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ERP Journey: Setting Sail Aboard a Ship of ERP Vendor Goodwill

Even more than solid infrastructure, strong vendor relationships have created smoother business processes.

Ten years ago, our company's owner, Bob Lemman, sponsored an evening cruise around Puget Sound for our electrical vendors. It was a balmy summer night, and the sun was just setting as we returned to the dock. Afterward, one of our largest vendors thanked us for a terrific evening. "This is the first time a distributor has ever put on anything like this for vendors," he said. "Treating vendors like partners is good business," Bob told me later.

As the role of IT continues to grow, so does the importance of our relationships with our IT vendors. We put our goodwill to work for our partners by opening our doors and providing them access to our experts to answer their questions. Good vendor relations help minimize expenses, lower inventory levels and support our customer service targets.

Frictionless Business Processes

Our new ERP system gives us tools to reduce transaction costs, improve inventory management and help ensure that we buy the right amount of the right products. For every automated purchasing cycle (from order to receipt to payment), we save $50. For every error avoided, we can double that amount. Much of our savings results from using the vendor-managed inventory module. Each night we send vendors a record of what we sold. Their systems create purchase orders, tell us when a product is shipping, then follow up with an electronic invoice. Our labor cost is reduced to physical receipt and payment approval. Our new system has made purchasing a frictionless activity.

Calculating what and how much to buy is more accurate with the new system as well. While we won't see major results for a few months, distributors like us have reduced inventory levels by 15% or more through statistical trending.

Improving our stocking levels also reduces customer back orders and lost sales. Having a product in stock prevents customers' electrical crews from waiting around idly for a reel of wire. Preventing stock excess is also important. It's a fool's bargain to have crews lose $100 an hour while we save 3 cents a foot on stock-carrying charges for 14-gauge wire.

The new system has also enabled new solutions to classic distribution problems. For example, vendors offer onetime pricing considerations for the duration of large projects. In the past, distributors had to reconstruct each transaction postmortem. Sharing our real-time sales information has made reconstruction a thing of the past.

The search capabilities of Google have also raised expectations; customers want more options. To accommodate customers, we've not only revamped existing vendor relations but also gotten ready for new ones. Now customers ask if we can provide nonelectrical products like cell phone batteries. It's a plus for us to be able to say, "You bet!" And all these improvements are possible because we are graying the line between us and our vendors.

By this time next year, we will likely have another hundred vendors as partners. IT must be flexible enough to integrate them into our ERP system, all while accommodating new governmental requirements and electronic standards.

So we must be nimble and do in days what used to take weeks. The architecture and the tools are there, even if our current system can't yet meet all these challenges. Hitting the curveballs depends less on technology than it does on relationships. Like our electrical vendors who enjoyed that evening cruise, we have built a partnership with our ERP vendor on trust and goodwill. The rest is just bits and bytes.

The journey's end: Looking back, lessons learned.

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