Can ERP Close Generation Gap Wholesale Distribution Finalsoftworx.co.za/wp-content/uploads/2016/05/Can_ERP_Close_Generat… · Source: Mint Jutras 2013 and 2014 ERP Solution Studies

August 2014

CAN ERP HELP BRIDGE THE GENERATIONAL DIVIDE IN WHOLESALE DISTRIBUTION?

“GETTING BY” WON’T BE ENOUGH WITH THE CHANGING OF THE GUARD

The vast majority of wholesale distributors are small to midsize businesses; most are privately held and many are family-‐owned and operated. Those built from the ground up in the post World War II era, and even those started up more recently, relied heavily on experience in buying and selling, negotiating skills, established networks, and a nose for getting the best deal. This generation was used to “getting by” on a shoe-‐string budget and applied this same frugality to support systems such as Enterprise Resource Planning (ERP). While most covered the basics, anything more was often assumed to be beyond their reach or even a luxury.

With 10,000 baby boomers turning 65 every day, we are now starting to see a changing of the guard. This next generation of owners is bringing a different level of expectation both in terms of functionality and the kind of ease of use required to operate efficiently and draw new talent to their organizations. Can ERP help bridge this generational divide? The answer is, “Yes, but…” While next generation ERP can certainly satisfy next generation expectations, can yours? If not, it might be time for a change.

THE BRIDGE TO A NEW GENERATION

On the surface, the business of wholesale distribution might appear to be rather simplistic. You buy goods at a reduced cost, mark them up and resell them for a higher price. The difference is your operating margin. Compared to other industries, operating margins in wholesale distribution are thin, sometimes razor thin, since the distributor doesn’t necessarily add value (in the physical sense) to the products it moves. But that is changing as wholesale distributors seek differentiation through added services. And even without this change, operating margin needs to fund a lot of operational activity that occurs between the purchase and sale. It costs money to procure product, move it, store it and move it again, usually in large volume.

Managing those operations includes building and maintaining an audit trail of inventory movement, making ERP, the transactional system of record of the

Key Takeaways ü Many owners of

wholesale distribution businesses are handing down control to a new generation of owners.

ü When these new owners look at inherited systems such as ERP they often ask, “Why doesn’t it do this?”

ü Wholesale distributors are looking for better fit and functionality, along with better ease of use.

ü The connectivity, collaboration capabilities and added visibility of newer ERP solutions hold the key to bridging generational and skill gaps

ü Younger workers are twice as likely to seek different employment as a result of usability challenges

ü Older and younger generations will be drawn to new user experiences for different reasons, but will wind up in the same place, accessing enterprise data in real time

ü New “social” capabilities now being delivered by ERP solution providers can produce a synergistic effect and help close the skills gap

Can ERP Help Bridge the Generational Divide in Wholesale Distribution? Page 2 of 11

business, an absolute necessity. But ERP is also often viewed as a necessary evil.

Early ERP solutions were tough to implement and even tougher to use, creating the need for lots of training. Not only did users need to be trained in how to navigate menus and screens, but also in workflow and procedure. Because early ERP systems didn’t work exactly the way people worked, workers first had to learn how to do their jobs, and then separately had to learn how to enter data into ERP, and/or how to extract it. Depending on how closely (or not) these two were aligned, the same ERP that was supposed to make life easier, sometimes made it harder.

Furthermore, most early ERP solutions weren’t exactly made for wholesale distribution. ERP evolved from Material Requirements Planning (MRP), which was originally designed for manufacturing. It gave the proper attention to managing inventory in a warehouse, but not necessarily to the activities that occurred in the same warehouse. It didn’t understand the complexities or help alleviate the potential inefficiencies associated with put-‐away and picking or the risks involved in strategically locating inventory.

Many of the original owners came from the baby boomer generation. While baby boomers might not claim to have walked five miles to school in two feet of snow (uphill both ways?), they were accustomed to “hard.” They didn’t revolt. Few wholesale distributors had the desire or the budget to buy or customize a solution specifically tailored for their operation. Instead they “made do” with what was available at a price they could afford. They adapted, even if it meant working around the system instead of with it.

