COVID-19 has wreaked havoc on business success worldwide. Unfortunately, the promotional products industry has not been immune. While the demand for PPE softened the blow for many, the next 12 months will test the mettle of every player in the space. While few expect promotional products to lose their appeal in the long run, the businesses that survive the current strain will need to adjust to a rapidly evolving new normal. It will require reimagining the relationship between suppliers, distributors and service providers. As a distributor principal, Michael Levitt, president of The MRL Group, recently told me, “Now is the time to reinvent yourself, or perish.”
I have been actively involved in rethinking the distributor’s perspective for the past decade. For five years, I served as chief technology officer for Corporate Imaging Concepts (CIC), one of the top 25 distributors in the industry, enabling me to learn the drivers of efficiency in this market and the friction in the current supply chain construct. After CIC sold to a private equity group in 2016—in no small measure due to the unique supply chain model it built and the efficiencies it was able to scale—I left the company to focus on building the ERP platform that I believe stands to change how suppliers, distributors and customers communicate. I share with you my thoughts.
Why Upgrade
For a distributorship to maximize its profitability, it needs the right people, processes and technology in place to promote efficiency while enhancing the client experience and controlling costs. Let me explain:
People: Employees are a company’s most visible—and often most expensive and valuable—asset. While employee cost can be quickly adjusted, the adjustment comes with its own set of serious consequences. Employees embody institutional knowledge. Many are touch points to the customers, while others serve as crucial communication links to the suppliers. Historically, distributors have invested in sales, training and incentives despite their costs, as long as the investment generated increasing profits.
But successful companies ensure that employee costs do not scale in direct proportion to the growth in orders. Leveraging technology is the most effective way of achieving this. Take accounting, for example. Do you add staff to accommodate revenue growth? Do you need more people to vouch supplier invoices and manage customer invoices and payments? Have you investigated whether new technology could do these tasks more effectively and with less cost? Why not use technology to vouch invoices that match the POs while your staff focuses only on invoice exceptions that need attention?
Sales taxes are another example. How much effort is put into paying sales tax and how accurate is your reporting? Again, have you investigated utilizing technology to do this faster, with fewer errors and at a lower cost?
Processes: A typical distributorship focused on revenue has little time to review processes, let alone change or upgrade them. With time, processes become fixtures, and people get hired to manage the increasing revenue within the confines of the established processes. Processes become habitual and embedded in a company, invisible and rarely examined for their value or efficacy. Habits are comfortable and hard to break, even when their purpose is unknown or when their outcomes are detrimental. Process changes without a clear driver are harder during a crisis.
Information is, invariably, the central nugget that is acted upon by different people in various stages of any process. The ability to share accurate information quickly and easily is the key to improving processes. A unified view helps organizations to develop processes that work in unison. Tools and common platforms play a critical role in promoting effective operations with minimal friction.
Technology: Information technology that provides the right information at the right time to the right employee is fundamental to any successful enterprise. To reinvent a distributorship, the right technology will be a key step to achieving success once the pandemic recedes. Now is the time to evaluate one’s investment in technology. A common view for sales, operations, warehousing and accounting can pay huge dividends.
To me, and based on my CIC experience, a robust ERP solution was no longer a nice-to-have, but a must-have tool to scale a distributorship without scaling costs. So I set out to find the optimal solution for CIC and, to be honest, there was not an optimal solution available in the market focused on a distributor’s unique needs. For this reason, I built one: a solution created for what was the forgotten mid-tier distributor.
What to Look For
The thought of selecting and implementing a new ERP solution conjures up visuals of huge costs and internal turmoil. Many of us have heard of or lived the experience of an ERP conversion. However, there is some good news. Things on the technology front have radically improved over the last few years. Technology can be the grain of sand around which distributors can reinvent themselves. Here’s what today’s ERP solutions offer (and what to look for when selecting one):
No capital investment: Rapid advances in cloud technology have ushered in the new era of subscription services. Pay-as-you-go ensures that organizations do not make high upfront investment in buying licenses and/or machines to adopt new ERP systems.
No upgrades or service disruptions: No more risky upgrades, software patches or “older” versions of the system. New versions are released on the cloud with no service disruptions and/or backward compatibility issues.
24/7 availability: Always-on and always-available structure provides flexibility essential for the current environment where employees cannot always come to work.
Scalable: Solutions that scale automatically to match the increase in transaction volumes, number of employees, or increase in teams and roles of the employees in the company are now the norm.
Role-based access: A comprehensive system must be complemented with role-based access management to ensure that every employee within the organization has access to information essential to perform his or her role, while managing privacy around personal information. For example, commission information should be limited to the salesperson, while orders should be accessible to the salesperson and the customer service rep supporting the salesperson.
Ease of use with intuitive navigation: Often overlooked, these are critical components of eventual success. ERP systems are invariably extensive, and ease of use plays a critical component in early adoption to the new system.
Integration: As technology becomes increasingly decentralized, integration plays a central role in keeping your organization connected within an “app economy.” Selecting solutions that adhere to the industry’s promo standards is an important consideration. Integrations with suppliers (for catalogs and accounts-payable invoices), with shippers (for automatic shipping and tracking), etc. are basic integrations essential for an ERP system.
Industry focus: For too long, generic solutions have been “tweaked” to meet the needs of the distributor. A product explicitly designed to address the many issues that distributors face is an important consideration when selecting a solution that will be at the center of your sales, operations, accounting and shipping.
Final Word
The pandemic has had a long shadow on the industry for months. Changing the mindset is step No. 1 to looking at the situation. Tomorrow’s winners will use this climate as an opportunity to be prepared to succeed as the pandemic recedes and the economy returns to the norm. An efficient, flexible, cloud-based ERP system is no longer a luxury for distributors. It is essential to combine, coordinate and simplify the processes required to manage the business, increasing efficiency and decreasing your operating expenses.
While ERP systems are robust, they need not be expensive. Few distributors in the promotional products industry can afford to spend hundreds of thousands of dollars and hundreds of man hours to develop a custom ERP, while the largest distributors in the industry continue to grow and grab market share. To succeed tomorrow, the mid-tier distributor should be able to compete with the larger distributors without breaking the bank. Cloud ERPs are clear winners: Time-to-ROI is 26% faster, time to implement is 46% sooner, profitability improvements are 60% higher, process cycle times are better by 85%.
Selecting the right ERP system for distributors is akin to Goldilocks finding the most comfortable bed. Some systems are extensive, complex and expensive, with features piled on high, most of which are never used. Others are beefed-up accounting programs designed for mass use, too limited and inflexible to satisfy a distributor’s unique requirements. Choosing the “just right” system is essential. Finding the system that delivers the advantages of expensive ERP systems—capability, flexibility, ease of use—for a price comfortably affordable by distributors of all sizes is not only possible, but also essential to reinvent your business.
