August, 2005

Evolution of the Wired Dealer

A look at the technology tools that are driving efficiency, productivity and bigger bottom lines for today’s lumber/building material dealer.

By Dan Emerson

The scientists and engineers who develop innovations in information technology often view their work as revolutionary. However, putting new IT tools to work in the real world is more often a process of evolution.

For LBM dealers, the short-list of basic functions may not have changed much over time: order-entry and tracking, inventory control, purchasing, accounts receivable, accounts payable, general ledger and financial reporting, production management, sales- and cost-trend analysis and e-commerce. At each step in the retail supply-chain, though, the real complexity resides in the layers of underlying sub-categories, those layers IT wonks are referring to when they use buzz-phrases like "vertical integration” and "flow.”

Fortunately, as the day-to-day data-management needs of business have become more and more complex, the state of IT architecture has taken a quantum leap forward. As the computing power of PCs has increased, ERP software designers have been able to build in more sophisticated "business logic” more advanced functionality and more speed.

Customization is Key

As ERP software has evolved and improved, the cookie-cutter products that were the norm in the early days of the PC Age have become obsolete. Every business has its own, specific information-handling needs. Realm Logic’s new webFLOW dispatching software is an example of a product designed to be configured to meet each retailer’s requirements, according to RL President Dave Smart.

"WebFLOW allows an LBM customer to define what their steps in the process are, and ‘beginning’ and ‘ending’ status for each of those steps; they can customize it to their own production needs, and then we set it up. For instance, for truss-assembly, one customer uses (the software) to track who the designer is, when he started the job, and when he completed the takeoff on the design. At another step they can track how long it takes to pull all of the material to build it; then, when that’s done, the sawyer checks back in to verify that he pulled everything. The sawyer cuts everything for the order, then scans it back in. The assembler goes through the same process, inspecting, tagging and staging the order... it’s set-up so anyone can check the customer information at any stage and find out the current status of the transaction,” Smart says.

Once the delivery stage is reached, "if you’re doing centralized dispatching, with three truss yards and a couple of delivery yards on the lumber side (for example), you can thread all of those work flows together. As you are going through the process, at any one of those given steps you can have the system send an automated e-mail notification to the customer, salesperson, manager, or whoever else you want to notify.”

"The unique thing about our system is that the customer is the one who tells us what they want to call each of those steps and statuses, and how they want the system to react,” Smart adds.

Cal German, president of Omaha-based DMSi Software, cites another industry trend that has raised the bar for LBM customer service: the new dominance of big-box retailers, "who have taken over most of the consumer business, which was once a pretty significant component of just about every lumber dealer out there.

As a result, many of the independent dealers who are thriving today have chosen to focus even more specifically on professional customers who require a higher level of service. In doing so, many of those dealers have transformed themselves into a business model that resembles a distributor more than a retailer,” German points out. "They’re certainly doing more logistical, inventory, delivery and transaction management for their customers.”

Tracking the Action

Near the top of any LBM dealer’s wish-list is having the desktop ability to track customer orders and deliveries in real-time.

Scheduling and tracking about 400 deliveries per day is a daunting task, but Albuquerque, N.M.-based Lumber Inc., does it with the help of Realm Logic software, according to Operations Manager Mike Jones. "None of those deliveries are scheduled; they’re just reactive,” he notes. "What we want to do is start using it to schedule equipment for manufacturing and producing orders, looking ahead one or two weeks.” Getting set up to accomplish that will be mainly a matter of "training the people who want to use the software.” Fortunately, the system is "very user-friendly,” Jones says. "Even our salespeople can arrange information on their screens the way they want it – sales per customer, per day, by salesperson...however they want to break it down.”

"It also lets our operations people see what’s going on in the different yards (Lumber Inc. has six locations), so they can make equipment or personnel changes as needed, on a daily basis. If we need an extra truck at the Rio Rancho yard, the system lets the people with authority know, and puts the information right on their desktop for them. Before, it would be a matter of tracking down the person who had that information, who was often not available when needed.”

Brown Lumber Co. of Traverse City, Mich. has been using Realm Logic’s webDISPATCH module since January and "we’re still tweaking it,” according to Systems Administrator Andrew Schalge, "We make 40% of our deliveries on the same day they’re ordered, and this is a great tool that allows us to function at the speed of business,” Schalge says. "Using the information, our dispatcher can properly schedule loads to be built and the trucks to build them on. Our salesmen are able to tell what trucks will be available to make deliveries before they make promises to the customers. They can print orders and have all the information at their fingertips.”

Plus, the amount of time Brown Lumber’s employees spend on the phone checking on the status of orders "is slowly coming down,” Schalge reports. "Lumberyards tend not to change as quickly as they could; we’re trying to deprogram people from picking up the phone and calling dispatch every time they have a question.”