But on a personal level baby boomers also wanted “better” and “easier” for the next generation. And they delivered that, providing not only more formal education, but also all the “modern conveniences” to their children and grandchildren. And of course the electronics of today were a natural progression for these next generations. They took to Xbox and computer games like fish to water. And games led to computers and cell phones and then smart phones, and then tablets. Computers led them to the Internet. Smart phones and tablets led them to “apps.”

Now many of the older generation are starting to retire, handing off the business to a younger generation that is not only more formally educated, but also grew up with consumer technology. As a new generation of owners takes over, they don’t understand why the “apps” they inherited with the business aren’t as easy to use as the ones they are using on their smart phones and tablets. And they expect them to do a lot more, even though they may not have any more budget to spend on them than the prior owners.

The older generation might have grown into the wholesale distribution business, and were therefore happy with any level of automation that relieved them of the burden of manual processes. They knew the business and the

Data Source In this report, Mint Jutras references data collected from its 2014 ERP Solution Study, which investigated ERP goals, challenges and status and also benchmarked performance of ERP implementations.

Almost 800 responses were collected from companies across a broad range of industries. This report references data collected in responses from 120 wholesale distributors.


business processes inside and out, and therefore when systems fell short, they knew how to augment them or operate outside of the system. But the younger generation being inserted into the business has become dependent upon technology and much more demanding.

But that is not the only reason new owners might demand more from their ERP solutions. First of all they are far more likely to be operating on a more global scale and as a result are subject to more rules and regulations governing international trading. If they deal with any kind of regulated product (e.g. food, pharmaceuticals, potentially hazardous materials, etc.), they are more likely to be required to preserve forward and backward traceability and satisfy other compliance requirements. These new requirements require knowledge and place new demands on ERP solutions.

In addition, while these businesses may have started as simple buy and resell operations, as they matured, they are also likely to have taken on new roles and responsibilities in order to grow and/or differentiate themselves from competition. Perhaps today they do some configuration or assembly. Perhaps they not only sell to retailers, but offer products directly to the consumer either online or through an outlet facility. Perhaps they provide services to manage their customers’ inventory and replenishment. These new roles and services not only require a new set of skills, but also require different features and functions that were not considerations when solutions were originally purchased and implemented.

Can ERP help fill both the skills gap and the feature gap? It can, but it won’t happen magically, without a concerted effort. And if your current solution falls short, you have to know what to ask for or you’ll never get there.

ERP SELECTION CRITERIA CRITICAL TO SUCCESS

The combination of these forces has led to a change in how enterprise software like ERP is evaluated. The Mint Jutras 2014 ERP Solution Study asked participants to prioritize 13 different selection criteria (Table 1) on a scale of 1 to 5.

While fit and functionality was the top selection criteria (by far) for many years, the past several years has seen ease of use catch up and has now nudged fit and functionality into second place for most types of businesses. This was true in wholesale distribution as recently as last year. However, this year fit and functionality has reemerged as the highest priority for distributors. However, note that the importance of ease of use did not decline from 2013 to 2014. It actually gained slightly in priority. Yet fit and functionality surged ahead, rated as a “must have/most important” by 68% of our survey sample.

Percentage of Respondents Who

Say They “Must Have”

Two criteria were also most likely to have been rated “Must Have/Most Important”

ü Fit and functionality: 68%

ü Ease of Use: 54%


Table 1: Selection Criteria

Source: Mint Jutras 2013 and 2014 ERP Solution Studies

The addition of new and different demands placed on wholesale distributors, combined with a generation more dependent on technology, translates to new organizational roles and a new role for ERP. You may find yourself needing to hire new employees with different skill sets and you need to give them with the tools to do their jobs. Not only must ERP provide the transactional system of record of the business, but it must also guide the users in performing in these new roles. You can’t rely on seasoned veterans to perform new functions or to fill the functional gaps left by a generic ERP that only provides the traditional 80% of functions required.

And therefore fit and functionality and ease of use go hand-‐in-‐hand. Having all the functionality in the world is meaningless if you can’t figure out how to use it. And yes, age matters when it comes to usability.

While the 2014 ERP Solution Study did not capture age of participants, prior Mint Jutras research did just that. This prior research was conducted to understand how different generations responded to usability challenges. Older generations were significantly more likely to complain about these issues. Less secure in their positions, and with less influence, the younger generation might be reluctant to speak up, but they are certainly not willing to just suffer in silence. The youngest segment (those in the age group of 18 to 35 years) was twice as likely to seek different employment as a result of these issues. So if you are looking to attract and retain bright, young talent, you need to address these challenges.

