AWMA UPDATE
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Wired for Work

The industry’s newest technologies provide a host of benefits for distributors big and small

by Lisa White

As technology keeps developing at breakneck speeds, many in the wholesale distribution industry strive to keep pace.

According to Facing the Forces of Change: The Road to Opportunity, a Penbroke Consulting article, the wholesale distribution industry has contributed 25 percent of the total productivity gains in the U.S. economy from 1990 to 2005.

Wholesale distribution has been at the forefront of using technology to reduce repetitive, low value-added activities, the article reports. The largest internal productivity improvements in distribution industries have come from substituting information technology for repetitive human processing activities such as order processing, billing, inventory control, delivery route scheduling and warehouse management.

From web-based programs to radio frequency innovations and improved mobile communications, distributors have benefited from new technologies that have impacted almost every area of the warehouse.

Working the web
One of the newest and more up-and-coming technologies allows distributors and their vendors to communicate directly via the web. This not only allows for up-to-the-minute updates on all types of transactions, but also provides visibility into the procurement side of the business.

According to Tammy Weant, senior vice president of supply chain solutions at Retalix USA, based in Plano, TX, the company offers a portal solution that compliments its Power Net suite. "This program allows distributors and vendors to communicate directly via the web. Distributors enroll vendors in the program," she says.

The portal offers a Vendor Managed Inventory (VMI), which allows vendors to enter purchase orders, have visibility of purchase order transactions, see historic data of transactions, including service level, and track item movement and item velocity. Vendors can log on and run sales analysis reporting through that distributor.

"A lot of this is overlap for vendors doing EDI (electronic data interchange) transactions, but there is a tier of vendors who are not EDI savvy," Weant says. Specifically local or commodity vendors like those involved in fresh meat, produce and dairy, are more challenging in the supply chain cycle because these companies have shorter lead times and are just in time vendors. "This program will provide full electronic media availability, regardless of a vendor’s choice of EDI."

The second phase of this technology will provide item management, allowing vendors to enter new items and send price change notification. "The distributor will manage this like they would manage an EDI item transaction change," Weant explains. This program will take the administration work of item entry outside the distribution center and give that responsibility to the vendor.

Deal management, including allowances, dollars off and ‘buy one, get one free,’ will be available in the program’s third phase. "This takes more collaboration between the distributor and the vendor. The benefits include added efficiencies of information between vendors and distributors over the web. This will drive more efficiencies into the supply chain cycle. Some of our distributor clients also say it strengthens their relationships with vendors," Weant says.

Kirk Visser, vice president of implementation and product direction for Danvers, MA-based Turning Point Technologies, says an increasing number of distributors want a presence on the Internet. "We offer a web portal that allows even customers with a homegrown system to have a web presence," he says.

With this program, customers can place orders on the web, check distributors’ stock, see new items and look for promotions. "We spent time last year rolling out this web package. Our distributor advisory board keeps feeding us things that they want on the web," Visser says.

Dallas, TX-based RFID Systems has been working with its business-to-business system, taking orders over the Internet for the past three years. According to Brian Blackmarr, president, this technology is very popular in some areas of the country.

"Sophisticated retailers, in particular, appreciate it. They can go on a customized website and place orders when they want to. Our system provides information on the top-selling items in the area and complimentary items for their order," he says. It also informs retailers about promotions.

This makes the ordering process quicker and easier, particularly with reordering. "Business-to-business has really taken off in the last 12 months. Companies that use this system tell us their ticket sizes have gone up. These setups don’t take away from the personal relationships and interactions, but instead provide more tools to order and communicate with customers more efficiently," Blackmarr explains.

He adds that the industry is heading toward a hosted system, where distributors use office PCs to access a technology company’s applications. This shared application approach provides the technology without the need for distributors to manage it. "The programs are accessible automatically on the Internet. We do all of the IBM downloads and operating systems so they can focus on their business and their customers. With this setup, distributors don’t need a dedicated IT staff. And, because we are sharing the cost of the computers and operating systems that the programs are running on, it is more affordable," Blackmarr says.

Bryan Head, the company’s vice president of sales, says smaller companies that cannot invest in sophisticated technology can benefit from this approach. "Shared applications offer fractional ownership, where we can post and manage applications that are leveraged by larger customers. This will help the smaller guys gain a competitive edge," he says.

Revving up with RFID
Although radio frequency identification, or RFID, is not a new technology, its use has become more prevalent by distributors in the last year. Visser says he has seen a big push for radio frequency in the warehouse. "There are still a lot of smaller distributors that are just discovering this technology," he says.

