In my first book “Points of Productivity; Turning Corporate Pain to Gain” I discussed the concept of a high availability order processing station as designed by a CEO at a large electrical distributor. Basically the idea was to allow distributors of certain products to share information and inventory by connecting their ERP systems. Once implemented, members of the “consortium” could share visibility of available-to-sell inventory in other geographic and non-competitive regions of the country. That would potentially allow each distributor to fill local orders even if another like distributor needed to drop ship the order to the customer site. Clearly distributors have always worked towards the highest service levels while maintaining adequate but not excessive and expensive inventories. It was a forward-thinking concept and one that had gained momentum with the group of distributors the CEO belonged to.
Not so long ago I had the opportunity to meet with that creative executive over lunch. The idea was to get an update on how the concept had worked for him and his colleagues.
At this point I have his permission to identify that CEO is my good friend Jack Lawson, now retired President of Electrical Equipment Corporation here in Richmond. As always the conversation was pleasant and informative. But I was surprised to find that the order processing scenario described in my book had never come to fruition. However, it was not due to the failings of technology. In fact, Jack is a former Chief Information Officer (CIO) and he and his colleagues had implemented state of the art computers and software. Under his direction the very best in technology and communications equipment and methodologies were readily available. Read on for the real culprit.
Initially Jack and his fellow distributors of various electrical products had formed the consortium to pursue mutual interests, one of which was shared inventory concepts, partly described above. They also had the idea that they needed to band together to “fight” the trend towards e-commerce, more precisely internet purchasing.
Exacerbating the situation and one of the factors that ultimately undermined the idealized “high availability order processing” scenario was that all of this occurred during the period of time I discussed in another blog/posting when manufacturers had pursued disintermediation. At that point in time, between the manufacturers trying to end run their own distributors using direct representatives and others selling to end users via web sites, traditional distributors (as previously mentioned) were running scared.
So inward focus and even self-preservation became prime directives. While the distributors continued to work together on certain common issues, the true sharing of inventory became unrealistic. Understandable, but a pity none-the-less. It was leading edge thinking in the national and global supply chain. But the moral of this story is that, as often is the case, it is the human aspect of interaction with and utilization of technology that was the weak link. I suspect given enough time one might find other types of organizations who have made this concept work. Kudos to Jack for conceiving and sharing the concept and my thanks for allowing me to share the story.