Selection Criteria Ranking

Participants were asked to prioritize 13 different selection criteria on a scale of 1 to 5 as follows:

5: Must Have/Most Important

4: Important

3: Somewhat Important

2: Nice to Have

1: Not a Consideration

The actual “mean” shown in Table 1 is less important than the relative priority of the different evaluation criteria.

Age Groups Participants were asked to identify their age by age group:

ü 18 – 35 years old



ü over 55 years old

Younger workers are twice as likely to seek different employment as a result of usability challenges.


In the meantime, all age groups are likely to use ERP less frequently and are more likely to use other tools as an alternative, with the younger crowd overwhelmingly turning to spreadsheets. Nobody graduates from business school today without having mastered the use of spreadsheets and that skill seems to be well utilized when ERP is hard to use.

But with the increased use of spreadsheets you lose your audit trail and introduce the risk of decisions being made based on data that was exported at a single point in time. That means it is not “real-‐time” data and if it has taken on a life of its own and been manipulated, it may not even be correct data. And spreadsheets do nothing to help fill a potential business skill gap.

So what does ease of use really mean? Realizing that this phrase means different things to different people, and even different things to the same person, we asked survey respondents to select the top three elements of ease of use that were most important (Figure 1).

Figure 1: Defining Ease of Use (top 3 most important requirements)

Source: Mint Jutras 2014 ERP Solution Study

Efficiency and intuitive navigation topped the list, as would be expected. But the third requirement -‐ easy access to ERP from anywhere, any time – is a requirement when you might have a distributed workforce and is also indicative of the impact of mobilization. With the advent of smart mobile devices, we are never disconnected, especially the younger generation who grew up with consumer technology.

And that is why the ability to connect to ERP through a mobile device is even more important than many realize. Notice that in Table 1 the ability to access ERP data and functions is very close to the bottom of the priority list. This is a clear indication that participants underestimate the role ERP can and should play in communication, collaboration and decision-‐making.


ERP can provide these capabilities but not by just lifting and shifting old ways of accessing ERP to a mobile device. Give a new mobile device to a millennial and he or she will find dozens of productive ways to use it. To get this “there’s an app for that” generation to use ERP on a mobile device, it has to look, feel and behave like other mobile apps.

Give someone of the older generation the same new device, and it is just as likely to sit in a desk drawer. To get these baby boomers to use ERP on a mobile device, you need to deliver a user experience that is purpose-‐built to answer their questions and help them solve their most pressing problems.

Today’s technology-‐enabled ERP solutions can, and in doing so also help bridge the generational divide. Older and younger generations may be drawn to these new user experiences for different reasons, but they will wind up in the same place, accessing enterprise data in real time and communicating from the same page. The conclusion? User experience is equally as important to both younger and older generations of workers.

THE GLOBAL FACTOR

But there is another factor at play here, which is also contributing to the added demands placed on the wholesale distributor today. As noted earlier, wholesale distributors are far more likely to be operating on a more global scale and the need to access ERP from anywhere, any time is a requirement for a distributed workforce. So do wholesale distributors face these challenges? There is no doubt that they do.

While wholesale distributors tend to be smaller companies, they are even more distributed than companies representing other industries. For a wholesale distributor, location of inventory can be a determining factor in meeting the demands of its customers. The majority (74%) of distributors operate in more than one location and even small distributors average 2.76 locations and this number increases rapidly with the size of the company (Figure 2). That number more than doubles as companies pass the $25 million a year threshold and continues to grow to a whopping 16.75 locations as they pass the billion-‐dollar mark.

This proliferation of operating sites adds a new dimension to the complexity of managing a distribution business. It is not enough to know whether inventory is available. You need to know where it is, whether you can deliver from this location in the time requested and what trade compliance regulations impact the delivery. Strategically placing inventory may be the difference between growth and contraction and the complexity of this placement grows exponentially as you start to cross international borders. This kind of environment not only creates accessibility challenges, but also places new functional demands on the system to manage these complexities.

Older and younger generations may be drawn to these new user experiences for different reasons, but they will wind up in the same place, accessing enterprise data in real time and communicating from the same page.


