Progressive Distributor - Sailing on an even keel

Sailing on an even keel

by Doug Levin

Most distributors’ fortunes ride with the economy. When times are good, distributors stock their shelves to the max, buy new warehouse space, and spend large amounts of time and money wooing customers. When times get tough, “For Sale or Lease” signs appear, inventory fetches only rock-bottom prices, and service – for customers and prospects – is scaled down significantly.

As a distributor, how do you avoid these highs and lows? How do you prepare your company to handle a boom, yet remain lean enough to thrive through a bust?

The answer is simple: Invest in distribution-centric technology designed with your industry in mind. While many distributors view technology as something they use only to monitor inventory levels and financial information, it can also be leveraged to expand your business’ horizons without major capital investments.

New warehouses at the customer location

Using technology to manage stock at customer locations (also known as vendor-managed inventory or VMI) enables many distributors to increase sales without investing in outside warehouse space.

The technology available in some of today’s leading solutions allows you to manage your customers’ inventory from your office by integrating your enterprise software solution with remote monitoring capabilities – whether it be a salesperson’s laptop or PDA, or a computer right at the customer’s site.

These capabilities allow you to access inventory and transfer product from your warehouse to your customer’s location to satisfy his needs. Cycle counting features confirm that inventory counts are accurate – both at your company as well as at customer locations – and lot and serial number tracking permits you to track stock and to ensure well-organized inventory rotations. And, thanks to the scalability and flexibility of many solutions, you often have the capability to manage an unlimited number of customers’ stockrooms. Plus, these inventory management capabilities have allowed some distributors to assume complete inventory management – giving them control over all of their customers’ purchase orders, thereby increasing sales and profit margins.

Michelle Vaught, system administrator at the Knoxville, Tenn.-based distributor The Tool Crib, knows the benefits of providing this service firsthand. Her company has been managing stock at customer locations for years. But now, thanks to a solution designed to help her manage industry-specific tasks, her company has been able to cut costs associated with VMI even while taking on new business. “Because we can use our solution to manage inventory at customer locations more effectively, we’ve been able to consolidate into one warehouse,” she says. “Technology has really helped us streamline operations so we can compete against a lot of the larger, national integrators.”

Plus, she says, “Our solution has really helped us meet a lot of customer demands. And if we don’t comply, they’ll find someone who does.”

Reaching out through the Web

Many distributors have also established Web-based storefronts to grant customers 24-hour-a-day, seven-day-a-week access to account, product availability, and pricing information. Customers also benefit from the ability to place orders outside their supplier’s normal business hours. This capability benefits the small, independent contractors you work with, because they can place orders online at night, after you’ve closed for the day.

With a Web-based storefront, you can service customers as near as next door or as far away as the other side of the country without making the financial investment of opening a branch or hiring more staff.

And, because the most comprehensive Web sites offer complete integration to your back-end solution, you can cut the time sales and customer service representatives spend fielding customer questions.

Many distribution executives – like David Stromquist, treasurer of the Georgia-based Stromquist and Company – realize that Web sites enable their companies to handle the extra business without hiring new employees. Plus, Web sites are an excellent vehicle for communicating product information, specials, and general information while allowing employees to increase productivity – whether through better customer service, product training, or through completing educational initiatives.

Says Stromquist: “Our site has benefited our company most in terms of improving service by giving customers the ability to order any way they want. We have noticed that customers sometimes order over the weekend – well outside of our normal operating hours.”

With the right technology, flexibility, and a good attitude, any distributor can develop the tools and operational structure he needs to survive any economic climate.

Doug Levin, executive vice president of Prophet 21, is widely recognized as an expert in technology for distributors. Prophet 21 develops technology solutions and services to help distributors increase sales, improve customer service, and reduce operating costs. Read more articles by Prophet 21 experts at www.p21.com.