Still, Brown Lumber is not using the software’s full, efficiency-improving potential, according to Schalge. The next feature slated for adoption is one that allows customers to e-mail to check on order status. "And there are other aspects we have not scratched the surface on.” One is an option to calculate fuel costs based on the weight of delivery loads – which could be particularly valuable in an age of skyrocketing fuel costs.

Delivering Efficiency

Florida-based Dunn Lumber uses order and delivery-tracking software developed by Round Rock, Texas-based DQ Technologies to manage its eight locations (three dispatching) and fleet of 28 delivery trucks, which cover a 60-mile radius in eastern Florida, according to IT Manager Alexander Bingham.

"The most useful feature is being able to look at a screen and tell which orders have to go out and which ones have to come in and their status.” It’s a big improvement over the old, paper system, he notes. "The ‘paper’ isn’t always correct. This way, the information is always up-to-date.” Dunn is just starting to use additional reporting features such as calculating the number of loads each ‘loader’ handles in a day "so we can know if we have too many people, or not enough.” Using GPS to track truck locations and assign the closest one to each delivery location is also "very helpful,” Bingham reports. "We’re also hoping to use the photo ‘proof-of-delivery’ feature when it becomes available, and we’re looking forward to having e-mail customer-notification.”

DQ is continuing to update and enhance its popular LBM software, says CEO Wayne Merritt. In August, DQ plans to release its latest enhancement to its delivery-tracking product: a "signature capture” proof-of-delivery feature using a Palm Pilot or similar handheld device that will "associate the signature with an order or invoice number, and download it into your data base,” Merritt says. "Any time you need to, you can call that up and show who signed for it.” DQ will also offer a small, digital camera add-on, to provide photographic proof-of-delivery.

The Pricing Rollercoaster

ERP software also helps LBM dealers manage another daily challenge: keeping tabs on the bottom-line impact of fluctuating prices for lumber and other commodities. The ability to check on recent and current price trends has proven one of the valuable functions of DMSi’s software, according to Tom Christensen, president of Fremont, Neb.-based Christensen Lumber. "If we want to negotiate with a customer we can determine which direction costs are going in, and what our replacement costs will be.”

Sometimes dealers need data reporting capabilities that are not included in standard system menus. That’s when "custom-built” reporting comes in handy, says Christensen. For Christensen Lumber, DMSi developed the ability to analyze sales by customer and by salesperson, using the data that was already organized under "parent” customer accounts.

Cost-based pricing is also one of the functions of a plug-in CRM module Vancouver-based Progressive Solutions introduced earlier this year to enhance its popular bisTrack software. Along with the ability to track all costs related to inventory buying and internal operations, bisTrack offers a pricing management or "negotiation” screen enabling sales people to quickly make real-time margin calculations. "The industry is based on managing margins and revenues, so we’re constantly building new things to help them do that,” says Marketing Director Geoff Douglas.

LBM software makers have also made it much easier for dealers and their sales people to quickly and accurately estimate custom projects.

Design in Three Dimensions

Pat Hegseth, sales manager for St. Paul, Minn.-based Lambert Yards, Inc., uses Seljax Int’l, Inc.’s estimating and 3-D design software. He particularly appreciates "being able to do custom projects and create 3-D images tied right to our POS system, so it doesn’t have to be entered manually. We’ve use other systems in the past, but after we created (projects) we’d have to go back and do the work of manually entering item by item — which opens the opportunity for more human error.”

The Menards of the world have similar estimating systems, but those are a little more ‘cookie-cutter,’ Hegseth says. "This allows you to do more customization.”

Edmonton, Canada-based Seljax recently introduced a new Package Sales program to make it easier for dealers to sell packages for projects such as sheds, decks, garages and fences. Using a database of more than 400 ready-to-go projects, Package Sales allows the salesperson to combine that with the dealer’s existing inventory information, according to Seljax President and CEO Rob Bjornsson. Starting with a base package, he or she can add options such as vinyl siding, metal sheathing, asphalt shingles and more. Other packages are available for yard projects, garden projects and farm projects.

Meanwhile, Seljax’ 3-D deck design program "has been a big hit,” Bjornsson reports, with simplicity of design a major factor in the product’s success. "It’s specifically designed to be as easy to use as possible, so anyone can use it,” Bjornsson notes. The company has incorporated users’ suggestions to further enhance the software in the roughly six years it’s been available.

The Virtual Showroom

During the ‘90s, as the Internet became an essential business tool, the growth of online retailing didn’t quite live up to initial predictions. But software vendors and LBM dealers are gradually narrowing the gap between potential and reality.