Figure 2: Environments are increasingly distributed


WHAT TO LOOK FOR IN AN ERP

By now you may be thinking that your current ERP solution just might not be able to help you in this changing of the guard. One sure sign is that your executive management, those making the strategic decisions about growth and operations, never actually touch the system. In the past no executives ever put their hands directly on an ERP solution. They didn’t have time to figure it all out. But that is rapidly changing. Top-‐level executives have access to and use ERP regularly in 74% of the wholesale distributors we surveyed (Figure 3). If yours don’t, that is the first sign that you definitely need a new one.

But even if yours do use ERP on a regular basis, there might still be cause for concern and a lot of room for improvement. While a very high percentage is somehow engaged, very few still have access to the kind of real-‐time decision-‐making tools that mean everything at a strategic level. Do they have access to dashboards that summarize the key performance indicators (KPIs) that signal the overall health of the organization? Can they touch these dashboards and selectively (and efficiently) drill down to supporting detail? Are they receiving alerts when an event occurs (like an important new order comes in) or when

Company Size

Mint Jutras defines company size by annual revenue as follows:

ü Small: under $25 million

ü Lower Midsize: $25m -‐ $250m

üUpper Midsize: $250m -‐ $1 billion

ü Large: Over $1 billion


one fails to occur (that critical shipment from a supplier is delayed at the border)? Can they take direct access from whatever device delivers the alert? Or even if they are alerted, do executives then turn their smart phones into dumb phones and start the long and arduous process of tracking down the real answers and the right action to take?

Figure 3: Level of Executive Access


As you can see from Figure 3, if your executives are not well equipped, you are not alone. But that is not because solutions don’t exist. It is because you don’t have the right solution.

Look for an ERP solution that includes new ways of engaging with ERP. Solution providers have progressed well beyond the old hierarchical menus that required you to know how the system and the data is organized. Look for a solution that can be tailored to a specific role and individual. And by “tailored” we’re not talking about programming. We’re talking about choosing the right charts and graphs, dragging business objects (like orders and customers and suppliers) around on a screen. We’re talking about filtering a certain way one day and a different way the next.

And these different views should be accessible on your favorite mobile device -‐ not just a laptop connected through a Wi-‐Fi and VPN connection, but a tablet or a smart phone that just requires a carrier’s signal. New ways of engaging with ERP, including engaging with mobile devices, has the potential to bring the older and younger generation together, to operate from the same page, to engage and learn from each other.

Also look for the new “social” capabilities now being delivered by ERP solution providers since they can produce a synergistic effect with the result being far greater than the sum of the parts.


Of course the term “social” has different connotations to the older and younger generations. The younger generation seems to operate from the principle of communicate early, communicate often. And this communication is largely electronic. They get answers from the Internet instantly, text their friends and colleagues constantly and are always in search of the latest in techno-‐gadgetry. So they immediately equate the term “social” to engagement, communication, collaboration and transparency.

Mention “social” to a baby boomer and you might get a different, at best lukewarm reaction. So you might need to tread lightly in terms of calling them “social.” Yet by applying social concepts to ERP, you not only unlock the potential of those same applications, you also provide a means of bringing multiple generations together.

Here are just some of the “social” capabilities being built into ERP solutions today.

ENTERPRISE SEARCH: It is not clear exactly when “Google” became a verb, but that is exactly how many people use the term today. Looking for information, for an answer to a question? Just “Google” it. Wouldn’t it be great if you could do the same with your enterprise data within ERP?

Next generation ERP solutions with social capabilities do this by incorporating a simple (to use) enterprise search capability. Don’t know exactly what you are looking for? Don’t know exactly where to look? What do you do? In the real world, you start searching and perhaps as you start to retrieve information, you refine that search. Why not apply the same principle to accessing data in enterprise applications? Search by customer, order, supplier, part or product, perhaps combining data residing in your enterprise applications with unstructured data available on the Internet.

Without this level of search capability in ERP, users needed to know where and how different data elements and business objects were stored and this knowledge was dependent on technology skills. Adding an enterprise search function bridges that skills gap and allows users to work, discover and learn more naturally.

PUSH VERSUS PULL: While all of these new consumer grade interfaces can be very valuable, they only deliver answers when interrogated. Younger, less experienced workers won’t even know what to look for. Older workers, aware of potential danger, may not know where to look. Why not have ERP deliver data to you without having to ask for it? In its most simple form, this could simply be in the format of an alert.

