Image via Kiva Systems

Wow! Shelves come to the picking station, highlight the bin that the product to be picked is stored in, flashes a light to indicate which carton the product should be placed in and scans the barcode on the product automatically when it is pulled off the shelf and again when it is placed in the carton. If you find that hard to believe, don’t take my word for it, go to the Kiva Systems website and see for yourself!

Finally, I thought, a system that would NEVER make a mistake in inventory. NEVER ship the wrong product to the right customer. NEVER lose track of exactly what is in inventory and where it is. It even reorganizes the warehouse dynamically to improve efficiency in storing and retrieving stock.

Then reality set in. Why should this be any more reliable than the use of handheld computers with built in barcode scanners and constant Wi-Fi connection to the database? It depends on the “human factor.”

Since the first merchant took his goods to market in the town square, people have been struggling with the “what do I have, how much did it cost, and who should I deliver it to?” question.

Automation has virtually eliminated errors in recording, tabulating and analyzing inventory data. It has not been as effective in eliminating the human errors. The times that a person is in the middle of picking 10 pieces of a particular item and is interrupted and then can’t remember if the piece that he just put in the box was scanned or not. Or the times that the piece is scanned and then placed in the wrong bin. You know the kind of errors I’m talking about. Not negligence, simply the human factor.

Automation addresses efficiency extremely well. It can also eliminate tasks that have been traditionally done by people, thereby reducing the opportunity for making errors. It is less effective in addressing the personal discipline required to reduce human errors. In fact, automation sometimes reduces the work of personnel to a repetitious, boring process that increases the likelihood of errors.

The best systems are those that eliminate boring, repetitive, error prone tasks and then enrich the job to keep the employee engaged and bring the satisfaction that comes from contributing to the organization.

We must recognize, however, that as long as we humans are part of the process, we will find a way to make an error!

Only a handful of people knew it at the time and I suspect none of them could have envisioned the impact on our society.

Actually, this is a familiar theme.

Image via Wikipedia

Who could have foreseen the iPhone when Jack Kilby conceived and built the world’s first semiconductor chip, or “microchip,” in his lab at Texas Instruments Inc. in 1958.  Or predicted the transcontinental railroad in 1663 when Thomas Newcomen, an English blacksmith, invented the steam engine.

As I’ve heard many times in my career, “the only constant is change”.   Or, as my wife is apt to say, “life is change.”

Change is sometimes good … sometimes not so good, but regardless, it cannot be avoided.

So, as we look toward life after the recession of 2008-2009 we as entrepreneurs should be looking for technical, tactical, strategic, stylistic and managerial changes that we can adopt to improve our businesses.

In fact, if your business is slow, now may be an excellent time to evaluate your strategy, processes, procedures, assumptions and the software and technology that supports your business.  Sometimes beneficial changes are delayed because “we’re just too busy to make changes …”  Most small businesses don’t have that excuse at the moment.

As my wife will tell you, “life is change.”

Regardless the current overwhelming forecast of the economists that study these things is that we are coming to the end of the recession and, although recovery will be slow, we will be seeing incremental improvement in the coming months.

In order to plan for this recovery I suggest that it is a good time to be studying your inventory investment to see where you get the best return and where you should be planning to invest.

The Inventory Analysis Calculator is a tool that will assist in making decisions on where you have money buried and where you may make strategic decisions that will increase better service to your customers and reduce the investment in your inventory even as you build up for the end of the recession.

Turn non-performing inventory into cash

Social Media

Social media is a term describing the tools and services that enable collaboration by users that share a similar interest or are connected in some way. According to a September 2008 study conducted by Opinion Research Corporation for Cone, nearly six out of 10 Americans who use social media interact with companies on social media websites.  The researchers found 85% of social media users thought companies should interact with their consumers through social media, at least when needed.

Yet many companies have been reluctant to adopt social media marketing.   No matter what industry or what size of company, social media provides a tremendous opportunity for businesses to connect with their customers in ways they have never been able to do before.

Social Media Marketing

Social media marketing does not replace traditional marketing; it is simply added to the online and offline tactical elements of the marketing mix.   Social media marketing differs from traditional marketing in many ways:

• Traditional online and offline marketing is mostly outbound  marketing with carefully crafted messages targeting specific demographic groups. Campaigns are measured in impressions or conversions.

• Social media marketing consists of two-way communication, with information shared between individuals. The goal is to listen, learn, create relationships, interact and achieve trusted advisor status.

Getting Started

While there are hundreds of social media sites, LinkedIn, Facebook and Twitter provide a good place to begin interacting with some of the millions of users already socializing there.

LinkedIn provides a great environment for business networking. Encourage your employees to create a professional profile that summarizes their accomplishments and provides insight into their current role in your business.  Each time business cards are exchanged, be sure and “link” with the new contacts. LinkedIn Groups also provide an opportunity for meeting and conversing with individuals in your industry.

