In the golden age of HVACR distribution, wholesalers kept written records of their inventories.

Entire warehouses were scratched out on 3-by-5-inch notecards. When customers inquired about stock, a counterperson would walk to the cabinets, locate the card, reference its handwritten data, return to the counter, and share that information.

For many distributors, that "golden age" was their reality less than 20 years ago.

“In 1999, we were using a card-filing system,” said Chris Hendricks, quality assurance and operations manager, Duncan Supply, Indianapolis. “Employees would pull out cards from cabinets based on their item numbers. If the card said we had five of them in stock, then we had five of them in stock.”

Durham, North Carolina-based ACR Supply was “notching notecards” well into the mid-1990s.

“Employees would walk up and down the aisles and look at the shelves to see what they needed to order,” said Mark Bray, director of supply chain, ACR Supply. “We’ve come a long way since then.”

Today, HVACR distributors rely on enterprise resource planning (ERP) software to handle nearly every level of their operations. Vendor data, turns, dead stock, cycle counts, sales margins, and much more can be accessed directly from a computer or, in some cases, a mobile device.

But not all ERPs are built alike. And selecting the proper system is a long-term decision likely to stick for more than a decade.

“An ERP is not something you can just change whenever,” said Bray. “Selecting the right software is one of the most important decisions a distributor can make. You’re essentially married to your system for the long run. Until death do us part.”

Picking the Proper Partner

The global ERP market is booming. A Market Research Future report states the market will be worth $41.69 billion in 2020. A quick Google search for “HVACR Distribution ERPs” returns hundreds of options. So, how does one determine which system to select?

“Initially, the most important aspect of an ERP is that you want it to be easy to implement,” said Don Livingston, vice president of information technology, Johnstone Supply – the Ware Group. “In the long term, you want your ERP provider to become a partner that you can grow with.”

In 2008, the Jacksonville, Florida-based distributor found its solution and long-term partner in Epicor’s Eclipse system.

“The Epicor Eclipse is a great core system that allows us to effectively automate our processes,” he said. “Coupling this level of automation with RF [radio frequency] technology, we can have something picked and ready to go in minutes. Our customers know when they send an order to us that it’ll be waiting for them when they get here.”

The Ware Group has experienced incredible growth since implementing the Eclipse system, as the company now employs 350 individuals across 25 locations — 21 in Florida and four in South Carolina.

Epicor’s ERP solutions have become one of the go-to options for the entire Johnstone Supply cooperative.

“We have about 100 different independently owned members in the Johnstone cooperative, and 40-plus and counting are running Eclipse,” Livingston said. “A couple more are coming on in the near future. We’re a tight-knit group that likes to help our peers find success in their markets.”

Bolt-on Options

Following the retirement of Ken Duncan in 2000, Duncan Supply entered the world of computerized automation by installing an IBM I Series AS400.

“My grandfather was running the company, and he made sure he retired just before we brought on the IBM system,” said Hendricks. “He wanted nothing to do with computerized distribution.”

The company's AS400 ERP has been heavily customized and tailored by DPS.

“Our ERP has a handful of different extensions,” Hendricks said. “It interfaces with our barcoding warehouse management system, is integrated with our e-commerce offering, and uses a third-party CRM.”

Hendricks praised the system’s flexibility and DPS’s ability to quickly adapt the system upon request.

“DPS has essentially made this thing do pretty much anything we’ve needed it to do,” he said. “As our business has changed, we’ve made changes to our ERP. We tend to bring our problems to DPS, and they say, ‘No problem. That’ll be two hours of labor. We’ll have it done tomorrow.’”

Livingston said many of the Ware Group’s ERP benefits come from add-on products, like Conexiom.

“Before implementing the Conexiom add-on, we would receive information from our customers in all sorts of forms, including Excel files, CSV files, PDFs, text, etc.,” he said. “Our team was essentially keying in each order by hand, which was very clunky. Conexiom allows us to automate that, which not only saves us time, but it saves our customers time as well.”

The Ware Group serves as a test group for Epicor, which allows the distributor’s team to sample new software upgrades before implementing them.

“We’re currently rolling out Epicor’s PW2, its product data warehouse offering,” Livingston said. “We like to stay on the edge — maybe not the bleeding edge but as close to the edge of implementation as possible.”

Century A/C Supply, a 26-branch distributor based in Houston, implemented Epicor’s Prophet21 in 2008. Renata Morgan, Centuary A/C’s director of marketing & IT, said Epicor has put forth a lot of effort to make this platform as extensible as possible.

“We can run all of the departments in the company with this software,” she said. “It’s highly customizable, which has really helped propel our business. Our operations don’t need to fall into a cookie-cutter box of ‘here’s what we offer and nothing else.’”

Morgan said P21 brings a lot of potential to Century A/C's warehouses.

