Given the frenetic pace of change in the world of technology, it can be difficult for a distributor to determine what will prove the best investment to strengthen his or her business. Is bar coding worth the time and expense? What about RFID? Are wireless networks really secure? What technologies will help distributors connect with both customers and suppliers? And what's Microsoft versus Linux?

Welding & Gases Today sat down with representatives from some of our industry's technology suppliers, and they answered all of these questions and more. They even made technology sound fun!

How are the technology needs of distributors changing?
Jim Broughton: Technology is an evolutionary process, and when we open the door to one thing, it opens up other doors for us that we didn't even know existed. We started looking at the Internet as a way for customers to have access to placing their own orders 24/7. But once we opened that door, the customers asked for other features, like access to purchasing history and invoices. Change begets change.

Jim McKenney: There is a lot of growth in the area of network capabilities. Some people are taking advantage of wireless connections, but as telecommunications costs continue to go down, people are replacing their frame connections with lower cost options, such as DSL or a private network over the Internet.

What other growth are you seeing?
Jim McKenney: At Computers Unlimited right now, we're seeing growth in mobile devices, both in the warehouse and in the field for sales and delivery.

Why?
Jim McKenney: Mobile devices offer productivity gains. There is no way that a cylinder's serial number can be recorded incorrectly when scanned by a handheld. It's faster and it involves only one person.

David Frea: Use of Internet-based systems to enhance communications remains on the forefront of new technologies. Virtual Private Networking (VPN) has reduced the cost of networking small branches into the distributor's computer systems, while Voice-over-Internet Protocol (VoIP) telephony allows inter-branch communication to be as simple and inexpensive as intercomming a co-worker's desk.

Jim Broughton: One of the things that has huge potential right now is GAWDA's work to establish standards for Extensible Markup Language (XML). Each distributor, using whatever software they're using, will be able to communicate easily with any vendor without having a new set of rules each time.

What advantages can a distributor expect to gain from XML?
Jim Broughton: A quick and efficient exchange of information with their vendors. Right now, it's not uncommon for distributors to call vendors five, in some cases ten, times a day to find out if a product is available and how much it costs. XML enables the distributor to get that information from their PC, without ever picking up the phone. This probably will awaken a lot of distributors to the power of the Internet because they'll see how efficient it makes them, and then they'll want to do the same thing with their customers.

Jim McKenney: Instead of mailing or faxing paper invoices and orders, distributors can use XML to send them over the Internet.

What about the end-user customer?
Jim Broughton: The advantage of XML is that it's one computer talking to another. So now, instead of sending an end-user to a Web site for information, we're starting to see end-users having some sort of XML communication with the distributor, getting information instantaneously. Giving people at the end-user level access to whatever information they need to make their job easier—whether it be copies of invoices, copies of signed delivery documents, cylinder information or purchase history—in a timely fashion will make the distributor look much better and more customer-friendly than the competition.

Why should technology be a priority for distributors?
Jim Broughton: When implemented properly, technology generates a lot of efficiency. For example, allowing customers to log onto an Internet site and enter their own orders completely eliminates the need for someone on the distributor's side to type in the order. And customers today expect whomever they're doing business with to be technologically savvy in order to meet their needs.

Jim McKenney: Technology provides distributors a real competitive advantage because it offers them the potential to save money or help them grow in such a way that they're gaining more customers. After that, there probably isn't a benefit to technology.

David Frea: It should be noted that investment in technology continues to become less expensive, as well as more productive, with more sophisticated solutions available all the time. And technology investments often outlast investments in human resources, providing a longer payback.

As supplier, what's your role regarding distributors' use of technology?
Jim Broughton: Suppliers play a crucial role in helping develop operational efficiencies for distributors. Suppliers really should be pushing technological advances at the distributor level. I don't see a lot of suppliers pushing these changes. I think suppliers have an incredible opportunity to promote the efficiencies within our industry.

What kind of investments should distributors expect to make in technology?
Jim Broughton: That's a very good way of expressing it. Many distributors look at technology as a cost of doing business, but it absolutely should be looked at as an investment. Distributors should be investing in e-commerce solutions and mobile technology. For instance, when a customer asks the price of a helmet, the salesperson has to either call the office or pull out a bulky printout of all the prices for his various customers. With mobile technology, he could have a Personal Digital Assistant (PDA) in his hand, put in the customer's account number, and find out within a matter of seconds what the price is and whether it's available. The customer is happier because he doesn't have to wait, the salesperson's more efficient because he can see more customers in a day, and no one is tied up back at the store looking up the information on a computer terminal. No more having three people involved to answer one question.