And like most technology, there have been a number of new developments in these systems. Phoenix, AZ-based Aspen Systems offers a technology that uses RFID tags to control products in the warehouse. "We use them for putaways. The tag is put on the pallet of product and the forklift has a reader. So when the forklift picks up the pallet, the reader or forklift-based computer that is attached to an antenna reads the pallets’ RFID tags," says David Kubinski, director of data capture.

The forklift computer talks using a radio frequency signal. This provides information on how many boxes are on the pallet. As product travels through the warehouse, the tag’s reference number or license plate is read by readers placed in different locations. "This technology tracks product and records when the product is received, where it is in the warehouse and where the oldest product is. The same forklift will get the product and record that it is picked," Kubinski explains.

After picking, the forklift drives through a portal or arch that contains readers that record where the product is headed, including which truck the product will be placed on and which retailer will receive it. "If it’s put on the wrong truck, the technology will alert the operator," Kubinski says.

One trend in RFID is the use of this technology at the tote level. "Reusable tote RFID helps cut down on tote costs," says Blackmarr.

Hand-held efficiencies
Innovations and improvements in hand-held technology have created efficiencies that save time, labor and cost.

For the past year, Creative Data Research (CDR), based in Mandeville, LA, has focused on developing software and technology that enables distributors to enhance customer service and improve profitability, according to Jebb Maginnis, president.

A new Returns Management program has recently been released that allows distributors to get better product returns under control and, consequently, increase profitability.

"During the last year, we focused on developing software that enhances customer service and improves profitability," says Maginnis. "It is a new functionality we added to DAC, which is our mobile device that runs on Palm Treos (wireless phones, which also act as hand-held computers)."

With this system, a salesperson has a mobile device that scans and provides authorization for pick up. Returned products are brought back to the warehouse and scanned again for credit. These returns are then automatically adjusted into the inventory. Nonsaleable products are directed to return locations for disposal or evaluation. The module then develops a credit memo based on the last price paid for the item. Return authorization is built in.

DAC Connect, an optional module introduced last year, also utilizes Palm Treo to provide real time mobile access information for sales people. "In addition to providing salespeople with pricing information, accounts receivable status and inventory information, they can also review customer performance by sales dollar, unit, periods, etc. This lets the sales person manage retailers more effectively," says Maginnis.

Access International, based in Chicago, IL, has sought to automate sales reps in the wholesale distribution industry. "We offer the potential to move away from the one-way legacy hand-held data collection device that sales reps have used for 15 years," says Ray Walsh, vice president of sales. "The real wave is to allow reps to use a more intelligent device than the hand-held. They need to have a robust laptop or pocket PC device where they can enter orders, see what is on special, find out what products are discontinued, see a vendor’s purchase history and change prices with margin limitations. This provides a full database that compliments the selling system."

With this technology, a task that was once about entering and transmitting an order is now a two-way communication that transmits and updates orders daily in real time using cellular technology. The improvement of wireless coverage and cost decreases, plus the added functionality of this technology, has made this a more popular solution.

"The sooner a sales rep can get the order in, the sooner it is allocated for inventory," Walsh says. "Reps can get information on this device as to processing and fulfillment of orders in real time." This system provides many customer service advantages and simplifies inventory management, as well.

AFS Technologies in Phoenix, AZ, also provides new software that helps drivers automate the delivery process, while at the same time allowing them to sell product directly off the truck. "When the Anti-terrorism Act was instituted, there was a big push as to how to track product in the supply chain," says Joe Greene, president. "As a result, we had to come up with better ways to help track product."

Warehouse management systems (WMS) were instituted in-house, but when it came to drivers, there were no systems in place to monitor product. This prompted AFS to develop a scanning program for drivers that could also be utilized for selling product right off the truck to retailers.

With this process, when drivers pick up a load, they place their hand-held device in a cradle to get up-to-the-minute information on delivery information. If needed, they can also get directions from one stop to another. The system also ties in to global positioning systems (GPS). When they return at the end of the day, the information is uploaded from the hand-held back to the main system. "In the past, drivers had to work with the accounting department to go over invoices, collections and deductions. This was manually intensive and error prone. Now a computer takes care of the task," Greene says.

AFS’ program provides drivers with the ability to modify invoices, change quantities, pick up stale merchandise, issue credits and take care of accounting on the road to reduce paperwork at the distribution center. They also are able to get inventory reports, manage any issuance of credits for returns, generate bills for vendors and enter cash receipts for credit.

