It's Time for Technology

To improve margins and drive efficiencies, the individual members of the foodservice equipment and supplies industry will need to come together to determine ways to better leverage the benefits information technology can provide.

By Joseph Carbonara, Editor in Chief -- Foodservice Equipment and Supplies, 7/1/2008

Countless members of the foodservice industry, representing all links of the distribution chain — including operators — beam with pride when discussing the fact that relationships make up the foundation of their business. Over the years, this high-touch, low-tech approach has served the many small businesses that help comprise this segment well. So, it's more than a little ironic that in order for the industry to stabilize its eroding margin base the individual players will need to strategically remove touches from their systems.

Brad Pierce, President Restaurant Equipment World
Orlando, Fla.

“Historically, when times get tough, human nature leads a company to cut back marketing as a way to make their businesses leaner,” says Brad Pierce, president of Restaurant Equipment World in Orlando, Fla. “What they tend not to do is look inside their businesses for efficiencies to make themselves leaner. The companies that do look inside to make themselves more efficient are the ones that are ready to take off once the business climate improves. It is the right time to leverage what you have to get leaner and use it as an opportunity to get better.”

The most obvious opportunity to improve efficiencies lies within the way the individual trading partners interact with one another. Most companies have their own internal systems that serve their individual needs generally well for a while but eventually they reach a glass ceiling. “When everyone is doing everything their own way, it's hard to grow your business,” says Susan Marcott, director of IT for The Boelter Cos. in Waukesha, Wis.

The opportunity lies in facilitating the ability to reduce the redundant steps that exist as product, and the requisite paperwork, flows from manufacturer to dealer to operator. For example, today it is very common for an operator to cut a purchase order and send it to the dealer who enters it into their system. The dealer, in turn, issues a purchase order to the manufacturer who also has to enter it into their system. And along the way there's no way of telling just how many hands have to handle how many pieces of paper all for one order. When it comes time to track the order and calculate estimated delivery times, the process resumes, usually in another department. “We have lots of payroll dollars committed to that stuff,” says Rick Ellingson, vice president for Bargreen Ellingson in Tacoma, Wash.

The inability to establish a baseline level of data exchange between trading partners continues to add cost into a system that seemingly has little capacity to accept it. “Every day I am shipping orders with exceptions because the product is sitting on my loading dock but has not been entered into the system yet because most manufacturers can't send me an automated shipping message,” says Brad Wasserstrom, vice president of The Wasserstrom Co. in Columbus, Ohio.

The competitive nature of the industry seems to limit some players' willingness to share information more openly with their customers or partners. For example, Pierce points out that obtaining information about manufacturer stock counts differs from one factory to the next. Some factories will acknowledge whether an item is in stock but they won't let a dealer know how many they actually have for competitive reasons. “Everybody is now in everyone's backyard and it breeds a lot of secrecy,” Pierce says. “You need to have a lot of trust because dealers, as an example, know how easy it is to lose a customer.”

In order for the individual members of the foodservice industry to reduce the number of touches for each order, they will need to work together to create common standards that allow for a seamless exchange of data and flow of information among all trading partners. Of course, in many ways, this approach may prove to be counter-intuitive to the way the industry has evolved. “To a large extent the industry has grown up around products and relationships rather than processes or systems,” says Larry Moon, chairman of Lakeside Manufacturing in Milwaukee.

Susan Marcott, Director of IT The Boelter Cos., Waukesha, Wis.

In addition, the industry's actual makeup also works against widespread adoption of such practices. “Our industry is a little more fragmented and smaller so the transactional costs in the past were too high,” Ellingson says. “But as consolidation continues, there will be enough concentration of transactions that will make more sense.”

Every company in the industry likes to believe they are unique and that can work against the necessary standardization of data. “It's so fragmented that it's really hard to get everyone on the same page,” Ellingson says. “We have been trying to get vendor-managed inventory implemented for a while with some of the factories that we do a lot of business with but nobody's there yet.”

