For distributors who are rethinking their businesses, technology is just one of several enablers of innovation. Innovation occurs by blending emerging technologies with existing processes, according to Stuart Maxel, Continuous Improvement Director at Epicor Software Corporation.
Maxel recently revealed the results of an Epicor study on innovation within distribution to the UnleashWD community. The report showed generally strong growth within distribution, as both growth and profitability pointed up, with median growth of 7 percent and profitability of 12 percent for companies involved in the study.
The survey of over 1,200 distributors revealed significant innovation in many areas such as pricing, inventory optimization and social media. More importantly, the survey gave an indication of the types of innovation driving the highest profits and growth for distributors.
The survey specifically revealed that distribution companies with the highest growth were those that had focused on the “old school” distribution areas of process, ERP and supply chain/logistics along with new technologies.
An example of this could be integrating ERP systems with eCommerce and mobile. Customers of distributors could then benefit by ordering products on their smartphones while at a job site, saving time and money. For the distributor, it means being able to get more orders more quickly, increasing sales while decreasing traditional order-taking costs. “By investing in eCommerce with your ERP system, you can have orders come in from all over the world, at all hours,” Maxel said.
Voice of the Customer
To understand where and how to invest in technology, Maxel recommends a simple solution—listen to your customers. Prioritize customer needs and use innovation and technology to drive improvement. Epicor accomplishes this by creating beta programs for their customers to experiment with and provide feedback during the development process.
“At Epicor, we have done a lot of training with our design people on how to take the voice of the customer and put it into the design of the software,” Maxel said. “Even when we hire developers, we look for people with warehouse experience. Our software developers go out to work with distributors, to really understand their day-to-day processes.”
Process Improvement with Lean and Six Sigma
Technology alone will not save a struggling distribution business. Innovation also requires regular close examination to discover problems in processes and communication, explains Maxel, who holds certifications in both Lean and Six Sigma.
Lean is about increasing efficiency through a set of principles that originated at Toyota, with the intent to drive out waste. For example, Maxel is currently using the Lean process in Epicor’s finance department to map and eliminate delays in the order process.
Originally developed by Motorola, the Six Sigma process seeks to improve quality and reduce variance. Maxel is one of 16 Epicor employees to attain a Six Sigma Black Belt. Achieving this status requires weeks of intensive statistical process improvement training and testing, and completion of a project that creates or saves $500,000 in value for a company.
“Accounts receivables and payables are goldmines for Six Sigma,” Maxel said. “An invoice for $300,000 can be held up by a single line. With Six Sigma, you want to get to the core reasons why an order has been held up, and replicate the solution to the problem across all channels. If your organization is making a mistake on an invoice with one customer, then the likelihood exists that the same mistake is being made with other customers.”
Once an error has been identified, solving it once is not enough. The organization must put in place a system to ensure that these types of mistakes are not repeated in the future. Maxel recommends that companies follow Pareto’s Law, otherwise known as the “80/20” rule: maximize profits by focusing on the (typically) 80 percent of processes that generate most of your profits. In this way, Maxel helped to discover $3 million in savings in Epicor’s internal processes by eliminating errors and increasing productivity.
For more information on innovation in distribution please refer to this Epicor/UnleashWD eBook: