The right business system software can make a company more efficient, productive and profitable. Getting the one that’s right for your business requires careful evaluation and a commitment from the owner on down.
A company equipped with the right business system software can improve in nearly every aspect of its operation.
Business systems generally support all areas of an aftermarket company – accounting, billing, parts inventory, service, payroll, etc. “Basically everything the distributor needs to run his business,” says John Lebel, chief technology officer for Karmak, Inc.
Only one-third to half of heavy-duty parts distributors are using a company-wide business system, according to estimates from business system providers. Those who are not range in their level of sophistication and automation. Kenny Nau, director of sales for PLUSS Corporation, says he recently talked to a $5-million company that was hand writing everything.
Duff Bell, software applications specialist for Karmak, Inc., says, “There are a lot of people out there running QuickBooks or trying to run off an old system [from a company] that might even be out of business. Every single day I come across a little in-house system, and it doesn’t even have to be at a small company. Just yesterday I was talking with an eight location parts house that does almost $10 million a year in parts sales and they use a homegrown little system. A local guy wrote the software and a local guy still supports it.”
Considering the importance of a business system – if it goes down, the company can literally shut down – it can be a risky proposition to rely on a single person or a smaller supplier to support it.
“The danger business owners run into is they’re kind of at the mercy of that supplier,” says Lebel. “If something happens to that supplier, then they can have trouble with their system. The same thing is true of an in-house developed system. For instance, if they have a small IT staff that’s doing their development work for them, in a lot of cases what happens is you get one guy who’s the expert on the system and if he ever leaves then they’re kind of struggling with that system again.”
A good business software provider is also a business consultant.
“It’s one thing to have a good, quality business system, but it’s also a good thing to understand business. It’s imperative,” says Nau. “For us, we’re a business management company and those are the types of things we provide people along with the system – the knowledge to stay competitive, viable – using the system as a toolbox.”
Many companies are using off-the-shelf products with functionality specific to areas of their business such as Intuit’s QuickBooks for accounting.
While most business systems can be integrated with those programs, companies will experience greater efficiencies by getting rid of the old programs and fully adopting the new software. “You put in a system that’s highly integrated and all of a sudden the accounting department is setting credit limits on [risky] customers and the salesmen don’t like it because they’ve been used to getting their orders processed,” says Lou Stover, vice president of marketing for DST, Inc. “With the old system, they just ran them through, right? Now all of a sudden because it’s all integrated and the departments have to talk to each other.” As a result, risk is mitigated through tighter ordering and credit controls.
FIND A FIT
Most distributors who have gone through a review process to find a business systems provider will advise other distributors to find one that specializes in the heavy-duty aftermarket industry, or at least has extensive experience in it. It is too critical of a business decision to be a guinea pig for a company that does not know the nuances of the industry.
For instance, managing cores can be a complex operation and there is no parallel to it in other industries.
Business systems integrate data and operations from throughout the company, giving managers access to critical information with a few keystrokes.There are also pricing strategies that are fairly specific to heavy-duty aftermarket distribution. According to Darryl Padgett, software consultant for PLUSS Corporation, they can automate customized pricing structures. For instance, a business can set prices with expiration dates to tie-in with sales and promotions, differentiate prices between products sold over the counter and those sold to the service department, and set preferred prices for specific customers.
Padgett says another example is velocity pricing. “We’re doing that more and more often. We have built provisions in the software program for that. It’s one strategy where a company may have X amount of sales of a particular line, and maybe they have a list of the top five or 10 numbers that everybody [the competition] sells, it’s very competitive. They have to be competitive on those 10 numbers, but they need to make it up somewhere, right? Because you do have a bottom line that you have to average on gross margin. We’ve created a utility within the program that will handle that velocity pricing so you can price those top 10 products at a certain price and keep it competitive, and also maintain those margins on the remaining products so you can achieve higher margins overall on average. It’s unique to this industry – very unique.”
Stover says the first consideration in choosing a business system is considering the business itself. It is not simply an IT choice. Since every aspect of the company will be affected, the owner and top managers should be involved in the evaluation and implementation.
“Figure out where business is good and where it needs to go, and make your system support your business today and in the future,” says Stover. “I think what not to
do is to turn the search and decision over to an IT person because they might make it based on their own expertise, such as ‘well, I’m good at Unix so I’ll buy a Unix-based system.’ But that might not be the best thing for the business.”
Padgett recommends considering three criteria:
1. Is it easy to learn?
2. Does it meet the needs of my business?
3. Will it grow with me?
Bell says they perform site surveys during the evaluation process to work out the best solution.
“We literally walk around their building. We find out if they have PCs or do they still have the old dumb terminals,” he says. “What kind of printers do they run? Literally, what does their building look like? We make drawings of their building and then we submit that information to a committee that we have at Karmak. Do we have the right software for the right application? Do we have enough trainers lined up to come out and help them? They may have a front parts counter and a back parts counter to help their service shop, and they might be in two different buildings.
“We try and go through quite a process not only to qualify them but also to find what products we have that are going to help them.”