It will not be long, though, before individual members of the foodservice industry start to make decisions about which suppliers to back, based on their ability to integrate with one another. “Manufacturers don't take into account the ease of doing business with them,” Wasserstrom says. “That's going to be a bigger part as I try to take more touches out of my system. I am going to look to support the vendors that can help make my life easier. Every dealer will have similar challenges just on a different scale.”

Despite the proliferation of barcode technology, many dealers point out that lots of items they purchase by the case and sell individually still do not come with barcodes on them. So, this drives additional expense into a price-sensitive environment as dealers manually add the barcodes. “Obviously, we have to recoup that cost before we can talk about profit,” Wasserstrom says.

This is especially the case when operators specify smallwares items manufactured by a low-cost provider offshore that enter the market without a barcode or packaged in standard units. “I don't think operators take into account how some of their value price inefficiencies affect their costs,” Wasserstrom says. “Maybe I would be better off dealing with a standard brand here in America because of the savings I would recoup. I think there's a realization that dealers are going to have to come to at some point. Customers are always going to ask for a better price. Vendors are always going to have to try to push through a price increase. So, dealers will always be between the two.”

While the foodservice industry still seems behind the times, it appears as if some individual companies are starting to see the light. “Dealers and manufacturers, individually, have finally gone over the hill and now recognize the value of technology,” Pierce says. “They are implementing order management and CRM systems. So, theynow have the tech-know to do these things.”

Slow to Adopt

Relative to other businesses it's clear that the foodservice industry has been slow to incorporate technology into its processes and modes of communication between trading partners. But the reasons for this tend to be slightly more challenging and seem to represent a confluence of factors.

Starting at the finish line and working back through the food chain, it does not appear as if most end-user customers express an interest in or demand these capabilities from their E&S suppliers. This seems to stem from a lack of education on the part of the operator. “They feel they can order something and send it back if they don't like it. They don't realize there's a cost in the supply chain,” Ellingson says. “Their corpus is having the right ingredients out there and not necessarily the smallwares they use. In the scheme of things they are probably doing this with their groceries and we are just under the radar screen for them.”

To help nudge them down this path, Bargreen Ellingson has offered customers incentives to place their orders online but only a few take them up on it, Ellingson says. “That's because the online order entry initiatives we have are fraught with problems and those are expensive,” he adds. “We are finding that customers say they want it because it's more efficient and that it will save everyone money. But we can't rely as much on the machines to do it for us. We still have to check the orders.”

Another factor slowing this change centers on the nature of the dealer principal's day-to-day

Rick Ellingson, Vice President, Bargreen Ellingson, Tacoma, Wash.

responsibilities serving these customers. “Most dealers are in that range of $10 million to $20 million in annual sales and they wear so many hats, which means this is probably not their priority,” Wasserstrom says. “It's pretty easy to get lost in the day-to-day challenges we face.”

In some instances, the resistance to change is cultural and generational. “Many people in the industry operate under the philosophy of if it works, why change it?” Pierce says. “They have been successful so where's their motivation to change? And with some people nearing the end of their careers, they may be hesitant to implement a widespread change like this.”

All of this leaves the factories in a state similar to their customers. “The manufacturers have not kept up, partially, because we, the dealers, have not pushed them to do so,” Wasserstrom says.

So, what's it going to take to get widespread acceptance and use of technology to improve communication and exchange of data among trading partners? “Technology needs to increase, on the one hand, and the openness needs to increase on the other,” Moon says. “This will make it easier for people to say, 'yes.' Up to this point, the solutions have been too hard, too expensive and too confusing to implement. And as soon as there is a solution that's easy to implement and cost-effective, they will adopt it.”

And the tide seems to be turning. “We are behind the times in our industry but it's coming now,” Wasserstrom says. “And it's not just those of us that have large systems doing it.”