“Epicor is looking at incorporating things like voice assistance and artificial intelligence and has taken the software from a desktop application to a web-based application, which will open up lots of opportunities for us,” she said.

What’s the Expiration Date?

Over time, every distribution business will be tasked with replacing its ERP — a process sure to have a ripple effect throughout the entire business. The when and why surrounding this decision rest solely on the shoulders of each distributor.

ACR Supply currently utilizes Infor’s FACTS system and is strongly considering a system upgrade.

“There is functionality we want to get out of our e-storefront software that we can’t get on our current FACTS release,” Bray said. “Replacing our ERP — it’s not a matter of if but when. In the meantime, I’m very happy with the changes from the last release to what we’re on now, and I’m looking forward to when we can upgrade to the next one.”

Bray said the transition to a new ERP system is a risky endeavor for ACR, given the number of add-on services the company’s current system uses.

“Our system is heavily modified and features a lot of bolt-on software additions,” he said. “Will this cloud offering be able to adequately facilitate all of our process modifications? Sure, upgrading sounds good on paper, but if you can’t get it to work exactly how you want it to, that could present some challenges.”

If and when ACR replaces its ERP, Bray anticipates it will take the company up to 18 months to get up to speed.

“From cradle to grave, a new ERP is quite an investment,” he said. “If you migrate the data over and maintain a test system that allows everyone to learn the software before going live, you could probably get it done in six months with a lot of handholding after that. To fully utilize and implement it, I can see that taking 18 months.”

Due to its age, Duncan Supply also finds itself at a crossroads with its ERP software.

“We’re in a transition period,” Hendricks said. “Our current president is retiring this year, and I will be moving into that role. He’s made the comment, ‘Eventually, we’re going to have to upgrade this, and I’m glad I’m not going to be here for it.’”

With the proper amount of support, Hendricks believes his team could fully implement a new ERP system in 18 months.

“If we ever were to switch to Infor, the question would be how many people would be available to train us,” he said. “We have counter people, a controller/CFO, accounts payable, accounts receivable, marketing, etc., and all of them are using different elements. Then, how quickly could we tailor the new system to fit our company? I’m sure our productivity would take a small hit as we focus on learning the new system.”

While Century A/C Supply has no intention of changing ERPs anytime soon, Morgan estimates a full ERP replacement could take as long as three-plus years to complete.

“Going from our previous system to P21 was difficult because we were transitioning from such a limited system to such a robust system,” she said. “Our team spent a year mapping data and preparing for the switch. When the program was brought on, Century spent a considerable amount of time teaching employees the shortcuts and getting them acclimated to the software. From research to full-blown implementation, I’d say that process could take as much as 36-42 months.”

A Night and Day Difference

One year ago, Dallas-based Cate and Co. Inc. replaced its antiquated Unix menu-driven system with DDI System’s Inform ERP.

“Our old system was 30 years old and was extremely outdated,” said Brooks Cate, general manager, Cate and Co. “Our new system is so much more advanced; it’s really a night and day difference. It has improved every aspect of our operations.”

Cate and Co., which employs 20 individuals, can now manage customer engagement by combining its CRM with its daily operations, including order entry, quoting, delivery inquiry, and customer service.

“With our old system, we couldn’t even track sales orders,” Cate said. “We were having to type orders into an Excel sheet and then use that information to key in our sales orders into our Unix system. There was no connection, and it was a lot of work to keep track of everything. The Inform system tracks products and usage, allowing us to quickly query data about our customers, what they’re buying, and other trends. All of our financials flow through it as well. The system automatically keeps our general ledger clean. It’s really made us much more efficient.”

Cate said the upgrade has positively impacted how the company interacts with customers as well.

“We now have customers who use our web portal to order from us; they’re creating their own sales orders with us online,” he said. “They’re also using it to monitor their payables. It’s changed how we’re doing business for the better.”

Cate said he’s excited to dig even deeper into Inform’s interface going forward.

“We’ve become familiar with the operations side of the program, but we’re just starting to learn some of the reporting that’s available through the system,” Cate said. “We first had to learn how to use the system for our day-to-day operations, and now we’re just digging into some of the financials. Little by little, we’re teaching ourselves how to utilize the program, and we’re excited to see what the future holds.”

Choose Carefully

Distributors can run, but they can’t hide from ERP replacements. With the right amount of research, custom-tailoring, and bolt-on applications, the proper software can help catapult a wholesaler toward record profit margins.

“You can’t operate an HVACR distribution business without an ERP nowadays,” Bray said. “Sometimes people tell stories of how things were done before ERPs, and I tell them I’m not interested in working in those warehouses. I try to remind myself of that scenario when our upgrades or changes don’t work as planned. No matter how challenging the change may be in the moment, it sure beats the way things used to be.” DT

Publication date: 2/18/2019

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