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Prophet 21 CEO Chuck Boyle shared his insights on the enterprise-distribution software market in a recent talk with Industrial Distribution.

Source: Industrial Distribution - August 2003

ID: There's been more consolidation among software providers recently. Is this a trend?

Boyle: Consolidation can be a two-sided sword. One side good, and one side open for possible failure. It makes sense when there are clear synergies and a common market focus among the organizations that are being consolidated. We recently announced the acquisition of Faspac Systems (see news item on p. 33). This is an example of two organizations combining into a new single entity that is more powerful than the two operating independently. In this example, domain expertise is centralized, research and development investments are increased, and resources of both organizations are pulled together to serve a common market more effectively.

Consolidation for the purpose of just gaining size is another story. Without a common corporate culture and focus there can be duplication of effort, confusion as to corporate priorities, and a lack of benefit to the customers that drive your success.

ID: In this tough economy, do you see distributors demanding any particular new functionality or services?

Boyle: Distributors want technology that will help them increase sales and improve customer service while reducing their operating expenses. For example, they want technology that can help them improve inventory control and manage demand forecasting to achieve additional turns; increase marketing/sales opportunities; improve their ability to facilitate non-stock purchasing; improve margins by having immediate management access and notification to special pricing or discounting; utilize real time accounting and a management information dashboard.

Many distributors also want the familiarity of a Windows-based solution with the flexibility of a SQL database. This way they can not only shorten the learning curve for new users, but also use the data in their solution to make better business decisions.

ID: Giant providers like Microsoft-Great Plains and SAP have become more active in the industrial distribution channel. What's the competitive landscape look like?

Boyle: It is difficult for the giant, general business software applications to be successful in industrial distribution because their focus is so broad. Distributors run on razor thin margins, rely on providing strong customer service, and manage their assets very closely. They know the cost of every aspect of their business. Because of this business need, a broad-based technology solution will not address the unique needs of industrial distribution.

The real competition among distribution software providers falls among the few technology providers that call distribution their only home.

ID: "Supply chain collaboration" has been talked up for years. Do you see it actually happening much?

Boyle: It is a reality thanks to Internet trading networks like Trading Partner Connect. For years, distributors and manufacturers have separately concentrated on using technology to reduce operational costs, improve customer service, and grow sales. The focus had been on how to do this within the walls of their own businesses since both parties lacked the ability to impact the commerce processes beyond their portion of the supply chain. As margins continue to shrink and end-users demand more value-added services, collaboration is a business necessity for both distributors and manufacturers.

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