State of the Industry

While everyone agrees foodservice lags behind other industries in this area, it's important to look at things objectively and acknowledge the progress made. “The industry has transformed so quickly that we lose site of where information technology was, even 10 years ago,” Moon says. “When you look back to 10 years ago, people were just starting to realize they had a problem with Y2K. Maybe it's me but that seems like a long time ago.

“People take for granted the ability to send e-mails and transfer files,” Moon adds. “Today, we think nothing of sending a file or a drawing to someone to review via e-mail. I can't imagine a dealer salesperson not having a laptop and the ability to connect to the internet where they are. Ten years ago that was unthinkable. What it does is make things faster. And having information at your fingertips allows you to make better decisions and provide answers. And I don't see that backing down.”

That's where the FEDA subcommittee on technology comes into play. Chaired by Pierce, the committee is working on creating a unified data format that manufacturers would follow when making information available to individual dealers. “We as dealers will know that when we implement our own systems we will receive the same exact data format from all of our manufacturers,” Pierce says. “The benefits of this are huge on both ends. It's kind of like we've all agreed to speak the same language and to organize things the same way.”

In formulating a system like this, FEDA is not working in uncharted waters. “Certain shipping companies do that already and our dealership has integrated the data we receive from them into our systems,” Pierce says. “They have figured it out where the smallest mom-and-pop shop can do it. So, we need to make it where the least tech-savvy kind of person can read this and say, 'I understand this.' And when things like this, especially in the technology world, are easy to understand then people will use them.”

The first step is to get the manufacturers to send the data to the dealers automatically, according to Pierce. This will keep the manufacturers from having to field calls from dealers about shipping confirmations and purchase order numbers. “Basically, it's agreeing to where the items go,” he says.

Right now, tracking the status of orders can be a very time-consuming and labor-intensive task for dealers because they have to contact each manufacturer individually. This hunting and gathering approach to assembling information also makes it more challenging for dealers to provide customers with the information they desire. “I am of the mentality that you can't give your customer too much information,” Pierce adds.

Estimated ship dates, for example, is one piece of data that REW provides its clients. Then, when an order ships REW provides the tracking number. “To provide each of those pieces of information requires individual phone calls to some manufacturers and that gets to be a burden,” Pierce says. “Some manufacturers will e-mail us daily updates. This eliminates some of the phone calls but then we have to have someone enter that into our system.

“Some manufacturers allow you to access information from their web sites but then you have to dig through all your orders with them to find the individual item the customer ordered,” Pierce says. “When you have an order with multiple items from multiple manufacturers, this can get to be pretty time-consuming.”

What Pierce envisions is pretty straightforward. “The manufacturers already have a database that tracks the orders, so why can't they generate a report on a regular basis that transfers the data to our system?” he says. “That creates efficiencies for all of us.”

Larry Moon, Chairman Lakeside Manufacturing, Milwaukee

Pierce estimates when doing something similar with one of his shipping companies, it took an hour to create the code that allowed the two organizations' systems to communicate with each other electronically. “That's not a lot of time and it can translate into lots of savings for the manufacturers and the dealers.”

And it's that kind of seemingly small but important step that will play a critical role in building momentum in the foodservice industry. “If we can outline where the savings occur for the dealer and the manufacturer, then we have a chance to be successful,” Pierce says. “This is not a one-sided proposition.”

While more manufacturers have embraced technology and stepped up their efforts to work more closely with their dealer partners, the communication bridge that ties both parties' systems together is seemingly nonexistent. Specifically, both sides have high-tech systems now but dealers and manufacturers are still not exchanging data.

“It's still driven by a lot of manual touches, specifically order processing,” Moon says. “That's from the time it's quoted to when it's shipped and delivered to when it's paid for. All of those steps can be automated and represent an opportunity for improvement to drive efficiency. Whether the steps are automated, there are still opportunities for errors. But automating your data exchange reduces your opportunities for errors.”

