Reading the Distribution Code

Barcoding helps distributors move out of the manual age of inventory counting.


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Distributors need some high-tech solutions to some very low-tech problems, such as drivers and warehouse workers who drop the handheld devices that read the barcodes on the inventory that they are trying to track and feed into their accounting software. Dropped PDAs are not directly an accounting problem. But the solution is, according to Mike Yeager, a senior vice president at InterDyn Cargas Systems, a Microsoft reseller based in Lancaster, Pa.

Because controlling inventory is increasingly occurring in the field where warehouse employees increasingly carry devices, such as the hand-held bar code reader from Intermec Technologies, which captures inventory data using software from Maximum Data and feeds it into the Dynamics GP financial system.

"I see this [devices used] going more to the Tablet PC, to a ruggedized Tablet that will give the user in the warehouse a larger screen in order to view data which can also handle adverse conditions such as dust, heat, and being dropped," says Yeager. "I see that coming down the pike in the next six months." Cargas is especially interested in such portable computing devices because the company serves businesses that deliver petroleum products and the drivers who handle the vehicles need rugged devices.

Partner Insights

Webbed Distribution?

The Internet holds a lot of promise for improving the operations of distributors. One of the main ones is the ability to provide different views of the products and prices to each customer.

"Distributors are looking for growth," says Joe Giegerich, partner at Horizon Associates Group, a NetSuite reseller, "and to do that through increased sales, they are moving to a Web-based model."

Some 75 percent of the NetSuite reseller's clients are distributors. Last year, half of the East Setauket, N.Y.-based Horizon's $1 million in revenues came from sales of NetSuite's Web-based accounting, CRM, ERP and e-commerce applications.

Distributors represent a significant chunk of business for San Mateo, Calif.-based NetSuite. Last year, 30 percent of its revenue was from distribution companies. NetSuite says it has 842 distributors operating their businesses on NetSuite.

AE Supply, a national distributor of industrial safety products such as protective gear and cleaning supplies, turned to NetSuite and the Web because it was checking inventory manuals, a time-consuming process.

In October, the West Chester, Pa.-based company turned to NetSuite for a real-time sales order and entry system, and integrated inventory management.

The base suite costs $499 per month for a single user that includes the license, maintenance, and upgrades. It is $99 per month for each additional user. With NetSuite, AE can perform a wide range of functions, including checking inventory availability and price, placing orders, sending invoices, tracking packages, and matching payments with invoices.

"It's not just the cost savings," Giegerich says, referring to the benefits of switching to the hosted application, "but the efficiencies afforded AE Supply as a result of the integrated accounting system."

Welcome to the world of distribution, in which counting things that are sold is the basic function of the accounting system, but which is a process that has to accommodate the realities of the physical world and the needs of businesses that sell all kinds of things.

Distribution has always been a huge part of the business for mid-market software resellers. It has been one of the key areas addressed by packages such as MAS 90/200 and Dynamics GP, among others.

About 25 percent of Cargas' $6 million in revenue for 2005 came from distribution, Yeager estimates. That includes a lot of verticals who have one thing in common-products need to be tracked and conveyed to market.

Similarly, distribution is a key market for Sage Software, which doesn't hand out many statistics on the number of installations. But Scott Pugmire, senior product marketing manager, says there were 60,000 distributors using a Sage product last year.

The need for better control also increasingly pushes the counting out into the warehouse, where devices transmit data back to the office and the accounting system via radio frequencies. It's also increasingly leading end-user companies to the Web because they want to customize product line-ups and price lists for their customers.

Barcoding is critical because of the importance of just-in-time delivery of inventory, says Doug Deane, president of San Diego-based DSD Systems, a Sage reseller. That's when the goods need to arrive at an assembly line not a moment before they are used.

"I think that's the No. 1 issue," says Deane. The issue includes radio frequency identification-the process of using electronic tags that are embedded in goods being delivered and which is of critical importance because it is being demanded by larger retailers. RFID is a bigger issue further north in the large distribution centers of places such as Riverside, Los Angeles, and Orange County.

Still, distributors are a key market for DSD, which it services primarily through Sage Software's MAS 200 and 500. Typical installations involve 30 to 50 users at three or four remote facilities served by a wide-area network and Internet portals.

End users are also driving vendors to the Internet, because they want portals in order to provide access to their customers. Portals can enable software users to provide customized price lists to their buyers.

However, at this point, Sage itself does not provide the portal views through the MAS applications. Deane says Sage resellers are relying on third-party vendors to provide the portals. Rival Microsoft has already introduced products that provide different views

Radio Beacon:

RFID Ripples Through

While the requirement to include radio frequency identification tags in shipments affects only customers of big retailers such as Wal-Mart, the impact will spread to the suppliers' suppliers, says Dale Jeffries, president of Radio Beacon.

Right now, RFID has little benefit to suppliers except that, "They get to maintain Wal-Mart as their customer. It's a cost of doing business," says Jeffries, whose Toronto-based company provides the Warehouse Management System that interfaces with most major mid-market accounting software packages. Wal-Mart is mandating the use of the system "and saying, 'You can't charge us more for it.'"

He says that anyone touting the benefits of RFID to a Wal-Mart supplier, "is likely to get tossed out of the office."

The trick is for suppliers to turn the use of RFID tags to their benefit. Because tags can be reprogrammed, these companies can require their suppliers to use RFID, and re-label boxes and send them on to Wal-Mart.

Some Radio Beacon customers have been able to eliminate the warehouse person who scanned the labels on incoming cases. The next step for many may be to have Far Eastern suppliers tag boxes.

"They can reuse the boxes and reprogram without repackaging them," Jeffries said.

As a third-party supplier, Radio Beacon itself relies on others to tailor its software to financial packages. Blue Moon Industries performed the Dynamics GP integration, while MaxQ Technologies took care of a version for Dynamics SL. SWK did the same for MAS 90 and 200, while SAP handled the work to make its integration of Radio Beacon look like the SAP Business One application. Radio Beacon performed the integration for Sage Software's higher-end MAS 500.

"Microsoft is always a half a lap ahead on the technology side," says Deane. However, he notes that there are advantages to the third-party approach. "You can make a case for both business models," he says.

The Wal-Mart Effect

As with most areas of software, functions once available only in higher-priced packages have moved downstream. Distribution features are not only available in mid-market software, but also in specialized versions of Peachtree and QuickBooks.

Even those products must deal with issues, such as the demands of Wal-Mart, which rules the retail roost, to have the products shipped to it contain RFID tags that enable the receiver to determine the contents and quantity of items shipped via pallet.

That affects businesses using products such as QuickBooks Premier for Manufacturers and Wholesalers and QuickBooks Enterprise Solutions for Manufacturers and Wholesalers.

Among the more than 400 applications authored by members of Intuit's Developer Network, there is one that gives QuickBooks electronic data interchange functionality.

"You can't do business with a Wal-Mart without this," says Bill Lucchini, general manager of Intuit's mid-market product QuickBooks Enterprise Solutions. "They won't take [a shipment] and it can result in a charge back."

Besides having EDI functionality available from a third party, the QuickBooks packages have such classic distribution features as ship to address, bill to address, a list of product numbers, and quantities.

The price for a variety of QuickBooks products, including QuickBooks Premier and QuickBooks for Manufacturers & Wholesalers starts at $399.95 while the mid-market QuickBooks Enterprise Solutions starts at $3,000 for five seats and one year of upgrades and telephone support.

Among vendors moving to supply RFID systems is SAP Business One. RFID functionality is also available in the company's All-in-One and MY SAP Business suite.

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