FAQ4

Integrated Business Communications Alliance

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Distributor Questions

Doug Young of Behler-Young, an HVAC Distributor, was asked to participate in an education session. Following are answers to several thought-provoking questions.

Question #1: What areas within a distributorship can benefit from the use of bar code technology?

Answer: Any place where information must be key entered into the computer. For example:

	The sales counter;
	The receiving dock;
	Taking physical inventory or cycle counting;
	Verifying shipments;
	Logging serial numbers.

Question #2: How would you suggest, step-by-step, a distributorship implement the use of bar code technology?

Answer: A short answer to this is difficult. Unless a customer is demanding labels on shipments or the advanced shipping notice, which is an EDI transaction linked with a bar code, a distributor should:

	Develop a working knowledge of what bar code can do;
	Review his operation and see what can be improved through more timely and accurate information;
	Be honest about what inventory is really costing to carry;
	Be honest about how many errors their are and the cost;
	Make a management commitment to reduce overhead by 20%;
	Briefly write down what you want to improve, how you will measure the improvement and how you think the system will work;
	Use that concept to select a technology partner (maybe your computer system supplier or outside services); have them tell how their equipment or system will meet your needs and then make a selection;
	Do It!

Of course, there are training and installation issues.

Question #3: In terms of money, what have been the up front expenses and what have been the payoffs of implementing bar code technology?

Answer: The up front expenses are what everyone sees or thinks they see. The cost of the equipment can be anything from $200 for a scanner to plug into your existing computer terminals, to a fully portable hand held computer that costs $2,500. Printers can cost $1,500 to $2,500. But there are other subtle expenses like management planning and design time. And there will be software to integrate to your existing system.

What is constantly overlooked is the cost of not using bar code. What are the real costs of errors and out of date inventory reports. This may be hard to set a dollar figure on, but one distributor put it this way. "I have been using bar code for about 18 months and I now ship 25% more volume without any additional people.

Question #4: What are the advantages of using bar code technology?

Answer: The advantages are that the bar code provides timely, error free information that can be used to validate receipt, movement or counting of products. It reduces key entry time, transcribing time and almost all errors.

Question #5: Why is the North American Heating, Refrigeration and Air-Conditioning Wholesalers (NHRAW) Association promoting the use of bar code technology?

Answer: The main reason is to drive costs out of the supply chain. If, for example, a shipping error costs a manufacturer $50 to handle the re-pick, ship and credit, it probably costs the distributor another $50 to contact the supplier, return the item and handle the credit memo. That is $100 in profit that is taken out of the distribution channel. At a 5% pre tax profit, that is the profit from a $2,000 sale. Think of the cost of receiving, counting, storing and managing inventory and you can see that the costs that bar code can reduce are really astounding.

Question #6: As a trade association board member, what do associations see as the future of bar code technology in the industries they serve?

Answer: The future is bar coded. Home Depot, etc. use it to reduce cost and eliminate errors. We can’t equal their buying power and they can’t equal our product knowledge, but we can learn how to reduce cost and do a better job in managing our inventory. Valid, timely information provided through bar code is a major part of what association members need to survive.

Question #7: What are the consequences of NOT migrating to the use of bar code technology?

Answer: It would be like not using telephones in the 50’s, not using computers in the 80’s or not using FAXes in the 90’s. This is the information and communication age and bar code is part of it. To not use it is to not use the things that your competitors are using. The consequences are obvious ... you die!

Question #8: What would you tell a distributor to encourage him to start using bar code?

Answer: I’d tell him that after you knock off all the hype about "technology" there are very good business reasons to use efficient business tools. I’d then ask him to tell me:

	The advantages of handwriting and then key entering product identification information
	The advantage of not really knowing (minute to minute) what was in stock
	The benefit of shipping the wrong item to a customer
	Why a counter person who could (using bar code) identify and price all the items on an order in a few seconds would prefer to take several minutes to key stroke the information into the computer.
	Why it is better to close the place down for a day or two to take physical inventory rather than to do it in several hours and have the reconciliation out as the job is being done.

Question #9: Sell me on the use of bar code technology!

Answer: Your biggest competitor is looking you in the eye and telling you "bar code, oh no it is too expensive for you, you are not sophisticated enough, you can’t afford the investment, it will never catch on".

Your best customer just looked at you and said, "the guy down the street has better delivery, lower price, more attentive salespeople, never sends the wrong stuff and it is always priced correctly. Sorry, but I’ve got to deal with ––them!"

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IBCA Phone: 215.489.1722 Email: kelleyt@quadii.com