Facebook enables businesses to create a Facebook business page.  At the sign up page, choose the link that says “To create a page for a celebrity, band or business, click here.” This creates an account for posting information about your business and provides the ability to engage with “fans.” A couple of examples of businesses maximizing this opportunity: Intuit, Coca-Cola, and Xbox.

Twitter is a powerful tool for connecting with customers and influencers.  Create an account, customize your page and description, begin following people, listen, learn the lingo and then begin to interact. When people follow you - show them you are interested in them as well and follow them back. The key to Twitter content is to mix it up - comment on others’ tweets, share industry news and information, re-tweet or RT interesting tweets, and then add in occasional information on your business. WeFollow is a great directory for locating like-minded tweeters and of course, be sure and look us up on Twitter - we have an account for this blog, http://twitter.com/InventoryMgmt and as ACCTivate! at http://twitter.com/acctivate.

In the summer of 1975, I was asked to go to South Africa and introduce an earlier wholesale distribution software product that we had developed with the encouragement of Singer Business Machines.  It was named Stars and we had successfully marketed it in the US, Europe and Australia in 4 languages (arguably 5 if you’ve heard the Aussies speak … 6 if you count Texans).

I agreed to the visit knowing absolutely nothing about the geography, history, business climate or culture of the country.  I don’t think I’d ever even heard the term “Apartheid.”

So, I kissed my wife and our 4 month old baby goodbye and flew off to Africa for a month.  I stopped in Nairobi to for an overnight visit with my wife’s college roommate and her husband, then off to Johannesburg.

I expected a jungle and grass huts with a few British colonial homes and buildings scattered around.  Imagine my surprise when we approached the airport … row after row of large homes separated by tennis courts and swimming pools.

I primarily worked with British ex-pats and held classes for a couple of weeks in a resort which bordered Kruger Park.  It was there that I began a long friendship with Tom Woodhill who was the local managing director and one of the best salesman I’ve ever known … in spite of the fact that he was British.  After three weeks he convinced me to go back to Texas, gather my wife and daughter and bring them to Johannesburg for a full year.

During that year I got to know South Africa as well as a Texan could.  I came to understand that Apartheid, even with its common roots in prejudice and greed, was very different than slavery in the American south.  That the embargo forced on the country by the industrialized nations had the unintended result of creating a strong, entrepreneurial business climate.  I witnessed unthinkable mistreatment of the majority “Non-European” population. 

But I also saw the beginnings of change:  the promotion of a Bantu driver to become a company bookkeeper, the first showing of the movie “Guess Who’s Coming to Dinner” to a mixed audience and the start of the activism that finally lead to the dismantling of the legislated class system that was at the heart of Apartheid.

In a few weeks I am scheduled to visit Johannesburg again to assist with the introduction of ACCTivate!  I am looking forward to seeing the new South Africa and once again working with the kind of entrepreneurs I met there … who knows, I may even run into some old friends.

~ Ron Souder is the Founder, President and CEO of Alterity, the makers of ACCTivate!  Under his leadership, Alterity has experienced significant growth and developed numerous software products for small and medium-sized businesses around the globe. With over 30 years experience in developing software products, Ron leads the Alterity team with both vision and a deep understanding of the practical needs of growing businesses. 

* “It’s déjà-vu all over again!”  Yogi Berra 

For the most part, these are not companies staffed by people with activist approaches.  They are companies that have recognized the commercial and competitive benefit of energy conservation and recycling.

A number of these companies have made a strategic decision to distribute green products and technology.  In some cases they have developed and manufactured these products, and in other cases they have responded to customer requests and have begun to stock ecologically friendly products in lieu of, or in addition to, more traditional ones. 

Examples of these companies include a paper distributor with a mission statement that includes…

“…We also know that schools, churches, childcare providers, and non-profit organizations want to help support the community with actions and not just slogans. That’s why we became the first supply company to go carbon-neutral. We’ve gone beyond that by planting trees for every order over $100. Our initiatives will offset more greenhouse gases than we produce.”  - Thrifty Hound Paper Company

Another example is a shopping bag distributor who has customers that are requiring environmentally friendly bags…

“…decided that they would like to be active participants in caring for the environment and that meant using environmentally friendly bags. They chose a…message to the consumer of Health First Pharmacy’s dedication to the environment. Health First Pharmacy encourages their customers to reuse and recycle…”  - Bags, Inc. 

Two of our customers have focused on energy efficient products that are ecologically friendly. 

The company vision for one is:

“Our 10th Anniversary celebration is as much about the future as the past. In the past decade, we have been honored as an industry leader for manufacturing residential and commercial spray foam insulation that is effective, cost-efficient and environmentally friendly. We pioneered Green insulation products made of renewable resources such as soy and recycled plastics.” - Demilec USA

and another’s vision and mission states:

“Vision: To reduce the world’s dependence on fossil fuels while reducing the carbon footprint.”

