Common ground

Three Pennsylvania distributors lower costs by sharing a common branch facility

by Rich Vurva

Most successful relationships are based largely on trust. But when you examine the relationship shared by three central Pennsylvania distributors that recently entered into a unique joint venture, one more factor comes into play. They share common technology.

All three companies – APR Supply, a plumbing and HVAC distributor in Lebanon, Industrial Piping Systems, a PVF distributor in York, and Schaedler Yesco Distribution, an electrical distributor in Harrisburg – use distribution management solutions from Intuit Eclipse to help run their businesses. That turned out to be a key enabler for the November opening of a shared location under one roof in Chambersburg, Pa.

“We all have the same work ethic and the same level of profit consciousness, but it’s the shared trust and technology that’s making this work,” says Jim Hoffman, who spent 38 years full-time with Schaedler Yesco and now serves as a management advisor to all three companies.

Breaking into a new market for one-third the cost
The three distributors – none of which previously had a physical presence in the Chambersburg area – can now offer their customers the wide variety of products they need in one place. “It’s an area where we’re all well known and where we all wanted to set up a branch,” says Hoffman. “We saw this as a great way to break into a market for one-third the cost. We’re pretty sure that the business model is the first of its kind in central Pennsylvania.”

The three companies began talking about the possibility of co-locating in the spring of 2006. While undertaking a search for the ideal location, they also put together several employee teams to make sure the joint operation would come together as smoothly as possible. Each company assigned branch managers from their York branches to serve on the branch management team. Their close proximity made it easy to get together for meetings and planning sessions. Similar groups of employees worked on IT, marketing and product teams to hash out issues that needed to be discussed before the new branch opened.

“At the first meeting, we were sitting there looking at one another thinking, “They want us to do what?”’ recalls Dean Krout, the IT representative from Schaedler Yesco who served on the IT planning team.

They methodically began reviewing business practices at each company to determine which technologies and processes to integrate. Because they all use the Eclipse distribution management software, order entry is virtually identical in all three companies. But they had to come to agreement on a centralized phone system, common warehouse numbering system, how to handle invoices, print tickets and other daily tasks.

“We could integrate the bar code printer because that was pretty common, but we couldn’t integrate the shipping ticket because we use pre-printed letterhead and it was different for the other companies,” Krout says.

All three companies use radio frequency warehouse technology, but Schaedler Yesco counter personnel punch in product numbers at the terminal rather than use a bar code scanner. The IT committee ultimately decided to install a bar code scanner at the counter in the Chambersburg branch.

To customers entering the 13,000-square-foot building, it looks like one company, according to Hoffman. Three salespeople – one from each distributor – man the 3,000-square-foot counter area. Each salesperson’s computer terminal links to the individual company’s Intuit Eclipse system, but they also have limited (order entry) access to the other two companies. Customers can easily walk just a few feet from one distributor to another to get what they need. But counter personnel are cross-trained on products and can enter orders into any of the three systems.

“If a customer walks in and the IPS counter guy is busy, one of the other two can wait on that customer. All they have to do is click on the IPS icon on their computer to get into the system,” says Amy Tawnee, branch manager from Schaedler Yesco’s York facility.

The salespeople have three Intuit Eclipse sessions open simultaneously on their assigned desktop PC. The sessions are color-coded to determine at a glance which company’s system is being accessed.

“When the counter person enters an order, they’re literally entering it into each company’s Intuit Eclipse system. It’s seamless to the counter person, other than they need to know which color coded Eclipse system to use,” says Hoffman.

The site operates as a cashless facility – accepting only checks, charges or credit cards – to help simplify accounting and speed transactions. So far, customers haven’t objected, but it’s an area the team may have to revisit in the future.

“We decided it was too difficult to keep straight when you have three different cash drawers managing petty cash,” says Tawnee.

For the same reasons, each company currently issues its own invoices. The operation is designed to function mainly to serve walk-in customers, so each individual company handles deliveries from their own distribution centers. The individual companies are also responsible for replenishing inventory.

RF Warehouse eases inventory management
APR Supply owns the building and pays for utilities and warehouse staff, invoicing the other two companies for their share of those expenses. Each counter person reports to a remote branch manager and is paid by that company.

Inventory is stocked in the building’s 8,500-square-foot warehouse and managed by a single employee, thanks to Eclipse RF Warehouse, a system that uses radio-frequency data collection devices to help eliminate typing errors, verify picking and shipping directions, and speed the entire order fulfillment process. “It would have been impossible to have just one person doing this job if we weren’t all using a common system,” says Hoffman.

The companies’ Intuit Eclipse systems also allowed them to easily identify which items to stock in the warehouse. “Space limitations dictated that we each stock only those items we sell at least 20 times a year,” Hoffman says. “That way, we know we’ll have on hand what most of our customers need. And because we’re restocking the warehouse every day, we can always get something in within 24 hours if we don’t already have it.”

Thanks to the shared technology, mutual trust and similar corporate cultures, Hoffman says the effort has gone remarkably well. In fact, the companies are already starting to discuss where to open their next joint operation.

This article originally appeared in the March/April 2007 issue of Progressive Distributor. Copyright 2007.

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