

October 2008 Company News \| From the Desk of \| Industry News Special Offer \| In-Depth Learning Meet Alonzo Williams We've been profiling the Zerion team all year long and will soon be using this section to introduce a new segment of our newsletter. But before we do, we have a few more people for you to meet. This month, you can learn more about another partner in the company, Alonzo Williams. Residence: Orlando Hometown: Jacksonville Position with Zerion: Vice President What did you do before joining Zerion? I worked for Hughes Supply as an Information System Manager. What is a day-in-the-life like for you? I spend most of my time managing the sales efforts for a division of our business that is focused on SAP Business One. I usually start my day by calling on prospects and piquing their interest in SAP Business One. Many of my afternoons are spent in meetings with potential clients, either overviewing or demo-ing the solution. This division has been about building relationships for us, and that's what I enjoy the most. What is the best location you’ve traveled to for your job at Zerion? Most of my travel is regional, but I traveled a lot more during my time at Hughes. San Francisco was my most memorable trip because I got to take my wife along. Before the conference I was attending started we got to spend a lot of time together exploring the city, which is what made it so special. If there was one place you could visit in the world, where would it be? Jerusalem What do you like best about your job? Having the opportunity to sell IT and business solutions like I am now has been the most fun I've ever had in my career. When you meet a prospect and you see that their business is in dire need of assistance, it makes you feel good to know that you can help solve a problem. What is your favorite “customer success” story? There are many that come to mind, but the most recent one was just the other day when one of our Eclipse consultants brought to light 300k in rebates that had not been filed for one of our customers (as referenced in our case study this month). Repeated results like that make me appreciate the value our consultants bring to clients. How do you spend most of your time when you’re not working? I am the coach of my 5 year-old son's and my 3 year-old son's soccer teams and it is a blast. Watching the little ones give everything they have is great. The best part is that after the game, their only concern is whose parents brought the Capri Sun and snacks. What is a little known, interesting fact about you? I am a trivia nut and have won multiple prizes by answering contest questions on the radio. Favorite book or movie and why: Guess Who’s coming to Dinner is my favorite movie because it was ahead of its time. It brought some real issues in America to the forefront that no one was ready to deal with. I believe that attention-getters like that make our homeland a stronger country. In one sentence, describe your philosophy on life and work: Passion for God. Passion for family. Passion for service. Passion for knowledge. Back to Top When I reflect on the last few weeks, one word that comes to mind is: transition. We’ve been overwhelmed with media reports and opinions on two related stories, both of which will be major turning points in our lifetime: the election and the financial crisis. Regarding our country’s financial health, we’ve heard a lot of doom and gloom talk about everything from a most certain recession or depression, to what some are calling economic Armageddon. Each morning when I’m trying to enjoy a cup of coffee and I hear these awful forecasts, the truism that surfaces in my mind is one that I use to guide my business life: “You cannot control the wind, but you can trim your sails”. Now, I know Tony used a sailing analogy last month, but since I actually do sail, I feel I can effectively revisit the idea. As a sailor, I know that a change in intensity or direction of the wind requires me to react. The question is, in what way? Do I put up larger sails or smaller sails? Do I trim the sails in or do I ease them out? Do I have to change the direction I am headed or attempt to stay MY course? All of these decisions are a required result of a change I had no control over; and that is exactly what we’re experiencing today. Since I once owned an electrical distribution company, and many of our customers are distributors, I’ve been thinking a lot about what distributors should be doing when the winds of today’s economy are gusting so hard. We may not be able to raise or trim the sails to change course in quite the same way a sailor can, but we certainly have some opportunities to adjust. The distribution business is based on getting the right product to the right customer at the right time, so you have much of your capital tied up in inventory. This is either represented by cash; or in some cases, you may be using up availability against your lines of credit. As a result of the current credit landscape, you can bet that some customers’ credit lines are tightening. They may be looking to you to hold product or take on some of this risk for them in other ways. While that may force you to shift inventory investment dollars in order to accommodate them, you have an opportunity to charge for that service in the form of higher prices. And there is no better time to attack and rebalance your inventory to free up credit availability and allow you to take advantage of this customer market opportunity. Another service that distributors can offer is the granting of credit. I know that most of you have no desire to be a bank. And, I’ve heard the old adage the distributor tells his customers … “My banker and I have a deal; I will not lend money if he doesn’t sell toilets (or fill in the blank with your product).” However, the circumstances right now are better than ever for you to momentarily put on a banker's hat with your more credit-worthy customers. Adjusting your sail in this way can help you generate sales and enable you to charge higher margins for extended terms. Both of these ideas demonstrate that there are ways for you to stay ahead of any financial crises, if you’re willing to change your course. But, either scenario demands better utilization of the technology tools available in the Eclipse software, such as inventory evaluation and replenishment, analysis, price matrix and credit limit adjustment. As always, the consulting team at Zerion is poised to help you trim your sails and take advantage of the tools available. Jack Whitwam, President 813.758.6103 Back to Top What’s happening with distribution, software and business? Zerion is committed to being a resource for our clients and friends. In the newsroom on our Web site, we have an RSS feed supplying new articles all the time. We also have some links to industry news. Here are some of the recent articles we found most interesting: HD Supply Honors Its Suppliers of the Year German Study Finds Most RFID Deployments Deemed a Success Aberdeen report indicates supply chain disruptions plague most companies Grainger branches out