PRACTICAL CONSIDERATIONS
Typically, business system software can either be purchased or leased. One advantage of leasing is updates are usually included in the monthly lease price. Providers also may require a monthly maintenance fee and this will usually include software updates as well as technical support.
Costs for installing a system can range widely depending on the size of the business, number of locations, number of employees using the system, complexity of the business and what software functions are to be included, such as bar-code scanning or core management.
According to Nau, if a company just wants basic point-of-sale and inventory management “they can get into that for less than $100 a month very easily, with support and updates included.”
On the other end of the spectrum, larger companies with multiple locations can invest upward to six figures.
But the rewards can recoup the costs. By eliminating redundancies and automating processes, the amount of manpower formerly needed for certain functions can be cut in half, allowing a company to re-allocate resources or lower head count.
Nau says shops using software that tracks technicians’ time on average realize a 20 to 35 percent increase in billable hours.
Software systems also can be setup to help drive business, for instance automatically sending out preventive maintenance reminders to customers.
On the inventory management side, distributors can improve inventory turns and reduce out-of-stock scenarios.
“The biggest advantage is everything is integrated,” Lebel says. “Let’s say you have a specialized inventory system for truck parts but then you use an off-the-shelf accounting system. Then there’s got to be some sort of way to get the data to flow between the two systems and that doesn’t always work really well. In a worst case scenario, somebody would have to re-enter a sale or receipt into the accounting system, which is redundant.”
In addition to evaluating the software, you need to evaluate your IT infrastructure. You don’t necessarily need the latest and greatest hardware, but typically things will run smoother the more current you are.
“Integration is one of the toughest jobs you could have in IT. Especially if they’re on different platforms,” says Stover. “If you’ve got Unix talking to PCs, for example, that might be a little challenging.”
Generally all business system software will be compatible with PCs running Windows operating systems. If you’ve upgraded your computer hardware within the last three to five years, you should be adequately equipped to support the majority of business systems. If you have older equipment, say a dot-matrix printer that has been in the shop for a decade or more, you may save money by spending money. Investing $200 for a new printer can avoid the cost of making the old printer communicate and work with the business system.
Stover also recommends getting the fastest Internet connection available. Not only will that make access to Web-based resources – such as parts catalogs, service information and training materials – easier, it will also facilitate e-Commerce initiatives. “e-Commerce is the thing that I would be thinking about the most,” says Stover. “Make it easier for customers to find you … the Internet is a great way to be found.”
MAKING THE COMMITMENT
Installing a business system for the first time or going from one business system to another is a decision that should not be taken lightly.
“It’s very, very painful,” says Stover. “It’s the most painful when companies haven’t defined what they’re trying to get out of it. But I think there’s a fallacy also in just assuming because you’ve got a system that that’s what you should stay with. The old ‘if it’s not broken, leave it alone’ is not the right answer either. Today’s systems need to be able to take advantage of the latest add-ons or the latest tools.”
Inventory management benefits from business systems include more accurate tracking, increased inventory turns and reduced out-of-stock scenarios.Adds Bell, “If you’re going to make this huge investment both dollar-wise and interruption to your business – changing business systems is an interruption – really do that due diligence. Visit the people you are buying that software from and make sure they really have a support staff to help you. And go watch it in action. How fast is it? How many keystrokes does it take for a guy to print a parts ticket? Is that going to fit your business model?”
Nau says selling employees on the benefits of the new system is essential to its success. People often don’t like change, particularly if they’ve been doing something a particular way for many years and are now forced to learn a new way of doing it. It can be frustrating and it’s up to management to make sure the learning curve isn’t too steep and that there is minimal disruption to business.
Stover says one of the most successful implementations she was ever involved in was when the owner of a fairly large aftermarket company sat through the entire more than day long implementation meeting. “The message he sent was ‘we’re spending a lot of money, this is very important and it is going to work. I will not tolerate failure.’ And it just went in as smoothly as you can imagine.”
Training is available from system providers and should be mandatory for top managers and department heads. Most companies take a train-the-trainer approach, and this can help minimize support calls and troubleshooting down the line.
Padgett says they approach training by focusing on five main areas: shop/service; parts management; point of sale/purchasing; bookkeeping; and management. “If you identify those five areas and who is involved with those five areas, then we focus our training on those five people,” he says.
Because the desired outcome is to do things the best way, and not necessarily improving the current way, some employees may bristle at changing procedures or adopting new operations.
“You don’t want to give somebody the inference that they’re a bad manager or they don’t know what they’re doing,” says Nau. “We help companies to benchmark…we look for the gray areas. It’s not what they tell us, but what they don’t tell us. Because they don’t tell us for one of two reasons: It’s too painful or they don’t know anything about it. We concentrate our efforts on bringing those things to light because whatever falls into those two areas is lost profit.”
Choosing a business system goes well beyond the realm of software and hardware. It literally means taking on a new way of doing business, usually throughout all aspects of your operation.
Do your homework and make sure that the commitment to the new system is firmly in place and that employees are properly trained and supported. There will be growing pains, but the end results – greater efficiency, productivity and profitability – can make it worthwhile. n
