April 8, 2021

Succeeding in the new normal

The escalation and persistence of Covid-19 has wreaked havoc on business success worldwide. Unfortunately, the promotional products industry has not been immune. While the demand for Personal Protective Equipment (PPE) softened the blow for many, the next 12 months will test the mettle of every player in the space.  While promotional products will not lose their appeal as marketing/sales incentives in the long run, the businesses that survive the current attack, will need to adjust to the rapidly evolving new normal. It will require a reimagination of the relationship between suppliers, distributors and service providers. 

For five years, I served as the CTO of one of the top-25 distributors in the industry learning the drivers of efficiency in this market and the limitations of the current supply chain construct.  The company ultimately sold to a private equity group in 2016 in no small measure due to the unique supply chain model it built and the efficiencies it was able to scale. Post-sale, I left the company to focus on building the platform that I believe stands to change how suppliers and distributors communicate in the industry.  I share with you my learnings.

The pandemic has created a seismic shift and the resulting jungle fire appears to be universally destructive. Unfortunately, some establishments will perish but, for those who adapt and act now, the clearing will be an opportunity to survive and thrive in the future. Now is the time for a metamorphic change. “Reinvent yourself, or perish” warned Michael R. Levitt, President of The MRL Group during my conversations with him. 

“Reinvent yourself or perish” is easier said than done. Is this a doomsday or an opportunity? Tomorrow's successful players must see this as a huge opportunity to not only identify and address many of the issues that have hampered past growth, but also to re-think the game and succeed when the dust settles. Will it be easy? Certainly not; however, it will not necessarily be as hard or improbable as many imagine. Clarity is key. The key questions are: What does “Reinvent yourself” mean? Where to begin and how to go about achieving the goals of "Reinventing Yourself".

Re-Inventing Yourself

When in doubt, start from the basics and establish practical and reasonable goals. With revenue hard to find, this is an opportunity to look into costs and prepare your foundation to reap healthy margins when the pandemic recedes. People, processes and technology form the key sources of costs as well as successes in any distributorship. Now is the time to dig deep and evaluate these components of the business with a fine-tooth comb.

People: Employees are a company’s most visible – and often the most expensive - assets. While the employee cost can be quickly adjusted, the adjustment comes with its own set of serious consequences. Employees embody institutional knowledge. Many are touch points to the customers while others are crucial touch points to the suppliers. Historically distributors have invested in sales, training and incentives despite their costs, as long as the investment generated profits without necessarily healthy margins. 

Trimming costs by asking employees to leave typically compounds the problem in the long run. It should be the last resort.

This is an opportunity to evaluate who is doing what. Are employees being under-utilized? Is accounting spending too much time in data entry for supplier invoices? Is this a value-add task or could we do this better?  Is vouching a significant cost? Are people doing work that they are over qualified for? How much effort is put into paying taxes? What fraction of a dollar in payroll is required to support a dollar in revenue? How can technology improve this?  For people to be effective, the distributorship needs the right tools and processes, which promote efficiencies and preserve institutional knowledge that can easily be shared across the organization.

Processes: A typical distributorship focused on revenue has little time and/or appetite to review, let alone change or upgrade processes. With time, processes become fixtures, and people get hired to manage the increasing revenue within the confines of the established processes. Processes become habitual and embedded in a company, invisible and rarely examined for their value or efficacy. Habits are comfortable and hard to break, even when their purpose is unknown or their outcomes are detrimental. 

Process changes without a clear driver are harder during a crisis. 

Information is invariably the central nugget that is acted upon by different people in various stages of any process.  Ability to share accurate information quickly and easily is the key to improving processes. A unified view helps organizations to develop processes that work in unison. Tools and common platforms play a critical role in promoting effective operations with minimal friction.

Technology: Information technology that provides the right information at the right time to the right employee is fundamental to any successful enterprise. To re-invent a distributorship the right technology is the key step to achieving success once the pandemic recedes. Now is the time to evaluate one’s investment in technology. A common view for sales, operations, warehousing and accounting can have huge dividends. Appropriate technology makes inherent sense. An Enterprise Resource Planning (ERP) solution targeted to the needs of a distributor in the promotional space is no longer a nice-to-have, but a must-have tool in your tool-kit. 