in Latin America Want more news? Visit us at: www.zeriongroup.com/newsroom/industrynews.html Back to Top Get a 50% off an RF site consult ... RF installation if hot right now because of the productivity and accuracy enhancements it can bring. Don't miss this great opportunity to get half off an in-person consultation covering all aspects of how RF will work in your warehouse. This offer is only available for newsletter subscribers for a limited time. Contact Tony King (321.229.1089) by November 28 to receive the discount. Back to Top Halloween Case Study: The Mystery of the Disappearing $300k By: Lauren Giles, Consultant It's Halloween and we couldn't pass up an opportunity to gather round the campfire and spook you with a horrifying story of missing money and the great team of spies who tracked it down. Zerion recently was approached by a client with a problem we often see in distribution: a difference in inventory valuation and the general ledger. The client had a short timeline to find a solution, and was looking for intense scrutiny of their operation in order to locate and resolve the issue. Money Gone Missing The client’s inventory valuation was vastly different from their general ledger, and the variance was continuing to grow. They believed they could be missing hundreds of thousands of dollars. This tends to be a common issue we see because the general ledger gives you the value at a particular defined cost, whereas your inventory valuation is taken from a different one (MAC, Avg Landed, Cogs, etc.). Initially, this customer noticed a difference of $50,000. Within a couple of months, this number grew to an astonishing $300,000. Year-end was approaching and this ever-increasing number needed to be dealt with quickly. Writing the amount off was not considered an option. A small team of Zerion consultants was called in to immerse themselves in the branch operations and system information in an effort to uncover the missing funds. Starting with Rebates When our team first reviewed the problem, they thought the difference could be caused by their Customer Special Pricing (also known as rebates), because many of their customers had rebates on specific product lines. Our first step was to run the “Cost Override” report by month and download it to Excel to analyze the data. In this process, approximately $30,000 in missing rebates was found. This was a great start, but we knew there had to be more money out there to collect. The team spent days running more reports, crunching numbers, and evaluating every branch process and procedure. It became apparent that the company was operating only on the bare bones of the Eclipse system, and not fully utilizing everything the software could offer. Pricing Mishaps One red flag along the way was with pricing. In Eclipse, when a PO is written, it extracts the price from the price sheet. We found that this client’s price sheets had some incorrect data. In these cases, it was up to the Purchasing Agent and/or Accounts Payable to recognize the error and work to correct it. The human element in this manual process sometimes led to a missed incorrect price. When material was received at the wrong (lower) cost and ultimately sold at that cost before AP or purchasing caught the mistake, the client would go back to the PO and change the cost to the higher and correct cost. However, the items already sold could not be fixed and the excess money (the difference between the true cost and what they received/sold it at) stays in your general ledger, creating what is called an “inventory drift.” We believed this too was contributing to the discrepancy between the inventory valuation and general ledger. Sales Concerns Another issue we uncovered was with sales. The salespeople had been noticing that sometimes their gross profit would negatively change after tickets were written. This occurrence was most often seen with commodity products, but not exclusively. We reviewed multiple price lines, product cost histories, and product reports to identify the source of the problem, but there was little consistency with the changes. We were, however, able to determine that their cost basis and parameters weren’t set properly. Different price lines pointed to different costs and often the cost on the sales order (Cogs or CommCost) was the same as the true cost (or REP COST). Since the salespeople had authorization to see all costs, they were not able to differentiate what should be Cogs versus cost. Their margins were set off MAC and as the cost of the items moved, it resulted in their perceived negative GP. Back to Rebates Even though we had overcome some significant challenges, we still didn’t feel we had justified the loss of $300,000. So we began looking at some bigger issues, such as where the majority of their revenue came from (specific lines, customers, etc.), and found that their rebates average 3.1 million dollars per year. Because this was such a large number, it made us re-consider our initial review of rebates. We had found some money in that process, and felt we could find more if we approached it from a different angle. We began looking at the report structure and the way it pulled data in reference to the branches. In doing so, we found that their rebates were defaulting to another branch. Though we were looking at the right report, the report wasn’t pulling accurate data because it was looking in the wrong place. In this case, one mis-keying error led to multiple chain errors in Eclipse. Because the rebates were incorrectly entered, the claims to the vendor for rebates were wrong, and the reports were erroneously calculating the credits. They branch wasn’t seeing the full amount they could collect, nor were they receiving their full credit. Once this simple error was fixed, the customer was able to collect on $300,000 they were missing from various vendors, thus bringing their GL back to balance. Conclusion Rebates can be big business in distribution, and Eclipse has the ability to track and streamline your collection of them. However, rebates can be tricky to manage and set up properly. In addition, many inaccurate settings and authorizations in Eclipse can cause outright confusion and loss of productivity, or an unknown trickle of lost revenue. In this case, our team researched, discussed, interviewed and examined to not only help this branch find their missing money, but also to identify and resolve other issues they weren’t aware of in a total of just two weeks on site. Back to Top	Tracker Stopwatch Ever wish you could keep tabs on certain trackers in Eclipse? Shift+F10 in eterm allows you to start and stop a stopwatch list of trackers. Upcoming Pricing Training Zerion will be hosting a regional training session at Electric Supply in Tampa, Florida on November 20-21. To get more information or to sign-up, contact Kathy Williams. Webinar Classes Next month, Zerion will be announcing an ongoing schedule of webinar classes. You can sign up your team members to get them up to speed quickly and cost-effectively. To get more information, contact Kathy Williams.

