Closed minds equal closed wallets

by Bob Boyles

As a consultant, I spend a lot of time talking to distribution MIS managers about their software. Lately, it seems that closed minds and closed wallets are the order of the day.

I spoke to the MIS Manager of one of the largest electrical distributors in the country recently. They have a dozen MIS people on staff to support several dozen branches. Half of them are programmers coding on a system not meant for distribution. It fact, if you look at the software company's user list, I can find fewer than six true wholesale distributors using that particular package.

But the MIS Manager loves the package and its capabilities. If he backed away for a minute, he might conclude he could operate his department with half the employees.

That's six people, multiplied by $80,000 per year max (programmers are expensive regardless of what region you are located in), which equals $480,000 in savings.

That type of savings would go along ways toward paying for even the most expensive distribution system on the market today.

This is not an unreasonable assumption. I ran the MIS department for a distributor with a dozen branches with myself and a single assistant and a part-time contract programmer as my total resources. The difference was that I had a software package designed for my section of the distribution business. I didn’t have to hire a programming army to rewrite major sections of the code.

The programmers back at the software company were always a step ahead in their designs, even if they were a little slow on delivering the goods. If this distributor had several PC specialists to handle all the personal computers spread out across several dozen branches and their incumbent communications problems, the realistic head count for that MIS department using the proper software is no more than six.

Open wallets?
The fact that the MIS manager was dead set against considering any other packages, even those his competitors were looking at and buying, really brought it home for me.

His competitors were looking at new software and seeing hundreds of thousands of dollars in savings and this MIS manager was looking for an excuse to get off the phone and back to his love affair with half-baked software. The result of the MIS Manager's closed mind was an involuntary open-wallet policy for the CEO.

What is the correct staffing level?
This really begs the question, what is the proper staffing level for a distribution MIS department? All the studies you see lump wholesalers together in one giant bucket. They look at Graybar and the single-location Mom and Pop as existing in the same market!

What about the difference between a full stocking company and direct house? This question needs further investigation.

Long-term problem
This type of situation typically evolves from a misguided selection process. Running a poor selection process can have ramifications many years down the road.

In the case of this electrical distributor, the CFO drove the process and forced the company to pick a system that provided a familiar general ledger package. The rest of the company got stuck with a piece of software shoe-horned into their business processes.

Spending a few dollars to make sure their selection process produced results that benefited the entire company rather than one department would have saved this distributor millions over the life span of its investment.

The definition of insanity is to keep trying the same thing over and over again, when you already know the result. To solve problems, keep an open mind and look and consider new alternatives, even if they upset your little red wagon. And yes, there are times when that means opening your wallet and spending some money on a second opinion.

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