For the past two years, eShowroom, a customized, "virtual showroom”, has been a useful tool for Curtis Lumber of Ballston Spa, N.Y., according to Jennifer Stickney, a Curtis advertising assistant. Developed by Remodeling News, Inc., the eShowroom search engine allows customers to log on and view listings of all the products a dealer sells. Clicking on a product takes the user to the manufacturer/vendor’s website for detailed information; the site visitor can download and print brochures and other material.

The eShowroom tool is also very helpful to Curtis Lumber’s retail employees, according to Stickney.

"A customer might be interested in a special kind of product we don’t stock. If the salesperson isn’t familiar with it, they can find it on the website, print out the information and find out how to order it. We have a huge special-order department and can get pretty much anything a customer wants.” Customers can also access eShowroom through in-store, touch-screen kiosks. The vendor provides 24/7 site maintenance and monitoring for Curtis, which recently launched a new website in connection with its acquisition of central New York state‘s Webb and Sons hardware stores.

A useful tool to assess web-site effectiveness is a monthly report sent to each eShowroom retailer tallying the number of visitors, and showing how many of those prospects downloaded brochures. "We had more than 2,500 visitors to our site in April, and each of those either browsed or printed out brochures,” Stickney reports. More than 8,000 visitors have logged on to Curtis’ eShowroom since its inception.

Not One-Size-Fits-All

Regardless of how sophisticated, adaptable and user-friendly technology tools may become, integrating new software and hardware into daily operations remains a perennial challenge in any business setting. While LBM large dealers with multiple locations often have a designated IT person on-staff, that’s usually not the case among smaller dealers. Recognizing that adopting new technology is often more of a challenge for small businesses, Livermore, Calif.-based Activant Solutions has developed "multiple product lines targeted for different types of LBM businesses,” according to Cary Anderson, senior director of LBM development.

Activant developed its Eagle for Windows software to meet the needs of smaller lumberyards (doing less than $20 million a year in sales). Onboard training videos are included in the package, along with employee training modules. Staff can complete the on-line training and then measure their skills by taking an e-test.

In contrast, Activant’s Falcon business-management system is designed for use by owners and managers of larger businesses "who need to get more usage out of the system and want quick access to enterprise-wide information, right on the desktop,” Anderson explains. Last year, Activant added new modules designed to integrate with its Falcon and Eagle packages, including one that guides dealers in setting up and tracking an installed-sales business. It also enhanced its inventory management module to provide more detailed customer-trend info and activity reporting.

Earlier this year, Activant made news by acquiring Montreal-based Speedware Corp. and its subsidiaries; one of those subsidiaries was Activant’s primary competitior in the LBM space: North Carolina-based Enterprise Computer Systems (ECS).

For Activant software customers, Anderson says the main significance of the acquisition will be the ability to further enhance Falcon, his company’s flagship product. Activant will be adding certain "best of breed” aspects of ECS Pro, which has been that firm’s equivalent product.

Real People, Real Feedback

The business people who use ERP software can play a role in helping vendors develop more effective tools. In today’s business world, most companies use customer feedback to improve, but few take it as seriously or use it as effectively as software manufacturers. User-group meetings have become a standard tool to solicit ideas for new features, products or improvements. "We’re a big believer in user groups,” says Progressive Solutions’Douglas. "Our users vote on what the priorities and ranking are of all the ideas, and have lengthy roundtable discussions. Between annual meetings there is dialogue going back and forth between us and our executive committee members.”

Customer feedback was also a factor in Progressive’s recent addition of a lien-management capability to its accounts receivable system. In doing so, the company was responding to "a number of our customers who said they wanted to be able to track liens,” Douglas says.

From an IT perspective, early adoption has not been a distinguishing trait of the LBM industry. Getting up to speed on new technology "can be a challenge, since many of those who work in the building-materials industry are not trained tech people,” Activants’ Anderson admits.

Realm Logic’s Smart agrees. "Even fax machines took a while. Now, using e-mail has become more prevalent, and it’s evolving.”

Rob Vomund, Activant’s LBM segment manager, notes one trend that has helped accelerate that evolutionary process: the influx of sons and daughters of owners who tend to be much more tech-savvy than their parents and older co-workers. The more we can make using software a matter of ‘point and click,’ the easier it is to learn and train other people to use it.”

It’s not uncommon, Activant’s Anderson says, for his company to hear from LBM customers requesting a feature that’s already in their software, "but they hadn’t discovered, yet.” Keeping customers current with software is one of the primary functions of the company’s annual Pinnacle users’ conference. In the software business, "you want to be able to get with customers at least once a year to make sure they are getting the utmost use out of the software they have.

Often, it’s not until they have a specific business need that companies will investigate whether software will perform a certain function,” Anderson notes. "There’s a lot of adapting left to be done in the industry; fortunately, we see it happening faster than it was in the past.”