Calling All Skeptics
“When you automate something, you by definition make it a commodity,” said Dr. Barry Lawrence, a faculty member of the Industrial Distribution Program at Texas A&M University. A healthy dose of skepticism and caution is appropriate for most of the technologies promising to revolutionize industrial distribution, he argues, automation included.
That’s a pretty unusual perspective for someone so rooted in research and theory, but Lawrence isn’t the typical academic. Besides his ten years of sales and distribution experience, he credits his students and consulting clients with keeping him down to earth.
Lawrence, who leads the largest industrial distribution educational program and the only distribution research center in the world, will present a session on price optimization at MSCI’s Carbon Conference Feb. 20–21 in Chandler, Ariz.
Founded in 1956, the program at Texas A&M was formulated by manufacturers and distributors specifically for the needs of industry. “Because they made it so targeted on the industry, the program became wildly successful.” And, he says, it remains large and well-connected to the needs and concerns of distributors today. With more than 1,000 undergraduate students and 120 graduate students, it’s twice the size of any other program. And the Thomas and Joan Read Center continues to consult with distributors over the problems that keep them up at night. “We’re the 8,000-pound gorilla. We have a knowledge base and a knowledge creation base unlike any other.”
In a recent interview with Edge, Lawrence shared his expectations for four trends impacting the success of the metals supply chain.
First, automation has allowed companies that can collect data with integrity to optimize processes, leading to increased profitability and return on investment. It’s a trend that’s been going strong with proven results for 15 years—and the potential hasn’t run out, according to Lawrence. But there’s a hidden threat: “The more information management can lead to better procedures, the more information companies [i.e. Amazon] will become new entrants in the marketplace,” Lawrence explained. “That means the market begins to take on a new nature.” Companies that can invest in top-of-the-line automation will compete with a low-cost, commoditized product, and they’ll win. For the rest, working with customers on a more personalized basis becomes more and more necessary as firms rotate toward value-added services.
Speaking of investment, better get your house in order because ERP systems are the new table-stakes. If you can’t run a decent ERP system, you’ll be taken out. Why? Because an ERP system is the foundation for e-commerce and customer relationship management (CRM) systems—two trends that are barreling in the direction of industrial distributors everywhere. And if you thought ERP systems revolutionized the metals industry, you ain’t seen nothin’ yet. “ERP went after efficiency. These systems go after your customers,” said Lawrence.
But not so fast. Thus far Lawrence—and many of the corporations he consults—have found e-commerce and CRM systems wanting. And it’s no wonder many service center executives are dubious of the benefits of these trends, because so few of these systems are built on reliable data. “Nobody is happy with their ERP system if they’re being honest with themselves. We want to take advantage of data, but nothing can be done if ERP data doesn’t have integrity.”
His advice? “Be skeptical. Be careful. Don’t buy into empty promises. But these systems are coming—don’t let yourselves be caught flat footed.”