Thursday, April 22, 2010

IT and Purchasing (tradecraft)

Our various suppliers are working to upgrade their systems in hopes of streamlining order processing. Most are intent on web based ordering. Here are the three scenarios, and why I think most aren't on the right track:

Person-to-Person: In this old fashioned scenario, I either call on the phone or send a PDF of a purchase order to my suppliers. The PDF is automated on my end by various factors, such as re-order points set in my POS system. I then "prune" my PO based on my budget and special considerations. For example, I need extra card sleeves and boxes for this weekend, since it's a Magic release. Once this PDF is sent off to my distributor in an email (some stores still fax their po's, possibly a hand written list on the back of a napkin), they manually type in all this data. "Monkey pound keyboard" is our usual joke about this. This is fairly labor intensive for both parties, but especially for the distributor. Most of the errors are theirs to make. On the positive side, problems can be corrected, out-of-stocks substituted, and product up-sold by my sales rep.  A lot of industry information is transmitted in these phone calls. For example, if something isn't available, I can learn why. There's usually a story, and it's how I learn a lot of what's happening in the trade. It's how ordering works with Games Workshop, Wizards of the Coast and my primary distributor, ACD, along with all the tiny little specialty suppliers.

Web Entry: This is considered the current "state of the art," in which I generate a purchase order, and then search for items on the vendor website that match my purchase order, entering in required quanitites. This is actually the most error prone method for the retailer, as we're taking a perfect purchase order and attempting to match it to another system with none of their feedback. Codes may be different between suppliers, descriptions look similar, and I'm usually multi-tasking while I'm doing it. This method is the most error prone, and worst of all, all the errors are inevitably my fault. I gain no information from the process, such as why something is gone, when it will be back, what I might buy instead, or what's coming out soon from that company. Those who don't have a system like this are working hard to develop one. It's a dead end, I think.

Computer-to-Computer: This technology has been around for almost fifteen years. It involves my computer taking the contents of a purchase order and processing it with the vendors system. This is done using an open standard called Electronic Data Interchange (EDI), and it's integrated into the better point-of-sale systems, such as Microsoft Retail Dynamics. The chance of error is zero, although you still don't get the advantage of substitutions and up-sells. It would save the most time for everyone while removing the errors. Perhaps the best system would be this model with a follow-up call from a sales rep. Diamond currently has such a system in place, and Alliance (their smaller game appendage) is supposedly working on EDI. Alliance is the largest distributor, so my hopes are that they'll lead the way. My suggestion to suppliers is to follow Alliance once they have their new system in place and skip the web entry model. If you've got web entry, closely watch the development of EDI by Alliance and figure out how to take advantage of it.

Requisite Game Trade Excuses. Why don't we have this now? Part of this is the slow adoption of technology by many comic and game stores. Quite a few use simple cash registers. A few years ago it was estimated that only 20% had point-of-sale machines of any kind. With such low usage, why invest money in something as complicated as EDI? Again, we see that alpha store phenomena showing its head, wherein only a small percentage of game stores operate like real businesses. Nevertheless, a company like Diamond/Alliance can force the issue to some extent. My advice to everyone else is to ride in their wake.