“Mission: To develop and to manufacture chemically modified naturally occurring products; market cost-effective, environmentally responsible, sustainable technical solutions that meet or exceed traditional performance standards.”
- BioBased Technologies

Other companies are living green by choice of office and warehousing facilities.  Industry Week recently carried an article on this trend.

“Environmental concerns, along with the traditional concerns of cost and service, are leading manufacturers to rethink their distribution networks.”

Martin’s Logistics Blog on March 3, 2009 discussed the topic “Green Warehouse Strikes Gold,” summing up the opportunity that…

“New warehouses are being built with the environment in mind.”
 

Inventory Management Today is an inventory management and business blog
published by Alterity, Inc., the makers of ACCTivate! 

 -          Harvard Business Review: Editor’s Blog, June 2008

“Companies that delay investments [in current strategy] may forego significant growth opportunities when uncertainty subsides and the economy recovers.”-          The McKinsey Quarterly, December 2008

“Stay on course… To chart a course to success in this economic climate, marketers must be confident that their brand compasses are accurate and their goals are clear… Don’t jeopardize your long-term brand strategy when adjusting to the new reality.  When the clouds clear, you need to be ready to compete.
- American Marketing Association: Marketing News, February 2009

At a recent meeting given by the United Way, I was impressed about how the above quotes from the presentation applied to our business. Too much prudence in the current economy may be a miscalculation.  Although the situation in the economy is dreary there are areas of light. 

To be sure this may be the exact time to tighten up your operations and to focus more clearly on the long term strategy - products, customers, suppliers, employee training and so forth.  In order to get the most take a hard look at your systems and procedures to ensure that you can be at top form as the economy brightens and the clouds clear.

Let’s consider your inventory records.  Would some of your information be of value to the competition?  How about how much you pay your vendors for your products?  What is your gross profit margin?  What volume are you doing with products that are competitive with his?

Surely it is a good thing that we have advanced and have developed this kind of information and made it available on an instantaneous basis.  This is, however, for your own use, not the competition!

So for all the advances that we have made in keeping good and accurate records, we must insure the proper security in order for this not to be a gift to outsiders.  If you haven’t done so already, consult with your IT specialist, read some security information such as Cyber Security standards in Wikipedia and Cyber Security Tips from the U.S. Government .  

You don’t have to become an expert but you should become comfortable that whoever is knocking at your door, you will only let them in with proper security.

In today’s world, however, there are solutions for small business that are not any of the above if appropriately implemented.  EDI is the magic that seems to come from the big guys and be pushed on many small suppliers without previous technical experience and a feeling that they are looking into the abyss.

First let’s define EDI - Electronic Document Interchange. It is a method by which standard documents may be exchanged between customer and vendor that has a lot of new nomenclature and standard names.  It is, however, highly implementable by even very small companies that wish to do business with the Big Box retailers who absolutely require their vendors to accept EDI documents.  The Big Box retailers are determined to squeeze every drop of overhead expense out of their order processing.  EDI allows them to do that.

Many small distributors are now doing business with these Big Box retailers and processing successfully using total EDI from PO to shipment to invoicing.  Fulcrum Products of Portland, Oregon, a distributor of lighting products such as book lights, flashlights alarm clocks, has four vendors processing EDI transactions.  Jody Brooks, the Operations Manager, says that EDI has greatly expedited the fulfillment particularly with their high volume customers.

BECCA Cosmetics of San Francisco sells high-end cosmetics to a variety of prestigious chains, including one in Australia and one in Canada. Mingyu Fang, General Manager, says that EDI has been very successful for them and it has been integrated into their total business management system.  She says that when EDI is done right, it is well worth it.

Both of these companies are relatively small and have been able to profitably implement an EDI system as part of their standard business practice.  They are playing with the Big Boys and doing well with it.

Identified key findings include:

clipped from www.distributiontrends.com

• The wholesaler-distributors in our sample spend one to two percent of their annual revenues on hardware and software per year. Almost 40 percent spend more than $250,000 per year, while the largest companies spending more than $1 million annually.
• Technology spending by distributors will remain solid in 2009. A majority of companies plan to increase spending in 2009. Smaller distributors are investing to catch up to larger companies. Web-ordering will see the greatest increase in usage in 2009.
  
• Surprisingly, many distributors lack the ability to track important customer-level performance metrics. Only four out of ten wholesaler-distributors can accurately track Operating Profit by Customer. One-third of wholesaler-distributors that offer fee-based services can’t even track the profitability of their services!

The report is available for free download on Dr. Fein’s blog, Distribution Trends.