AutoQuotes helps bridge that gap but there's a ways to go. “I think the manufacturing community feels if they work with AutoQuotes they are working with the dealers, which they are to an extent, but that's not where we need to be,” Pierce says.

Current Applications

AutoQuotes is a standard online application designed to facilitate collaboration in assembling projects. Like any evolving technological application, over the years AutoQuotes has had its challenges, most dealers point out, specifically in the security aspect. But dealers quickly add that AutoQuotes has made great strides in this area.

“Within our industry it is an essential tool. It's not just for big quotes, either,” Pierce says. “It's a need AutoQuotes is working toward meeting. They work with both the manufacturer and the dealer. The challenge is establishing trust with the fact that a third party will have your data.”

As a result, the industry remains rife with custom-developed systems. These systems offered some initial benefits, namely they allowed companies to do things the way they had always done them without disrupting their approach to selling or working with customers. “The dealers using them did not have to look at their business processes a lot,” Marcott says. “They started out as smaller businesses and grew from there.”

While this approach may have worked well for a while, its isolatable-nature proved to be limiting and did not introduce the widespread efficiencies the industry needs to move forward. “When I first started, everyone was their own little island,” Marcott says. “Everything you did with vendors was done on paper.”

One example of a dealership that made a custom-developed system work to its advantage is The Wasserstrom Co., which designed and launched its program back in 1987 to help provide management with sales totals. The dealer hired and kept on staff a team of programmers whose job is to constantly upgrade and tweak the system to meet company and customer needs. Over the years they have added a variety of functions, ranging from order entry to accounting to execution of purchase orders to a vendor to various warehouse applications.

“It's kind of an enterprise resource planning system,” Wasserstrom says. “It's worked great and supported what we do. Because we had a team of developers we have been able to customize and tweak things to meet their needs.”

As a result, The Wasserstrom Co. can provide customers customized reports specific to their needs. The dealership can provide these at any timing interval, depending on the customer needs. The data arrives in a customer's inbox in one of several format options. According to Wasserstrom, each customer prefers to receive things in a slightly different manner but most want the same types of information.

While this may seem advanced, it still includes some inefficiency that The Wasserstrom Co. hopes to eliminate through the implementation of a new ERP system. “Our current system is a manual-based transaction system, so there's a lot of people that have to touch an order,” Wasserstrom says. “And the consistent flow of communication is not there.”

Going to a standardized, scalable system will solve some of the challenges The Wasserstrom Co. faces and could help manage the dealership's growth moving forward. That proved to be true in the case of The Boelter Cos. during a period of accelerated growth. In 2004 Boelter brought on a number of new offices from various locations throughout the country, which included a substantial number of projects and people and inventory. Marcott and her team integrated them into the dealer's ERP system in a month's time.

“We could have never done that with a homegrown system,” Marcott says. “They would have done everything by paper. Did we run into some glitches? Yes. But we were up and running from day one.”

How to Get Started

For many businesses, the most challenging task of automating some of their operations can be simply getting started. “There's a lot of hesitancy in any kind of tech idea that's out there,” Pierce says. “Part of the intimidation comes from the unknown factor of what it will take to implement the system in terms of cost and time. It does not need to be expensive to have something really solid.”

Pierce suggests starting by hiring a college student or someone newer to the foodservice industry that has a strong aptitude toward technology. This introduces some familiarity with technology into the organization. “A number of dealers who have embraced technology have followed that course of action,” he says. “It's a whole different language that highly technical people speak. But the people with the technical know-how need to be able to marry business and technology. Get someone who speaks your language that can put things in simple terms.”

One of the first steps to take when implementing any technological solution is looking at, documenting and cleaning up a business's processes, Marcott says. “Make them as straightforward as possible and delete any aspects that don't add value. To me, the financial area has been a good place to start. Then look at the ordering and then customer database. Then look at your warehouse.”

