Help For The Small Guy
By Bob Boyles, Principal
Smarter Distribution

Too often we tend towards focusing on the large and well known. For example this article was going to be about the different distribution processes employed by Wal-Mart and 7-Eleven stores and which one of those is a better model for the distribution marketplace. Consultants like my self tend to focus on the large companies and their large company problems. We need to be reminded that the full spectrum of distributors out there have needs. A conversation with a small plumbing wholesaler looking for a solution to a real business problem reminded me of this got me thinking about focusing on real problems and providing real solutions.

This family owned plumbing supplier stocks 4,000 inventory SKU's at a single location in the northeastern US. They own a few personal computers networked with a server. They are running their business on one of the generic PC packages that you can pickup at any office supply store these days. The owner mentioned the company's need for a bar-code solution and their reluctance to part with the $30,000 that most of the distribution specific packages are asking for.

This is a very typical situation. The smaller single location distributor that knows they've outgrown their generic accounting package but can't seem to get over the sticker shock to make that investment in a distribution specific package. There was a couple very telling points in our conversation:

First, the distributor wanted to cobble together some off-the-shelf generic software packages to create a solution to his problem. This process would look something like this; sticking with QuickBooks for accounting, purchasing a bar-code package to handle inventory and use Microsoft's Outlook as solution for email and rudimentary CRM. The distributor was convinced that he could save a significantly portion of the minimum $30,000 investment he had been quoted by distribution specific software solution.

The problem here is that he was comparing apples and oranges! The owner had completed only half of the cost benefit equation and had come up with an answer. He knew the cost of the two approaches but had not bothered to look at the potential long term benefits. The patchwork solution offered very little in potential return. Yes, he could cobble together some PC software and spend $10,000 rather than $30,000 the problem was going to be that none of these packages worked together in any way. The solution being offered by the distribution specific provider had the potential of offering some very attractive long term paybacks. Unfortunately, the salesman for the distribution software company had focused on cost and done a poor job of laying out the real ROI the wholesaler could achieve from an investment in a true solution.

If you are a small distributor, how do you know when it's time to quit using QuickBooks or Peachtree and start using a piece of software designed for wholesale distribution? The answer always comes down to money! The key to analyzing a situation like this is not to look the buy-in price but to the look at the monthly lease payments on the system. How easy would it be for this single branch company to improve their operations enough to come up with that amount each month? Looking at the processes and where there are straight labor savings are obvious but it takes experience to look at paper flow and know where things can be improved. Sometime it's a simple matter of perspective. It may have been easier for an experienced outside professional to project the potential payback and determine an ROI for the investment than it was for the desk bound owner of this distribution company.

The second interesting part of the conversation was the slightly mentioned fact that they also had an inventory problem. We didn't get into the details of his inventory problem but the bare facts indicated that the PC package he was using didn't offer any method re-order management so they were SWAGing the purchase orders. Very few of the traditional PC packages are going to have the inventory management tools that a distributor needs. Most of the distribution specific packages are highly evolved in this area. The ability to assist even a small plumbing distributor with dramatic improvements in inventory turns is there for the taking.

The third interesting point was the owner's reluctance to invest in a new software system because of the bad experiences a local competitor had with their software. Why should he part with $30,000 when the poor performance of the competitor's software package had negatively affected their performance in the marketplace to the point that our distributor was getting business from frustrated contractors? These problems, while not common, do exist. The key is to properly structure the selection and implementation processes to avoid these types of on-going problems. The software companies that operate specifically in the distribution marketplace know the value of a good reference and cost of an unsatisfied customer. Buy a package offered by a company experienced in your industry and they will often bend over backwards to make sure your implementation goes comes off properly.

The decision this company made was typical. They decided to study the marketplace some more. The decision to analyze is the same as the decision to do nothing! The benefits this small distributor could have realized were low hanging fruit just waiting to be picked. If we all waited until we could afford children we'd all still be single and not have any gray hair instead we took the plunge and we are happier for it. The same applies to making the leap and purchasing a piece of software that will enable your business to reach the next level.

About Bob Boyles and Smarter Distribution:
Bob Boyles is the principal of Smarter Distribution in Coppell, Texas, a strategic coaching business focusing on assisting distributors in using technology. He is also the author of "Succeeding With Distribution Technology" a practical how-to guide for selecting and implementing the right technology. You may reach him at (972) 304-1180, via e-mail at bob@smarterdistribution.com or on the Web at www.smarterdistribution.com

© Copyright 2003, 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.