Re-Inventing with Technology

The thought of selecting and implementing ERP conjures up visuals of huge costs with internal turmoil because of change management. However, there is some good news. Things on the technology front have radically improved over the last few years. Technology can be the grain of sand around which distributors can reinvent themselves.

  1. No capital investment: The rapid advances in cloud technology has ushered in the new era of subscription services. Pay-as-you-go ensures that organizations do not make high upfront investment in buying licenses and/or machines to adopt new ERP systems.
  2. No upgrades & service disruptions: No more risky upgrades, software patches or “older” versions of the system. New versions are released on the cloud with no service disruptions and/or backward compatibility issues.
  3. 24x7 Availability: Always on and always available structure provides flexibility essential for the current environment where employees cannot always come to work. 
  4. Scalable: Solutions that scale automatically to match the increase in transaction volumes, number of employees or increase in teams and roles of the employees in the company are now the norm.
  5. Role based access: A comprehensive system must be complemented with a role-based access management to ensure that every employee within the organization has access to information essential to perform her role while managing privacy around personal information. For example, commission information should be limited to the sales person or orders should be accessible to the sales person and the customer-service-rep supporting the sales person.
  6. Ease of Use with Intuitive Navigation: Often overlooked, these are critical components of the eventual success. ERP systems are invariably extensive and ease of use plays a critical component in early adoption to the new system. 
  7. Integration: As technology becomes increasingly de-centralized, integration plays a central role in keeping your organization connected within an “app-economy”. Selecting solutions that adhere to the industry’s “promo-standards” is an important consideration. Integrations with suppliers (for catalogs and AP invoices); with shippers (for automatic shipping & tracking); etc. are basic integrations essential for an ERP system.
  8. Industry Focus: For too long, generic solutions have been “tweaked” to meet the needs of the promotional products distributor. A product explicitly designed to address the many issues that distributors face is an important consideration when selecting a solution that will be at the center of your sales, operations, accounting and shipping. 

Final Word

The Covid-19 pandemic has had a long shadow on the industry over the last 8 months. Changing the mindset is step one to looking at the situation. Tomorrow’s winners will use this climate as an opportunity to be prepared to succeed as the pandemic recedes and the economy returns to the norm. An efficient, flexible, cloud-based ERP system is no longer a luxury for a promotional product distributor. It is essential to combine, coordinate, and simplify the processes required to manage the business. 

While ERP systems are robust, they need not be expensive. Few distributors in the Promotional Products Industry can afford to spend tens of thousands of dollars and hundreds of manhours to develop a custom ERP while the “Top 40 Distributors” in the industry, as ranked by The Advertising Specialty Institute, continue to grow and grab market share. To succeed tomorrow, the smaller distributors should be able to compete with the top players without breaking the bank. 

Cloud ERPs are clear winners:  Time-to-ROI is 26% faster; Time to Implement is 46% sooner; Profitability improvements are 60% higher; Process cycle times are better by 85%

Selecting the right ERP system for a promotional products distributor is akin to Goldilocks finding the most comfortable bed in the Three Bears house. Some systems are extensive, complex, and expensive, with features piled on high, most of which are never used. Others are beefed-up accounting programs designed for mass use, too limited and inflexible to satisfy a distributor’s unique requirements. Choosing the “just right” system is essential. Finding the system that delivers the advantages of expensive ERP systems – capability, flexibility, ease of use – for a price comfortably affordable by distributors of all sizes is not only possible, but also essential to re-invent your business.

author
Atul Shevade
Atul Shevade was the CTO at Corporate Imaging Concepts, LLC (CIC), one of the top-25 distributors in the promotional products industry. CIC’s focus on technology, automation and integration was instrumental in consistently delivering margins significantly higher than the industry average. In 2016, CIC was acquired by NY based Private Equity, Berkley Capital. Atul was also the founder of iMenu360, a high frequency online ordering platform for restaurants, which was successfully sold before he joined CIC. Born of his experience at CIC, Atul is the founder of Aturian, LLC, the leading ERP solutions designed for distributors in the promotional space. Distributors face daunting challenges in a fiercely competitive environment and Aturian was developed to support their unique needs.
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