"The whole process is much more accurate, because everything is integrated," explains Mark Skoog, vice president of marketing. "Because the information in the accounting system and warehouse can be downloaded directly to the sales rep’s mobile device, there are fewer errors and fewer incorrect deliveries. The result is a higher quality order and better customer service."

Greene says many distributors today are seeking the ‘perfect order’, and devices like this help make it possible by taking the human element out of the process.

Inventory management
The buzzword in inventory management is VMI or vendor-managed inventory. This is a process in which a supplier generates orders for its distributor based on demand information sent by the distributor, allowing distributors to capture the more profitable business within the retail chains. "VMI allows distributors to not compete solely on price, but to sell products as a commodity. By doing this, they develop better relationships with their customers and have better customer retention," says Head at RFID Systems.

To implement a VMI program, distributors need to have a good handle on their inventory, trends in the industry and the pattern of sales. "This has to happen on a site-by-site level," says Blackmarr. "VMI affects everyone and is coming quickly."

Along with VMI programs, a number of new inventory management programs have increased warehouse efficiencies. Dan Donovan, senior sales executive at Retalix says its DemandAnalytX solution, called DAX, is a forecasting replenishment tool that results in a 10 to 15 percent reduction in out-of-stocks, along with fresh product and reduced spoilage for perishables. "The adoption of this tool by c-store vendors has been tremendous. Right now, many larger companies are adopting this technology. If we can influence distributors to use it, they can implement it with smaller chains that can’t afford to adapt this technology on their own," he says.

Labor-saving tax stamping
New technologies have also impacted cigarette tax stamping. The latest developments have made the process less labor intensive and more streamlined.

Steven Stomel, president of Tax-Right, a Manasquan, NJ-based company that provides cigarette order verification systems, says the technology in this segment continue to evolve. "There are more features for stamping agents. Our company, along with ProCat Management, came out with comparative stamping data that gives wholesalers a benchmark of comparison to other wholesalers. By using a standard software application to calculate rankings, everyone can compare their numbers," he says.

Tax-Right is turnkey software that insures accurate cigarette orders with correct tax stamps in post stamp operations.

The companies also have developed Check Right, a stand-alone checking verification system that allows wholesalers to check high dollar value products. "It works similar to Tax-Right, where we get a copy of the electronic order, distributors scan UPC codes on products and we confirm the accuracy," Stomel says. "This ensures accurate picking for orders."

Other programs from these companies include Stock-Right, software that creates optimal cigarette orders for retailers and is designed for chain accounts that have 20 or more locations; Ship-Right, software that confirms the accuracy of customer order bundle counts and driver manifests; View-Right, a turnkey video system that records all bundle loading and activity at the dock door; and Show-Right, touch screen software that manages deal buying and customer processes at wholesaler trade shows.

Two new software programs will debut in 2008. Pick-Right will confirm the accuracy of picking as products are being picked, and Sign-Right is a software package that will insure driver accuracy regarding bundle delivery, accounts receivable instructions, totes retrieval and returns handling.

Because tax stamping can be labor intensive, Lake Mary, FL-based Warehouse Innovations has created LESS, a Labor Efficient Stamping System designed to eliminate 50 percent of the labor of tax stamping.

"By batching or making a wave of orders, we can pick up to 120 orders at one time. Where a distributor may have needed 15 or 16 pickers in the past, our technology gets them down to using only four or five," says Leon Hennes, president.

For example, this software will batch all cigarette orders from Virginia and stamp them at one time, rather than doing states randomly. Also, because the process batches the different cigarette sizes, the process runs more efficiently because the machine’s height doesn’t need to be changed as often. "We have a Massachusetts customer that has 11 different inventories for 11 different states. He needs warehouse space for 11 inventories. With between 700 and 800 SKUS multiplied by 11 states, that takes up a lot of warehouse space. With this system, we use a single inventory and stamp only when it is needed, so there is no stamped inventory sitting in the warehouse," Hennes says.

Not only does this conserve warehouse space, but distributors don’t pay the cigarette taxes until the product is out the door. A conveyor available with the system sorts up to 12,000 cartons of cigarettes per hour, providing 100 percent accuracy by scanning all UPC codes. Hennes says the return on investment is about a year and a half. "We saved one company $350,000 the first year it used LESS," he says.

AccuStamp, geared for smaller distributors, scans each order before stamping. "This program sends information to the AS400, alerting if product is out of stock, cartons are damaged, etc.," Hennes says.

As technology continues to evolve, distributors need to evaluate what implementations will better their business. Taking stock of warehouse inefficiencies and becoming educated on the latest technologies will not only keep a company competitive, but will add to the bottom line in the long run.

Lisa White is a food industry writer based in Cary, IL.

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