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Information crisis.

According to Information Concepts, beer wholesalers may have spent millions on the wrong data processing technology.

There's a standard complaint we hear from distributors throughout the industry: "We've spent thousands of dollars on computers and software, millions in the case of mainframes, and it's yet to pay off in increased productivity."

One solution is simple: Unplug the system, fire your computer staff and go back to the old way of compiling data pertinent to your business. You will save a pile of money and get the same results you do now.

The beverage industry in general--not just purveyors of alcoholic beverages--is mired in an information crisis today, and we think there are some very basic reasons for the problem:

* Many distributors rely on antiquated data processing technology. Many have made large investments in proprietary systems, which are slow and functionally obsolete in today's business world.

* Even distributors outfitted with newer PC technology and hand-held data collection devices don't use them effectively.

* Most distributors simply have automated their old way of doing things, rather than re-engineering tasks to take advantage of the technology.

At a time when information is the most important ingredient in business, beer wholesalers generally make poor use of it. The distributor who collects data manually and relies on canned reports to feed back information is headed for trouble. He is not getting all the information he needs to survive in this competitive world, and what information he does have is not getting to the people who need it most.

Concerned that you fit the mold? Then consider the following questions.

How did you get the wrong tools?

Why are mini-computers and proprietary systems so popular if PCS can do the job? Hardware vendors looking to make big sales and commissions are a big part of the problem.

One reason is the mind set of the customer. Computers are foreign territory and the best bet for many was to go with the best known: IBM. Unfortunately, IBM, Digital Equipment Corp. (DEC) and others made commitments to market proprietary systems--systems whose programs won't run on computers made by other companies--longer than they should have, and now these computer giants are struggling to catch up to a thriving PC market that is taking business by storm.

PCs have always been less expensive and easier to use than proprietary systems. Now they have the power, speed, capacity and business functionality at a fraction of the cost of proprietary systems.

Automating used to be considered a hardware issue. Software was secondary. So it's no wonder many distributors find themselves with large proprietary systems, which only run software designed specifically for these computers. The best software for managing a beer distributorship works on systems without these limitations.

Ironically, smaller distributors with between one and five routes have better information capabilities because they automated with PC technology out of financial necessity.

How are you gathering data?

Just as puzzling is the lack of popularity of hand-held data collection devices, key tools for success in the industry today. According to a survey by one of our competitors, only 41 percent of beer distributors in the country use hand-helds. This is a shocking discovery.

A great deal of information you need to run your business comes from the field, the point of purchase. New trends, participation in promotional activity, customer returns and other marketing data is right there in front of you. Drivers and salesmen recording information manually don't capture it, or don't capture it accurately. This is proven over and over again by typical use of the route book. Once data is recorded, it is probably never looked at by anyone again.

Hand-helds open up an abundance of information opportunities. There are obvious advantages regarding route efficiency, fewer errors on invoices and less time spent performing truck reconciliation. Hand-helds can help in many other areas, such as:

* Restricting the sale of unauthorized product to a given account.

* Automatically applying promotional pricing, thus eliminating driver discretion and memory problems.

* Allowing drivers to receive specific messages regarding specific customers at time of delivery, which will improve customer relations.

There are many other benefits derived from better control and communications with hand-helds. Unfortunately, hand-held devices are still considered expensive, when they should be considered part of the truck itself. No distributor would have a truck without a set of tires, yet this is roughly the cost of each hand-held.

What kind of reports do you generate?

Distributors with proprietary systems and without hand-helds still generate plenty of data. In fact, if computers have done nothing else, they have created a "report mania" among companies that have automated. The question is, who uses these reports? What do they mean? Are they understood?

Most distributors generate too much of the wrong data and none of it gets below the level of top management. Ideally, information should be generated by the people who will use it.

A lot of information reporting is done to prove something to someone in the been counting category, either the accountant or the parent company. Information can be used for other reasons: helping personnel in the field sell more product, or helping sales management make better pricing decisions. Many distributors understand the concept of "price elasticity," selling more during a price reduction. But the question is, does profitability improve?

Have you taken a good look at your management system?

Even if you quit the habit of large proprietary systems, you won't necessarily end the cycle of untimely and meaningless data.

Distributors, by and large, choose automation merely to enhance the way they've always done things. You may say, "Of course, if it ain't broke, why fix it?" Look at one of the leaders in the beverage industry: Pepsico recently announced an inverted management structure that places distributors--their people in the field--on top of the pyramid, rather than the bottom. Top management will do all it can to support its distribution network.

When it comes to the flow of information, your point men in the field--the salesmen and drivers--are at the bottom of the pyramid. Instead, they perhaps should be at the center of the information flow, with others in the organization supporting their efforts.

If data is fed back to them through properly applied information technology, delivery people can help put the right products on trucks, improving service levels and reducing costs. Salesmen with hand-helds could be advised to sell higher margin products, enhancing their compensation as well as the company's overall profitability.

In today's world, change is right up there with death and taxes. It happens. Current software technology offers you more and more tools to help you manage the change, so you can win over competitors.

Why keep up with technology?

One comment we hear often: "Why should I spend money to keep up with technology? It will always keep changing."

That's a widely mistaken impression. It used to be that technology forced change and brought with it a completely new set of tools. Today's systems, using PC technology, will still run many of the old applications developed a decade ago. That's progress.

The reasons to keep up are simple. New technology usually means better performance, better tools, lower costs. The technology that's emerged today is in response to the needs of users who are looking for more processing power to get better information, on time, in the hands of people who will use it.

Big players in several industries recognize that the game has changed irrevocably. Software developers are taking advantage of this technology.

Users of Total Route Management, the route accounting software we've developed for food and beverage distributors, have access to the latest advances in hardware and software. Yet companies with newer technology often cling to many of their old methods. Even some of our users are reluctant to use all the capabilities now available to them.

Why? Old habits are hard to break. If you've invested heavily in your present mini-computer or proprietary system, you are even more reluctant to change. But, again, look at Pepsi: That company recognized change was necessary in order to remain at the top. Many other leaders didn't until it was too late, and now they're paying the price. IBM is a good example.

Why convert sooner rather than later?

If you are not convinced, consider these facts:

* Recently, one of our customers moved from a proprietary mini-computer to a PC. What had been a six-hour month-end process at the company was reduced to 30 minutes with absolutely no change in functionality. This user will happily take advantage of advances in technology.

* A spreadsheet running on a proprietary mini-computer cost more than $5,000 just five years ago. Lotus 1-2-3 usually sells for under $500 and is twice as good. Lotus is just one example.

* Usually the "developer" of your proprietary system is the only source of new software. There are at least 50,000 independent software developers for PC technology today. I like the PC odds myself.

In the old days, companies used to print financial statements as their primary way to keep score. They performed this religiously once a year and usually took vacations afterward from pure exhaustion. In today's "total quality" driven business world, keeping score has become paramount. How else do we know when quality goals are met, or when deviations from our goals of zero defects need to be addressed?

Modern computer systems allow monthly closing to be done routinely, not five days into the next month. Daily closings are on the horizon. Why? It is one of the many methods to keep score. Open systems, PC technology and better information tools will be part of successful distributorships in the 21st century.

John Gardiner is the vice president, technical services for Information Concepts, Inc., a firm specializing in logistics and information systems to selected industries throughout North America.
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Title Annotation:beer distributors' use of wrong computers
Author:Gardiner, John
Publication:Modern Brewery Age
Date:Jan 25, 1993
Previous Article:Picking the right computer system: from magic formulas to common sense.
Next Article:Building routes, building business.

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