An easy way to jump into this is to examine those items the business uses most every day. “Look at all of your forms. A business form that's not automated out of your system is inefficient,” Wasserstrom says. “No matter your size, there's a system for you. You need to ask, 'Where is someone doing something that a computer can do for you?'”

Management should also consider the way the company consumes data. “Is your information need transaction-based or project-based? You need to answer that question,” Wasserstrom says. “I am driven by information. And for me to save cost, I have to take touches out of the system. But I have to drive reports to stay on top of inventory, client needs, etc.”

When implementing a system it's important to look at it in two parts, according to Marcott. The short-term view should factor into consideration what it takes to get up and running, while the long-term view is a bigger picture in nature, focusing on how the company will benefit from this change, Marcott says. “It takes a couple of months to feel the impact. It takes a while for people to get used to it, to work with it and get comfortable with the flow,” she says. “It takes a while and no matter how much training and testing you do, it's still different once you get into the day-to-day.”

Then, of course, there's the old “jump right in, the water's fine” approach. “Clearly, I would start with the biggest pain area for the company and apply something in that area,” Moon says. “Today, most solutions don't have to be all or nothing. You can implement lots of solutions in small pieces. The exception to that is when you are looking at ERP systems. You still need a platform and that's typically a big bite. But you can do all sorts of things using that platform that are not big bites.”

No matter what course of action a business chooses, the benefits have the potential to be long-lasting. “It's like learning how to read,” Moon says. “That's a big investment. But once you learn how to read you don't have to read all the books at once. You can read them one at a time. And you can have them sent to you in a print form, read to you or you can read about them online. You have lots of options.”

Still, one key to any successful transition or evolution is to properly manage expectations about the benefits the system will provide. For example, a common misnomer is that automating some processes will result in a reduction in force. “People always think that, but it does not work that way,” Marcott says. “If your business is running lean already, you don't lose anyone. When you put a system in, it can become evident that some people are standing around doing nothing. We put in the system to make people more efficient so the company can grow without making everyone crazy.”

Loss of People?

Indeed, just because a company automates some of its processes and enhances its communication capabilities with vendors and customers alike, does not mean the organization will rely any less on its people. “There are a lot of long-tenured employees that are worried about things like this,” Wasserstrom says. “But I ask them if they are doing their jobs the same way they always have and the answer is 'no.' The way they do things has evolved over the years.”

Pierce points to the nature of the business as one reason why. “It's too personal of a business. It's too individual,” Pierce says. “Let's say we implement some of these steps to eliminate some of the phone calls, we will still need the human component. Right now we're low-tech, high-touch. We need to become high-tech, high-touch.”

Brad Wasserstrom,Vice President The Wasserstrom Co., Columbus, Ohio

Wasserstrom agrees and adds, “Running a restaurant is a relationship business. So, the people that serve them need to have relationships, too. There will always be a need for the DSR. My people should not be worried that any system will replace them. You will always have someone that wants to see a sample and know the pros and cons of an item. I just want to give my people the tools they need.”

The intent of adding systems is to help retain long-tenured, good employees by making them more valuable to the dealership and their customers. “Those are great people for the industry. It's about growing without adding people,” Wasserstrom adds. “So, instead of processing 50 orders they can now handle 75. Getting good people is so hard that you want to hold onto them.”

Evolving the technological tools companies provide their people can be a recruiting benefit, too. “You have a different generation entering the market and they expect things to be done a certain way,” Pierce points out. “They see these technologies and availability of data in other aspects of their lives and they expect it here.”

Other industries consistently support the theory that the use of systems will allow employees to work smarter, not harder, and develop more meaningful bonds with customers. “The shipping companies are so incredibly automated but they still rely on people to maintain their customer relationships,” Pierce points out. “They have merged the ability to have real high-tech systems and build trust with customers. It's high-tech on the back end and low-tech, human interest on the front end.”

