JanPak was not always a large regional distributor with locations in 13 states. It started out at just one location, but — like other successful companies — JanPak followed a strategic plan of market expansion and customer retention that led to increased influence, size and revenue. “Now we’re about a $115 million business,” says Tim Feeheley, president of the Davidson, N.C., distributor.

That plan was an overall business vision that gradually addressed the need to grow the company’s enterprise resource planning (ERP) software capabilities. Larger distributors usually have some kind of ERP or general plan that states how the company’s accounting, warehousing, sales and other internal processes will work together as part of a system. Smaller distributors may think it futile to invest too much planning and time into these processes, but if their vision is to grow their business, then they’ve got to include ERPs as part of the dream, says Michael Marks, president and founder of Indian River Consulting Group in Melbourne, Fla.

“Technology should be a weapon; it shouldn’t be an excuse,” he says. “If you want very aggressive price management, [advanced] private labeling and all the rest, then you really have to have an ERP.”

Most distributors would surely say yes to aggressive price management, which is accomplished when a distributor’s software package allows him to quickly adjust his prices to changes in markets, competition and customer needs. Distributors also want more efficient customer profiling data, improved product evaluation and better ways to manage the supply chain. A good ERP can do all these things.

The real question isn’t why distributors should already be thinking about ERPs, it’s where do they start the process of purchasing adequate distributor software.

A Product, Computer and Me
Distributors can only start with what they can afford, so breaking them into three groups according to annual revenue will serve to set realistic parameters. The first group consists of small distributors, or distributors who are still “starting out” — those that do less than $1 million of business each year.

“Most start-up distributors have COTS: common off-the-shelf software,” says Marks. Typically, they have the ability to do purchasing and invoices, but it’s absolutely bare-bones stuff.” Most of these companies are probably using Microsoft on one or two computers, or they have something like QuickBook, he adds.

Even though they may have limited options, simple ERP software is probably the right place to start, says Timmy King, who heads up all of buying group Pro-Link’s information system needs. “It really depends on your definition of ‘off-the-shelf,’” says King. “If it’s what someone gets down the street at CompUSA, then I would agree that you’ll probably need something specifically designed for your industry pretty soon down the road. However, there are ERPs that are considered off-the-shelf in terms of applications, but they suit some large distributors just fine.”

Marks and King both recommend that distributors purchase a low-end ERP from a large vendor who specializes in distribution technology. “The smaller vendors don’t have ERPs that can scale and migrate as the company grows,” says Marks. “I know that when they buy their first ERP, they don’t want to spend a lot of money, so they go and buy one from Bubba for 5 or 10 grand, but they’ve got no room to grow from there.”

Flirting With Growth
The second group is where most sanitary supply distributors reside: between $1 million and $5 million. These companies may have already established themselves in the jan/san market, but that doesn’t mean they have a clear idea about how their technology should grow with their business.

Their success doesn’t mean that they’ve even started to think about the right ERP, but most are probably doing evaluations. For JanPak, part of getting the company on the path to profitability was choosing an ERP that increased efficiency throughout the company, says Feeheley.

“The big thing for us has been getting all our ERP technology to be part of one system,” he says. When each department is using different software programs, they most likely will not exchange information easily, he adds. That only increases the company’s inefficiency.

Distributors that do between $1 million and $5 million of business definitely notice the benefit of an ERP that can mold itself to their needs, says Marks. “As they move into that range, they’ll see that the off-the-shelf version they got from Bubba won’t cut it.” A good price for a low-end ERP from one of the major vendors (which can be scaled and added on to later) should cost a distributor at least $25,000, he adds. Kings says that $40,000 might be an even more realistic figure.

“In my mind, there are really two tiers of ERP vendors in our industry, and it’s wise to purchase a low-end version from a top-tier vendor,” says King. “It’ll be more expensive, and there may be hardware costs in addition to software: the actual computers, back-up drives, platforms. A lot of distributors who are buying new ERPs are probably going to have to buy new hardware as well.”

Of course, new computers don’t need to be purchased on a regular basis. Hardware usually continues to be effective for three to five years, says King. When a distributor purchases a new ERP, however, it’s very unusual for it to be completely compatible with the existing hardware.