Event management, which is the underlying technology that triggers an alert, is hardly new, but still not widely used. An event manager can be constantly

Younger, less experienced workers won’t even know what to look for. Older workers, aware of potential danger, may not know where to look. Why not have ERP deliver data to you without having to ask for it?


searching for conditions or events that occur (e.g. a big order comes in) or fail to occur (e.g. payment of a large invoice does not) while you go about your business. Alerts can be delivered in any number of ways, but the most common today is still via email.

While the exception management facilitated by these alerts is certainly a plus, executives and line managers can still be blind-‐sided by a notification that seemingly comes out of the blue. Of course in some cases the sensitivity level can be increased to give a warning, but think how much more valuable it would be to have the ability to monitor a stream of activity surrounding that big order or the efforts made to collect payment from that delinquent account. In order to do that, you need to be “following” the account.

THE CONCEPT OF “FOLLOWING” If you aren’t already a fan of “social”, the concept of “following” someone or something might not seem immediately familiar to you. But chances are, you are already following someone or something either in your professional or personal life. Perhaps you follow the stock price of specific companies, or you watch a stock exchange like NASDAQ or the Nikkei. Or maybe you follow the stats of your favorite sports teams. Maybe you do that through newspapers, online or using an app on your mobile device. Perhaps newsfeeds are delivered to you through email. Regardless of the delivery method, the objective is to stay informed.

What if you could easily apply that same concept to your customers, orders or prospects? Let’s look at that big deal you are expecting to close. The sales rep has it on his forecast and his manager also feels confident. But if you really want to get a feel for the timing and the likelihood of closing the deal, today you probably pick up the phone and talk to the rep or his manager. But do you get the full picture?

Wouldn’t it also be helpful to follow the trail of activity that has already occurred during the sales cycle? What if you could see the conversations or chatter between sales rep and manager? What documents have been delivered to the prospect? And what if this potential deal is with an existing customer? Wouldn’t you like to be able to scroll through the support activity over the past few months, including the calls, issues and resolutions? Has the customer experienced any quality or delivery issues? Have they been consistently paying their bills on time or is the outstanding balance over 90 days? Think what could be learned, potentially filling more of those information gaps that are only aggravated when you have a skills gap.

COLLABORATION Simply aggregating all this activity and data and making it available to all interested and involved parties provides an environment conducive to collaboration. These tools can easily draw all parties into the conversation,

Social capabilities can easily draw all parties into the conversation, sharing strengths and creating synergy. Younger workers are drawn into real business conversations and more mature workers can be guided through using these electronic means of engaging, sharing and collaborating.


sharing strengths and creating synergy. Younger workers are drawn into real business conversations and more mature workers can be guided through using these electronic means of engaging, sharing and collaborating.

SUMMARY AND KEY TAKE-‐AWAYS

Is your company experiencing or anticipating a changing of the guard, with a new, younger generation at the helm? Even if that is not the case, it is likely that you will be infusing new blood into the organization and that new blood will likely be running through the veins of younger, more tech savvy workers. Will you be able to attract bright new talent and help them learn your business, even as it is evolving? ERP can help, but not just any old ERP solution. You need one that provides new ways of engaging with ERP, accessible from anywhere, any time, especially from a mobile device. You need one that easily operates in a global environment, and can evolve as you do. It needs to incorporate social capabilities and bring all the generations together to connect and collaborate. “Making do” and “getting by” simply won’t be enough with today’s changing of the guard.

About the author: Cindy Jutras is a widely recognized expert in analyzing the impact of enterprise applications on business performance. Utilizing over 35 years of corporate experience and specific expertise in manufacturing, supply chain, customer service and business performance management, Cindy has spent the past 8+ years benchmarking the performance of software solutions in the context of the business benefits of technology. In 2011 Cindy founded Mint Jutras LLC (www.mintjutras.com), specializing in analyzing and communicating the business value enterprise applications bring to the enterprise.

www.mintjutras.com

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Can ERP Close Generation Gap Wholesale Distribution Finalsoftworx.co.za/wp-content/uploads/2016/05/Can_ERP_Close_Generat… · Source: Mint Jutras 2013 and 2014 ERP Solution Studies