All Systems Go: The Distributor Tech Arms Race
More than a dozen people are gathered in Vera Muzzillo’s living room. On a muggy June afternoon, Proforma staffers and guests from PPAI and PPAI Media enjoy conversation, blessed air conditioning, a floor-to-ceiling view of Tampa Bay and Chef D’s hot cinnamon rolls – the best cinnamon rolls anyone has ever made or will ever make.
The conversation revolves around one of the host’s sincere passions. Over the last several years, Muzzillo, CAS, the Proforma CEO, has invested more than $15 million of the company’s money in a tech solution called ProVision.
Billed as Proforma’s fully-integrated business management technology platform, it’s otherwise known as an Enterprise Resource Planning system (ERP), and the underpinning of a company that has firmly established itself among the five largest distributorships in the promotional products space.
In an industry where large distributors increasingly compete on the strength of their technology, ProVision is not the icing on the cinnamon rolls for Proforma. It’s not some secret ingredient baked into the batter.
It’s the cinnamon itself. The main ingredient.
As the promotional products business accelerates its modernization, a great technology system is the reason an individual salesperson might leave one distributor to join another. A great technology system might allow them to work with minimal friction, leading to more closed deals, decreased overhead costs, fewer headaches and greater success.
Muzzillo says she believes Proforma is the tech leader in the industry. To hear it from her and Proforma Chief Technology Officer Brian Carothers, Provision is the best ERP anyone in promo has ever made or will ever make.
It being Muzzillo’s living room, that doesn’t lead to any disagreement. But the whole industry wasn’t in that room that day.
And there are a lot of different ways to make cinnamon rolls.
What Does An ERP Do?
- Workflow Planning
- Data Analysis
- Web Automation
- Inventory Management
- Financial Reporting
- Customer Resource Management
- Human Resources
- Production Processes
One of the paradoxes of running a successful business is that growth will typically create problems, albeit the kind of problems that most companies strive to have.
Fortunately, technology is constantly improving on its ability to alleviate, solve or even prevent many of the dilemmas that come with success. To balance orders from a large number of clients at once, to communicate with those clients easily, to potentially provide a variety of offerings with unique customizations – all of these things require a sophisticated workflow platform. Not to mention accounting programs.
All promotional products companies of a certain size understand that there are countless logistics that go into everyday business, and the industry’s increasingly tech-savvy distributors know that ERPs play a big part in creating organizational flexibility.
Perhaps most important when considering the industry’s competitive landscape, the quality of a firm’s ERP can be an enticing factor for a sales team looking to maintain a profitable relationship with clients.
Ensuring that quality is no easy task, especially when you are trying to be specific to your company and your clients’ needs. Many companies, both in and outside of our industry, struggle to find and implement an ERP without serious complications along the way. Moving to a new system can be extremely costly and time-consuming.
But, as the need for these systems grows, the larger distributors in the promotional products industry are seeing the value of ERPs, with many viewing them as a competitive advantage; the better your system, the more your business and its individual salespeople are capable of achieving.
Most of the industry’s largest distributors have highly customized versions of established, off-the-shelf ERPs from companies that provide technology for many industries, such as Oracle NetSuite or Acumatica.
Meanwhile, promo industry business service providers like Essent, commonsku, Facilisgroup, SAGE and others can provide the majority of what certain distributors need.
When it comes to ERPs, it might not be about which distributorship has the best system but whether a firm has quality solutions for its unique problems.
Building From Scratch
If you want something to fit your needs, then perhaps the best route might be to build or customize it yourself.
Increasingly, that is becoming the path taken by some of the industry’s largest distributors. It should be noted, however, that by and large, it is only those companies operating on a much bigger scale than the rest of the industry that are able to take on such a task. Building and customizing an ERP from the ground up could potentially cost a company hundreds of thousands, or potentially even millions, of dollars.
Large distributors like Proforma, iPROMOTEu, Geiger and others have essentially created proprietary technology specifically for their companies’ needs, and customization is indeed the No. 1 reward. Each would argue that their system is the best for one reason or another.
“The strongest attribute of our internal system is the flexibility and speed at which we can make changes and/or add functionality,” says Dave Kneram, iPROMOTEu’s vice president of technology.