The primary benefit of automating certain aspects of a business is that it allows the organization to make more effective and efficient use of its most important asset: its people. “You are not spending time doing the routine things,” Pierce says. “You are spending your time building the relationship. This allows you to leverage people's time, even at the most entry-level position. They are probably more valuable doing something other than providing a tracking number. Once they understand it and it makes sense to them and their businesses, they are more likely to implement them.”

Introducing a software application that automates a process or better facilitates the exchange of data among trading partners will never replace the need for the human component in the business. “There's no magic in software,” Wasserstrom adds. “It's in the preparation of the process and the people. Why should someone have to write up an order on a piece of paper and have it flow through the system? This is just a better hammer to drive the nail.”

At the end of the day, the real reason to implement any business improvement comes down to one thing: adding value to your customer. “You are taking some of the human side out of it but it's not something that anyone would see of value on either side,” Moon says. “If you can make that process easier and quicker, then you have enhanced the ability to deliver information to your customers thus improving your relationship.”

When evaluating ways to improve a business, it's easy to fall in love with all the potential the various whistles and bells can provide. But these only benefit if they inject value into the stream of commerce for both the company that's implementing the change and its suppliers and customers. In other words, don't implement a technological solution just for the sake of doing so.

“You have to look for ways to intelligently apply technology to your business,” Moon says. “The question to ask is: 'Will this drive efficiency or is it something someone will pay for down the road?'”

Companies can use technology to not only benefit themselves but also enhance the experience their front-line people have with customers, allowing the nature of the interaction to go from the mundane to a value-added mode. “I want my customer service people to be prompted with accessories and add on items that the customer needs when they call in an order,” Wasserstrom says. “If I am shipping them an order already, adding an item like this adds nominally to the freight.”

And the notion of adding value is not a one-time thing. “There should be something set aside every year for technology improvements,” Wasserstrom says. “That way, you will keep up and get ahead. If you do that for five or 10 years in our industry you are way ahead. And I don't mean big things. Just something that makes a difference. You don't have to put out millions of dollars to own a great software package.”

Conclusion: The Future Is Now

A challenging business climate will necessitate this kind of change. “As the margins continue to get squeezed we don't want to lower our level of service but we have to carry less inventory,” Ellingson says.

It's a matter of knowing your costs. “If people on both ends of the equation really tracked the costs of placing an order, expediting it and following it through they would really be flabbergasted,” Moon says. “And people not knowing that allows them to be more tolerant of inefficient systems.”

As mentioned earlier, foodservice operators have been seemingly slow to require their equipment and supplies providers to communicate with them using more technologically advanced means than the traditional paper methods. Some dealers report that's really starting to change and it's affecting the way they manage their business. “Customers are asking us for a lot. The reporting and analysis they request from us is increasing daily,” Marcott says. “They are putting the onus for the materials and stock analysis on us. The morning after our month end is the busiest day of the month.”

For example, a growing number of operator customers continue to demand e-commerce portals for their use. As a result, Marcott has been involved with some customer meetings to help articulate and explain the IT benefits. “It's something that you can use to put you ahead of the rest,” she says. “And that's what it's all about: making you the supplier they want to work with above all others.”

This evolution does not come without challenges. “It does force changes within our company because you are under more of a microscope as customers watch things at a more detailed level,” Marcott says.

For the most part, she says that Boelter's DSRs are onboard with the program. “It used to be that some of our salespeople would not look at their e-mails,” Marcott recalls. “But now they are so used to the benefits of technology and they are really doing a great job with it.”

Regardless of a company's position in the foodservice industry, the need to improve communication and drive efficiency across the board remains inevitable. “Putting your head in the sand and ignoring technology is not the answer,” Wasserstrom says. “Most people don't realize they can afford it. They don't realize there are scalable options out there that are affordable and can be just as effective. There's a distrust of technology among people that don't understand it. The next generation of foodservice professionals will want to place an order online over their cell phone or using some other type of technology that we have not even thought of yet. It's going to happen.”