Progressive Distributor

Think twice

S.L. Fusco thinks carefully before making any technology investment

by Rich Vurva

Investing in technology is never as simple as it seems. It’s easy to become enamored by the added functionality new software and hardware provides, but before signing on the dotted line with any technology vendor, you need to make sure your company will actually use the new features. And, if so, will they generate enough measurable return on investment to justify the added cost?

Executives at S.L. Fusco Inc. try to take a deliberate approach to their technology investments. Over the past four years, the company invested in a new ERP platform, a warehouse automation system, an integrated phone system, and equipped its entire sales force with BlackBerry wireless communication devices. In each case, Fusco managers are confident the investments have paid for themselves in added productivity.

“We do not want to move too fast or invest in technology that will not provide us with a strong ROI, yet we are steadily getting to where we want to be. Frankly, we feel we are more technologically advanced than most of our competitors,” says chief financial officer Jennifer Arndt.

Headquartered in Rancho Dominguez, Calif., with branches in National City, Calif., and Tempe Ariz., S.L. Fusco is a general-line distributor of industrial products to the metal, wood, MRO, composites, electronics, glass, stone and aerospace industries. It employs 55 people and has annual sales of about $26 million.

ERP system lowers labor costs
Its first major technology initiative was investing in the CommerceCenter enterprise software solution from Prophet 21 (now Activant) in late 2001. The Windows-based, SQL Server platform enabled Fusco to reduce manual labor costs and keep better track of dead stock and slow-moving inventory.

Receiving vendor invoices via electronic data interchange (EDI) eliminated data entry functions, helping reduce accounting staffing by 25 percent. Four major vendors, which account for nearly half of the company’s purchases, transmit invoices via EDI, so data entry clerks no longer have to manually key in data.

But the most noticeable improvement since purchasing the ERP system — with the biggest bottom-line impact — resulted from identifying and tracking slow moving and dead stock.

“After purchasing CommerceCenter, we were able to identify what we define as dead stock in our system, which generally speaking is inventory that hasn’t sold in one year,” says Tom Burke, director of operations. “We had quite a few items identified as dead stock, so we implemented a program with our sales force that gave them an incentive to sell it.”

For every $5,000 in dead stock merchandise sold, salespeople and customer service reps earned a $100 gift certificate. Since implementing the program, S.L. Fusco recorded $283,000 in dead stock sales.

“The SQL database lets us query information and put it in a report in a readable format. It allows us to classify those items so we can further track them,” says Arndt. “With our old system, it was hard to identify an item and track it. It didn’t provide us with flexibility.”

Increased inventory visibility helps the company track slow-moving inventory while there’s still time to return it to the manufacturer without incurring restocking charges. The company generates reports that show salespeople the date when items held for a specific customer were last sold.

“Most vendors will let you return stock items with no restocking charge within three or four months. In a worst case scenario, we can return it even if there is a restocking charge before it’s non-returnable and becomes dead stock,” Burke says.

Automated warehouse improves accuracy
Just a few months after installing the new ERP system, the company also invested in the PathGuide Technologies Latitude automated warehouse system. Inventory accuracy jumped to 98.5 percent, greatly improving customer service.

“What was happening before was that when someone went to pick an item, too often they’d have to look around the warehouse two or three times to find it,” Arndt says. Sometimes, products got lost for days, causing order delays. This no longer happens.

The Latitude system tells pickers exactly where to find items in the warehouse, speeding the picking process and improving accuracy. Because the system can read bar codes from vendors’ labels, warehouse employees don’t have to re-label products, which wastes time and also provides opportunities for mislabeling and other errors.

The system also makes it possible to implement a first-in, first-out lot control tracking system of time-sensitive inventory such as adhesives.

“We had spoilage in the past, which is a real headache. When a drum goes bad, it means we not only have to get someone to take it away and dispose of it, but we have to pay the freight,” Burke says.

Call routing system boosts customer service
A new Inter-Tel phone system purchased in January 2004 automatically routes calls between branches. When a customer calls any branch, if a CSR is out to lunch or on another call, the system looks for the next available person. The system routes the caller to the CSR who has received the least amount of calls that day, which helps balance workloads.

“Our customer service reps at our branch locations are entering 55 percent more line items after we installed the new system,” says Arndt. Before, each CSR entered an average of 3,352 line items per year. Today, that average has jumped to 5,213 line items, with no additional staff.

The Inter-Tel Call Center Suite tracks the number of calls during a given time period, abandoned calls, the length of calls, how much time each CSR spends on calls and other relevant data.

“That information helps us analyze workloads. It’s useful for scheduling lunch hours, vacations, or special requests by employees who want to take off early. We can see where the call loads fall and make informed decisions,” says Burke.

Wireless e-mail saves time
Equipping salespeople with BlackBerry wireless communication devices was the most recent technology investment. Salespeople initially are using the devices as cell phones and to retrieve e-mails, but they will eventually provide remote access to the ERP system.

Giving salespeople a method to retrieve e-mail while they’re away from the office makes them more accessible to customers and to other employees.

“When we use Microsoft Outlook to schedule meetings, it automatically adds the event to their calendar, and a pop-up reminder appears right on their BlackBerry to remind them of the meeting,” says Burke. “It provides them with everything they need to keep on top of their day — calendar, address book, memo pad and task list.”

Like its other technology investments, S.L. Fusco bought the BlackBerry units hoping the productivity gains they provide will justify the investment. Return-on-investment isn’t alwayssimple to measure, but managers do their best to think twice before making any purchase decision.

“Some investments are a leap of faith. Until you implement it, you really don’t know the improvement you’re going to see,” says Arndt. “However, the improvements we’ve had as a result of these investments have been greater than what we estimated before making the decision to invest.”