This company was coasting. They are blind to the fact that they are sacrificing market share to their competitors. The real loss here is about missed opportunities and missed markets, more on this in a later article.

This company won’t be interested in a new system until there is some kind of pain in their daily life. If might be a negative force such as a major customer that wants electronic invoices. It might be a positive force such as a drastic increase in sales that their manual system can’t handle. Until then this company is frozen in time and a prime museum piece of what the wholesale distribution business was like when Carter was President or what it’ll be like today with the electricity turned off.

Still it was refreshing to meet a wholesale distributor that was satisfied with their level of business and happy with their margins and not palpitating for the next sale. But come to think of it the phone didn’t ring the whole time I was there. But I wasn’t there to long since we didn’t have much time to talk, the owner was busy hand pricing a ticket.

About Bob Boyles and Smarter Distribution:

Bob Boyles started his strategic consulting business in 2001 and focuses 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 their return on investment. Bob 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 graduated from Appalachian State University (BS - 1981) and the University of North Carolina at Greensboro Graduate School of Business (MBA - 1985).

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