How much should distributors expect to pay for their technology investments?
Jim Broughton: It's impossible to put a price tag on that because it's going to be different for everybody, but when they make that investment, they're going to be investing in improving customer service, and that's invaluable.

Jim McKenney: I agree. Distributors are going to make investments only where it affects the real bottom line, and they're going to be driven by their customers' requirements. Part of the reason distributors are putting in networks or Internet connections is for business-to-business transactions, and those connections increasingly are becoming requirements to do business, especially with larger customers.

Any specific recommendations?
David Frea: Plan hardware obsolescence programs that commit to replacement of older desktop PCs every three to seven years. This will keep systems up-to-date without need for massive retooling all at once. Servers and software investments should be kept updated as much as practical, but certainly within a five-year timetable.

Are end-users driving any changes?
Jim Broughton: As a distributor finds himself competing with the Home Depots and now Wal-Marts of the world, or with larger organizations that have certain pricing efficiencies, he has to operate as efficiently as possible with the resources that he has. A distributor can have four or five people sitting in the office answering phones all day and have the cost of phones and lines, desks, benefits, and so forth, or he can use technology to give end-users the same information they need faster, more efficiently and at a lower cost.

Do you see the mobility trend continuing to gain momentum in 2005?
Jim McKenney: Mobile devices will continue to grow in popularity because they not only get rid of paper, but also increase accuracy.

Can you give an example?
Jim McKenney: The serial number on a cylinder always will be recorded correctly when scanned by a handheld device; otherwise, the employee has to write the number down, then bring it back to the office to key it in. There are two opportunities to get the number wrong, in addition to the fact that it's very time-consuming.

Jim Broughton: There are other ways mobile devices are useful in the field. Right now, a lot of salespeople, when they need to answer questions for customers, are going to pick up the phone and call the office, or say, “I'll get back to you later,” or carry a printout with them. That wastes time, and it wastes paper. Now there's more and more use of handheld computers, like a Palm Pilot, that download information directly from the distributor's computer system into the handheld. No paper, and everything's as up-to-date as the last download, which is typically the last time a salesperson went in the office.

Can the cost of this equipment be justified?
Jim Broughton: This is not Star Wars technology! It's things that you see every day at Office Depot.

Think about it. If a distributor has ten salespeople, and he's providing printouts for each of those ten salespeople, and each one is calling on 300 or 400 customers, there would be hundreds and hundreds of pages of information being printed out, including customer lists, unpaid invoices, cylinder balances, and so forth. The opposite of this is the salesperson who transfers all this information into his Palm Pilot, puts it into his pocket, and he's off. One of the costs of doing business is buying forms and paper. If you can eliminate paper, you've lowered your cost, which can make you more competitive.

Security has become a major issue over the past few years. What measures are your customers taking to beef up security?
David Frea: Practices must be put in place to ensure systems stay up-to-date with the latest security patches and enhancements. Embrace hardware firewalls as the front line of defense, and use anti-virus and anti-spam software on desktop PCs.

Jim Broughton: There has to be enough value in the data to justify someone trying to get into your system. Oftentimes the most valuable piece of information that you have is your list of customers, and a competitive salesperson could drive around behind your truck drivers all day and just see who you're calling on, and that'd be a whole lot easier than breaking into your system. So I think that security for a welding supply distributor is more “protect my data from inadvertent loss.” Make sure you back it up everyday and you have copies of your data stored off-site in case of a crisis or a disaster.

Jim McKenney: Some people are uncomfortable with wireless networks because of security concerns, but they need to understand that they can limit access to the network.

Have security concerns caused any of your customers to look at moving away from Windows-based software?
Jim McKenney: No. If anything, we see it going the other way. We've had Linux, we've used Unix for years, and pretty much every new sale that Computers Unlimited has made over the last couple of years has been Windows-based. The main reason that security is an issue on Windows is because it's where the majority of the users are. If the majority of users move over to Linux, security will be as big an issue.

Is there increasing momentum for distributors to scan their hardgoods with a bar code scanner at point of sale?
Jim McKenney: Somewhat, yes. Our software's been enabled that way for years, but there's still a lot of frustration in that distributors don't feel there's enough adoption of standard UPC numbers across the board. There is some growth in bar code scanning, but generally the distributors who are doing it have been doing it for a while.

