What's a Distributor To Do?
MSI - Newsletter, July 15, 2002 - By Alex Anderson, Contributing Editor

With ERP geared toward companies that make stuff, where do companies that simply deliver product turn for enterprise management?

It’s generally accepted that all manufacturers are distributors of one kind or another. It doesn’t matter what they make, they must ship finished goods to their customers—and that process usually is managed by the enterprise resources planning (ERP) system. But not all distributors are manufacturers, and pure-play distributors have no need for all the materials planning elements and shop-floor control that manufacturers require in their systems.

"Most distributors are focused on execution rather than planning," says Gerry McNerney, an analyst with the Boston-based information technology consulting firm AMR Research. "Planning is an important variable for distributors, but they don’t need the robust planning functionality that a manufacturer requires." Therefore, McNerney adds, distributors are looking for systems that contain fewer modules—and sell for a lower price—than the typical ERP suite.

"We need a lot of insight into our historical data and inventory to maintain a high level of customer service," says Anthony Prossi, director of information systems at Ronkonkoma, N.Y.-based Rothco—an importer/exporter of military-style apparel and accessories to nearly 6,000 retail stores. "With that information, we can immediately tell a customer whether the item they want is in stock—and if not, when it will be. We don’t care what stage it’s at in production. We are more concerned about the finished good and when it will hit our warehouse."

Rothco uses software from Toronto-based Blinco Systems called 3rdwave, an ERP package that focuses on the tracking of inbound and outbound goods. Prior to deploying 3rdwave, Rothco used a proprietary legacy system, called Prod4, which didn't integrate its sales, inventory, and distribution systems.

"The old system was good at taking orders, but not at running the company from the top level," says Prossi. "We’d been growing consistently for 15 years and we knew that system wasn’t going to suffice."

This led Rothco to issue a request for proposal to which about 30 vendors responded. The majority didn’t get past the first hurdle.

"Both import and export had to be integrated," says Prossi. "We found that a lot of domestic vendors didn’t do that well. They partnered with third parties, or they would write it for us. I didn’t want to be a guinea pig for that part of the system. That cut it down to a few. Of those, Blinco wasn’t the cheapest, but it was the best integrated."

Inside Job

Blinco understands distribution because the company—launched in 1982 by brothers Ned and David Blinick—started out as an international food importing and distribution business. By 1988, the Blinick’s decided to develop a software system to manage their supply chain logistics. In 1994, they realized that the software business was a lot more profitable than the import/export business.

"We’re really a boutique custom-hybrid shop," says Blinco Vice President Ned Blinick. "Our focus is on providing a total system for companies that are involved in sourcing, distributing, and reconciling products."

Blinco Systems employs less than 15 people—including management, programmers, and implementation specialists—but despite that has managed to chalk up an impressive list of happy customers, such as the aforementioned Rothco, and Marysville, Ohio-based Honda Trading America Corp.

"We had concerns about their size," admits Prossi. "On the other hand, there were larger companies that couldn’t cater to our type of business the way Blinco could."

Adds McNerney, the AMR analyst, "[Blinco] has some people they’ve worked with who definitely give them high marks."

"There are so many vendors coming at this market from different directions," McNerney says. "The best choice of vendor depends on the individual distributor’s needs."

The SCE players grew out of warehouse management system (WMS) suppliers, and as such are strong on inventory control. McNerney believes these vendors will be attractive to companies that already have the basic ERP functionality—such as financials and order management—covered, but need more help in managing the supply chain.

The large ERP vendors, such as Oracle Corp., Redwood Shores, Calif., and SAP AG, Walldorf, Germany, have added distribution functionality to their suites. Specifically they’ve introduced transportation management systems (TMS) that include transport planning, international trade and logistics, and supply chain network design—all of which are critical elements for distributors. For the most part, these offerings are extensions of ERP suites—although most ERP vendors now claim to have modular architectures that allow their extensions to be deployed as stand-alone applications.

For related information, please go to:
3rdwave Retail
3rdwave Fashion
3rdwave CGD (for Consumer Goods Distributors)
Rothco Case Study