“Hardware has to be upgraded every few years, but the good thing about a quality ERP is that the system can be added to without having to make as many upgrades,” says King. “It’s better just to put in the new software; it’s not cost-effective to always upgrade your machines.”

The main consideration for distributors who are looking to grow is to find an ERP that will be able to grow with the company over time. That usually means investing in software from one of the top-tier vendors who cater their software design to the needs of distributors.

“I have seen some distributors use the small players because that’s all they can afford,” says King. “But then they hit a point where there is no upgrade path, so they either have to stay where they’re at or throw that program away. If there’s any way they can get a full-featured system, it would be in the long-term interest of their company.”

Long-Term Tech Planning
Next are those distributors who do between $5 million and $20 million of business each year. These distributors have already made some critical decisions that have to do with an ERP that is right for them. Most of them probably have some kind of warehousing management system (WMS), and they’re starting to really find out that technology can keep them ahead of the curve. If not, they’re probably struggling to keep things together, says Marks. “Believe it or not, I’ve seen some companies that are making $20 million or $30 million, and they don’t have a WMS. But it’s usually not for a good reason; it’s usually because they’re so wrapped up in their own underwear that they don’t know how to get free and make things efficient.”

Distributors who fall into this category most likely have at least one full-time employee who manages the ERP, along with any other IT applications, such as maintaining the company website for e-commerce or maintaining supply chain management (SCM) software.

“My experience says that up until the $10 million mark, a distributor doesn’t really need a dedicated supply chain procurement person, but you do need someone who is able to do the electronic data interchange (EDI) with the supplier,” says Feeheley.

The biggest problem for JanPak, as they grew into a multi-location distributor, was finding out how to manage the technology needs of several different buildings in several different states.

“At this point, we do business from Virginia down to Florida, and over into Texas, so when we didn’t have a centralized location for IT management, it was really confusing. Now all our IT applications are based out of Davidson, N.C.”

JanPak and Feeheley didn’t know everything about purchasing, operating and evaluating ERPs when they started out, but they learned along the way. The vision of business growth carried the vision for technology growth. Now the two are seamlessly intertwined.

Add a Company Website to Your ERP Arsenal

Enterprise resource planning (ERP) software can encompass as many business functionalities as a distributor can handle: accounting, warehouse management, payroll, purchasing and shipping schedules, for example. However, a company website doesn’t necessarily fall under the ERP umbrella.

“When you’re talking about ERPs, you may not want to mention websites, but I think it’s something that you have to consider,” says Michael Marks, president and founder of Indian River Consulting Group in Melbourne, Fla.

ERPs, by definition, contain the essential technology that’s needed for a distributor to run his or her business. Distributors who are still embarking on the road to operational efficiency may wonder whether or not to include a company website and Web marketing in the ERP picture.

Marks, for one, says that a website is essential for today’s distributors. “Even start-up companies should have a location website,” he says. “People then can at least log on and see what the distributor is about and what kinds of products are offered.”

Many jan/san distributors already include a company website as part of their standard ERP, and software vendors commonly sell Web applications as add-ons to standard ERP systems. What was once a novelty is now more status quo, and the bar is being raised for even small distributors, says Marks.

“Even a small distributor who is just starting out can have a page for each salesperson on the website,” he says. “That way a potential customer can click on a product line, and it will send a message to the salesperson who’s in charge of selling those products.”

For those distributors who aren’t afraid to use the Web to their advantage, it can as profitable as any other ERP application for business operations.

“The purpose of the website is to build, create and manage customer relationship equity,” says Marks. “Technology isn’t about e-commerce, it’s about being reachable.”

 

 

Business Software Central

Browsing for supply chain technology strategies? Enterprise resource planning (ERP) software news, vendor comparisons, wireless innovations for business, and much more can be accessed free .

The site serves as a clearinghouse for the copious ERP commentary that sprawls throughout the Web. Business software articles from eweek.com, InformationWeek and ASPstreet.com (among other sources) are gathered and organized according to business application. The website heading separates information into relevant categories including: CRM (customer relationship management), B2B (business-to-business software, SCM (supply chain management) and Investing.

There are also listings of vendor “freebies” and several little-known ERP services available on the Net.

 

 

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POSTED ON: 6/1/2003