October 2008

Company News | From the Desk of | Industry News

Special Offer | In-Depth Learning

Meet Alonzo Williams
We've been profiling the Zerion team all year long and will soon be using this section to introduce a new segment of our newsletter. But before we do, we have a few more people for you to meet. This month, you can learn more about another partner in the company, Alonzo Williams.

Residence: Orlando
Hometown: Jacksonville
Position with Zerion: Vice President

What did you do before joining Zerion?
I worked for Hughes Supply as an Information System Manager.

What is a day-in-the-life like for you?
I spend most of my time managing the sales efforts for a division of our business that is focused on SAP Business One. I usually start my day by calling on prospects and piquing their interest in SAP Business One. Many of my afternoons are spent in meetings with potential clients, either overviewing or demo-ing the solution. This division has been about building relationships for us, and that's what I enjoy the most.

What is the best location you’ve traveled to for your job at Zerion?
Most of my travel is regional, but I traveled a lot more during my time at Hughes. San Francisco was my most memorable trip because I got to take my wife along. Before the conference I was attending started we got to spend a lot of time together exploring the city, which is what made it so special.

If there was one place you could visit in the world, where would it be?
Jerusalem

What do you like best about your job?
Having the opportunity to sell IT and business solutions like I am now has been the most fun I've ever had in my career. When you meet a prospect and you see that their business is in dire need of assistance, it makes you feel good to know that you can help solve a problem.

What is your favorite “customer success” story?
There are many that come to mind, but the most recent one was just the other day when one of our Eclipse consultants brought to light 300k in rebates that had not been filed for one of our customers (as referenced in our case study this month). Repeated results like that make me appreciate the value our consultants bring to clients.

How do you spend most of your time when you’re not working?
I am the coach of my 5 year-old son's and my 3 year-old son's soccer teams and it is a blast. Watching the little ones give everything they have is great. The best part is that after the game, their only concern is whose parents brought the Capri Sun and snacks.

What is a little known, interesting fact about you?
I am a trivia nut and have won multiple prizes by answering contest questions on the radio.

Favorite book or movie and why:
Guess Who’s coming to Dinner is my favorite movie because it was ahead of its time. It brought some real issues in America to the forefront that no one was ready to deal with. I believe that attention-getters like that make our homeland a stronger country.