Jim Broughton: Bar code scanning is not usually a hot topic of conversation when we're talking to prospective customers, although it should be. It's an easy technology to implement, and a lot of suppliers and manufacturers are putting bar coding on their items. But I really don't see a lot of momentum that way. I wish there were.

What percentage of your distributors use bar code scanning?
Jim Broughton: Around 40 percent.

As Internet-based technology continues to grow, have you had many distributors switch their data networks to the Internet via VPN?
David Frea: Almost all our former point-to-point data networks have transitioned to Internet-based VPN.

Jim Broughton: Many DataWeld customers are using VPN. Many distributors already have DSL, cable or a T1 connection, so the only cost to communicate with another branch is the hardware. If you have a dedicated phone line going to another location, it's a very, very quick payback to set it up over the Internet.

Jim McKenney: We've had a lot of up-tick in VPN. Distributors like it because it's secure, but because it's still going over a public network, they can keep costs down.

Have any of your customers switched to voice networks?
Jim Broughton: Some, not a lot.

Jim McKenney: It's a similar situation at Computers Unlimited. We haven't seen as much interest as we thought we would.

Do you see many distributors building/adding to their e-commerce Web sites in 2005?
Jim McKenney: The distributors who actively market e-commerce are very successful at it, and they're continuing to grow that area of their business. The ones who have been passive about it are not really seeing any growth.

Jim Broughton: It's always of interest, but it's not a major concern this year, and I think part of that is because end-users are not really demanding more than what's there. In our experience, e-commerce tools have been relatively flat. Are people adopting it? Yes. Is it growing rapidly? No.

David Frea: End-users have not fully embraced e-commerce, as many still lack Internet access or willingness to use technology, and seldom demand online buying. Leading-edge distributors will continue to invest in these technologies even without much direct payback in the form of online commerce.

When do you see RFID being used in our industry?
Jim McKenney: The Wal-Marts and Targets of the world are saying RFID on hardgoods is going to be mandated. We're not seeing that yet, but we are seeing RFID being used widely on cylinders. I expect it to be a couple more years before RFID on hardgoods is widely adopted in our industry. There are too many things still being standardized.

Jim Broughton: I don't see suppliers offering RFID this year or the next couple of years. It's taken a while just to get the level of penetration we have with bar codes. Our experience is that a bar code lasts a year and half, maybe two years, before it has to be replaced. On the other hand, we've had RFID tags on cylinders for more than 10 years now, so there is an incredible payback on RFID for cylinders.

What do you think will be distributors' top technology expenditure in 2005?
Jim McKenney: The last big sales cycle for software vendors was in the late '90s, because everyone had to get Y2K compliant. Now that those systems are anywhere from five to eight years old, people are starting to upgrade their hardware and software. If they're not upgrading, I would expect to see growth in mobile devices.

David Frea: An investment in a new Linux server and software, Internet connectivity, VPN and VoIP, mobile/wireless connectivity to reach the field sales force and route trucks will be top investments for many distributors.

Jim Broughton: Three things: Moving to Windows-based systems from some of the older technologies, more use of mobile technology, and then implementing some newer e-commerce or Internet-based tools.

The Well Connected Distributor We're in an industry where relationships and technology are tied together. Take a look at seven distributor companies and how they are using the latest in technology to boost their bottom lines. Also, read more about XML, RFID and E-Commerce as a Strategic Alternative.

What technology advancements do you foresee on the horizon?
Jim McKenney: There definitely will be more handheld computing in the future, both within and outside facilities. Right now, when salespeople use a handheld device, it's a stand-alone connection. I foresee that becoming a real-time connection, so they'll actually be talking back to the main computer system as they're out making sales or deliveries to the customer.

Jim Broughton: Wireless network connection will have a big impact on all of us. Anybody who uses a cell phone knows that it's not too difficult to get out of range of a good signal. Once there's sufficient coverage of wireless access to the Internet, we'll see a lot more distributor salespeople with handheld computers connected wirelessly to the Internet. We can do it now; we just can't do it everywhere.

What's the most important advice you can give distributors about today's technology?
David Frea: Invest in proven technology.

Jim Broughton: Understand and embrace your investment in technology. Look at it as an opportunity to operate more efficiently, as opposed to a necessary evil to do business.

Jim McKenney: Explore your options. There are always options out there, and there usually are some that are less costly, but still get the job done. If it is too pricey, wait a little bit because the price will always go down.