Distributor technology tools can remove costs from supply chain
Graybar responds to Facing the Forces of Change report
By Susan Avery -- Purchasing, 10/18/2007 2:00:00 AM
Results of Industrial Distribution magazine's 61st annual survey of distributor operations are in. The data show distributors expect sales to grow 13% this year, after rising 9.8% to $320.5 billion in 2006.
Other findings demonstrate distributors are evolving to stay relevant in the supply chain, says Adam J. Fein, president of Pembroke Consulting, and author of Facing the Forces of Change: Lead the Way in the Supply Chain. One way they are doing this is by investing in, and increasingly using technology to do business with customers. According to survey results:
-
Distributors are most likely to use these technology tools: wireless e-mail/Internet access (68%), financial management software (56%) and online ordering (36%).
-
Sixty-six percent say customers use the Internet to make purchases.
-
Fifty-two percent expect Web-based sales to grow this year. None expect a decrease.
-
Seventy percent believe their corporate website will be important to their future growth.
In an interview with Purchasing, John Mansfield, vice president of corporate accounts at Graybar in St. Louis, says use of technology by purchasers, distributors and their manufacturer suppliers helps reduce errors and remove waste from the supply chain, making it more efficient—and competitive.
In his experience, Mansfield says, every customer is trying to meet three objectives: reduce costs, improve processes and increase revenues. He talks of the latter two.
"With technology, distributors can help customers improve processes or increase revenue," he says. "Taking advantage of a supplier's technology provides annuity-like benefits." Automating even a simple transaction like a purchase order reduces errors—and number of transactions. Customers then can re-align resources around more high value, beneficial work. Technology can help grow revenue by improving time-to-market. Use of bar coding to re-order parts, for instance, can help reduce downtime, improving productivity.
Mansfield says that nearly every RFP (request for proposal) Graybar receives includes a section on technology, with questions on everything from EDI capability to whether the distributor's technology integrates with third-party software providers. "Key for a purchaser is to understand not only whether the distributor provides technology, but also how it's used to integrate within operations to drive cost out of the supply chain. Ultimately, it's what you're both trying to do."
 Mansfield: “We’ve identified savings for customers that reduce costs throughout the supply chain.” |
Mansfield calls EDI (electronic data interchange) the plow horse or staple for most Fortune 500 companies doing business with suppliers. E-catalogs are also popular with buyers, whether they go directly to a distributor's website to place orders or punch out to the site through third-party e-procurement software.
Web order management is one technology that's becoming increasingly important with customers looking for information, he says. "Customers want answers right away so they look to distributors to provide self-serve capability to check inventory, pull an invoice or learn whether a delivery arrived on time," says Mansfield.
Another technology that provides ready information is signature capture. At Graybar, drivers take photos of a package delivery and the signature on the packing slip using a cell phone. "The photo is automatically uploaded to our system so the customer can find out when the package was delivered and who signed for it," says Mansfield.
Bar code technology helps reduce errors in the supply chain. In a storeroom application with manned or unmanned bin locations, a handheld wireless scanner reads the bar code and uploads the order electronically into an EDI transaction for next-day delivery. "It provides tremendous efficiencies compared with people counting and sending requisitions," he says.
A customer doesn't have to be a Fortune 500 company to leverage this technology. For example, customers that have not implemented EDI may send orders to Graybar in several formats, including Excel spreadsheets, flat files and/or uploading to an FTP site. The distributor has the capability to reformat and process them just like regular EDI orders.
Mansfield says customers don't track performance related to technology per se, but they may measure cost savings or efficiencies gained through its use. Graybar, however, tracks performance with its suppliers. Its goal: 90% of orders going by EDI. "When we send orders to our suppliers, we want the same benefits as our customers: fewer errors, lower costs, speed, and reliability."
Related stories:
Distribution 2007: Price is still king
2007 brings lower prices, and innovations from distributors
Now Playing: 