In one sentence, describe your philosophy on life and work:
Passion for God. Passion for family. Passion for service. Passion for knowledge.

From the desk of Jack Whitwam When I reflect on the last few weeks, one word that comes to mind is: transition. We’ve been overwhelmed with media reports and opinions on two related stories, both of which will be major turning points in our lifetime: the election and the financial crisis. Regarding our country’s financial health, we’ve heard a lot of doom and gloom talk about everything from a most certain recession or depression, to what some are calling economic Armageddon.

Each morning when I’m trying to enjoy a cup of coffee and I hear these awful forecasts, the truism that surfaces in my mind is one that I use to guide my business life: “You cannot control the wind, but you can trim your sails”. Now, I know Tony used a sailing analogy last month, but since I actually do sail, I feel I can effectively revisit the idea. As a sailor, I know that a change in intensity or direction of the wind requires me to react. The question is, in what way? Do I put up larger sails or smaller sails? Do I trim the sails in or do I ease them out? Do I have to change the direction I am headed or attempt to stay MY course? All of these decisions are a required result of a change I had no control over; and that is exactly what we’re experiencing today.

Since I once owned an electrical distribution company, and many of our customers are distributors, I’ve been thinking a lot about what distributors should be doing when the winds of today’s economy are gusting so hard. We may not be able to raise or trim the sails to change course in quite the same way a sailor can, but we certainly have some opportunities to adjust.

The distribution business is based on getting the right product to the right customer at the right time, so you have much of your capital tied up in inventory. This is either represented by cash; or in some cases, you may be using up availability against your lines of credit. As a result of the current credit landscape, you can bet that some customers’ credit lines are tightening. They may be looking to you to hold product or take on some of this risk for them in other ways. While that may force you to shift inventory investment dollars in order to accommodate them, you have an opportunity to charge for that service in the form of higher prices. And there is no better time to attack and rebalance your inventory to free up credit availability and allow you to take advantage of this customer market opportunity.

Another service that distributors can offer is the granting of credit. I know that most of you have no desire to be a bank. And, I’ve heard the old adage the distributor tells his customers … “My banker and I have a deal; I will not lend money if he doesn’t sell toilets (or fill in the blank with your product).” However, the circumstances right now are better than ever for you to momentarily put on a banker's hat with your more credit-worthy customers. Adjusting your sail in this way can help you generate sales and enable you to charge higher margins for extended terms.

Both of these ideas demonstrate that there are ways for you to stay ahead of any financial crises, if you’re willing to change your course. But, either scenario demands better utilization of the technology tools available in the Eclipse software, such as inventory evaluation and replenishment, analysis, price matrix and credit limit adjustment. As always, the consulting team at Zerion is poised to help you trim your sails and take advantage of the tools available.

Jack Whitwam, President
813.758.6103

What’s happening with distribution, software and business?
Zerion is committed to being a resource for our clients and friends. In the newsroom on our Web site, we have an RSS feed supplying new articles all the time. We also have some links to industry news. Here are some of the recent articles we found most interesting:

HD Supply Honors Its Suppliers of the Year

German Study Finds Most RFID Deployments Deemed a Success

Aberdeen report indicates supply chain disruptions plague most companies

Grainger branches out in Latin America

Want more news? Visit us at: www.zeriongroup.com/newsroom/industrynews.html

Get a 50% off an RF site consult ...
RF installation if hot right now because of the productivity and accuracy enhancements it can bring. Don't miss this great opportunity to get half off an in-person consultation covering all aspects of how RF will work in your warehouse. This offer is only available for newsletter subscribers for a limited time.

Contact Tony King (321.229.1089) by November 28 to receive the discount.

Halloween Case Study: The Mystery of the Disappearing $300k
By: Lauren Giles, Consultant

It's Halloween and we couldn't pass up an opportunity to gather round the campfire and spook you with a horrifying story of missing money and the great team of spies who tracked it down. Zerion recently was approached by a client with a problem we often see in distribution: a difference in inventory valuation and the general ledger. The client had a short timeline to find a solution, and was looking for intense scrutiny of their operation in order to locate and resolve the issue.

Money Gone Missing
The client’s inventory valuation was vastly different from their general ledger, and the variance was continuing to grow. They believed they could be missing hundreds of thousands of dollars. This tends to be a common issue we see because the general ledger gives you the value at a particular defined cost, whereas your inventory valuation is taken from a different one (MAC, Avg Landed, Cogs, etc.).

Initially, this customer noticed a difference of $50,000. Within a couple of months, this number grew to an astonishing $300,000. Year-end was approaching and this ever-increasing number needed to be dealt with quickly. Writing the amount off was not considered an option. A small team of Zerion consultants was called in to immerse themselves in the branch operations and system information in an effort to uncover the missing funds.

Starting with Rebates
When our team first reviewed the problem, they thought the difference could be caused by their Customer Special Pricing (also known as rebates), because many of their customers had rebates on specific product lines. Our first step was to run the “Cost Override” report by month and download it to Excel to analyze the data. In this process, approximately $30,000 in missing rebates was found. This was a great start, but we knew there had to be more money out there to collect.

The team spent days running more reports, crunching numbers, and evaluating every branch process and procedure. It became apparent that the company was operating only on the bare bones of the Eclipse system, and not fully utilizing everything the software could offer.

Pricing Mishaps
One red flag along the way was with pricing. In Eclipse, when a PO is written, it extracts the price from the price sheet. We found that this client’s price sheets had some incorrect data. In these cases, it was up to the Purchasing Agent and/or Accounts Payable to recognize the error and work to correct it. The human element in this manual process sometimes led to a missed incorrect price. When material was received at the wrong (lower) cost and ultimately sold at that cost before AP or purchasing caught the mistake, the client would go back to the PO and change the cost to the higher and correct cost. However, the items already sold could not be fixed and the excess money (the difference between the true cost and what they received/sold it at) stays in your general ledger, creating what is called an “inventory drift.” We believed this too was contributing to the discrepancy between the inventory valuation and general ledger.

Sales Concerns
Another issue we uncovered was with sales. The salespeople had been noticing that sometimes their gross profit would negatively change after tickets were written. This occurrence was most often seen with commodity products, but not exclusively. We reviewed multiple price lines, product cost histories, and product reports to identify the source of the problem, but there was little consistency with the changes. We were, however, able to determine that their cost basis and parameters weren’t set properly. Different price lines pointed to different costs and often the cost on the sales order (Cogs or CommCost) was the same as the true cost (or REP COST). Since the salespeople had authorization to see all costs, they were not able to differentiate what should be Cogs versus cost. Their margins were set off MAC and as the cost of the items moved, it resulted in their perceived negative GP.

Back to Rebates
Even though we had overcome some significant challenges, we still didn’t feel we had justified the loss of $300,000. So we began looking at some bigger issues, such as where the majority of their revenue came from (specific lines, customers, etc.), and found that their rebates average 3.1 million dollars per year. Because this was such a large number, it made us re-consider our initial review of rebates. We had found some money in that process, and felt we could find more if we approached it from a different angle.

We began looking at the report structure and the way it pulled data in reference to the branches. In doing so, we found that their rebates were defaulting to another branch. Though we were looking at the right report, the report wasn’t pulling accurate data because it was looking in the wrong place. In this case, one mis-keying error led to multiple chain errors in Eclipse. Because the rebates were incorrectly entered, the claims to the vendor for rebates were wrong, and the reports were erroneously calculating the credits. They branch wasn’t seeing the full amount they could collect, nor were they receiving their full credit. Once this simple error was fixed, the customer was able to collect on $300,000 they were missing from various vendors, thus bringing their GL back to balance.

Conclusion
Rebates can be big business in distribution, and Eclipse has the ability to track and streamline your collection of them. However, rebates can be tricky to manage and set up properly. In addition, many inaccurate settings and authorizations in Eclipse can cause outright confusion and loss of productivity, or an unknown trickle of lost revenue. In this case, our team researched, discussed, interviewed and examined to not only help this branch find their missing money, but also to identify and resolve other issues they weren’t aware of in a total of just two weeks on site.

Tracker Stopwatch
Ever wish you could keep tabs on certain trackers in Eclipse? Shift+F10 in eterm allows you to start and stop a stopwatch list of trackers.

Upcoming Pricing Training
Zerion will be hosting a regional training session at Electric Supply in Tampa, Florida on November 20-21. To get more information or to sign-up, contact Kathy Williams.

Webinar Classes
Next month, Zerion will be announcing an ongoing schedule of webinar classes. You can sign up your team members to get them up to speed quickly and cost-effectively. To get more information, contact Kathy Williams.