Proforma reaps the same benefits with their system. Others say likewise.
“We built with the latest framework and the latest language,” Muzzillo says of Provision, which is supported by a Proforma technology team of nearly 80 people. “It’s all customizable. We can plug anything we want into it. We can build anything we want off of it. Everything that someone says is important to them, we can make it a part of it.”
In the minds of these DIY companies, the “off-the-shelf” offerings available for purchase are outdated, and while that’s likely a less expensive option than building your own, it is still a significant expense for something that might not perfectly meet their needs. How well those available ERPs work for your company may change as you grow.
“iPROMOTEu started with a third-party ERP product in 2002, which met our needs at the time,” Kneram says. “However, as our affiliate base grew, we increased our back-office support offerings and customized the product into our own ERP system that provided added features and ultimately a competitive advantage.”
This is not just a matter of ambition for companies of this size. The reality is that they are operating on a very large scale and are designing ERPs for exactly that reason.
“We built the platform from the ground up for the multimillion-dollar distributor,” Muzzillo says. “We didn’t build it for the under-$1 million distributor. We figured if we built it for a multimillion-dollar distributor, then it would work for the smaller distributor.”
A Mix-And-Match Approach
If customization and flexibility is the ideal result of an ERP, then it would make sense that how one gets to that result should not necessarily be binary. It is possible to invest financially into the development of a unique system without creating a full proprietary ERP.
For the past 20 years, HALO has used a combination of custom and configured off-the-shelf technology solutions.
“We find this approach provides the best balance of unique features and capabilities while using available technologies and tools to support more standard features and functions,” says Kevin Pollack, HALO’s chief operating officer and executive vice president.
Even for a distributorship the size of HALO – the industry’s largest in 2021 – this approach works. It still allows for e-commerce solutions that provide the customization of artwork, kitting, buying group allocation and multi-ship options. That customization isn’t just about avoiding a headache. It’s how they aim to get a step up.
“We see best-in-class technology tools, including ERP, as a requirement when recruiting sales leaders and customers,” Pollack says. “Unique features and capabilities, along with the ability to support multiple services, turns a requirement into a competitive advantage."
Don’t Underestimate PPAI Business Service Provider Members
It’s important to remember that PPAI-aligned business service providers succeed based on their ability to help promotional products companies solve and avoid problems. They focus on our industry and exist to address the complexity of workflow, which meets the needs of thousands of industry participants.
A company like commonsku, for example, can provide the majority of what a traditional ERP provides, with the exception of accounting.
Catherine Graham, commonsku’s CEO, understands the chaos and complexity that go into a promotional products company’s logistical operations once they reach a certain scale. There are so many moving parts.
“That is where software is obviously such a game-changer in terms of how it can enable the distributor,” Graham says. “But it’s also where implementing a complex ERP that you’re having to build all of those kind of workflows and complexity from scratch is extremely difficult.”
Likewise, Facilisgroup offers a workflow solution for companies that have run into a logistical ceiling that perhaps they were not expecting.
“That’s more for someone who’s maybe a little mature of a company that’s still looking to potentially grow, but maybe they’ve maxed out their bandwidth with their current processes, and by using our software, it gives their teams so much more time,” says Jim Manno, Facilisgroup’s vice president of marketing.
“It’s obvious the vast majority [of promo companies] are mid-size or smaller, and there’s only a certain percentage of the industry that ultimately could afford or even consider going down the path of customizing something from scratch,” Graham says.
Of course, Graham believes in what commonsku and others might have to offer, and she also fundamentally disagrees with the notion that, in the future, competing with the biggest distributors will require building your own ERP.
“I think it’s going to be a requirement that they have a sophisticated technology stack,” Graham says. “That doesn’t mean they have to build and customize their own. I categorically do not think that is a requirement.”
Perhaps most notably, Graham pushes back against the idea that a company needs its own ERP for the reason that its problems are solely their own.
“I think there’s a misconception by larger distributors that they think that their workflow is unique just to them,” Graham says. “And what I would argue is that workflow for the promotional products industry is workflow, period.”
Manno agrees that the point of any system is simply to make a business more efficient, and each company must determine what that means for its own present and future.
“It’s just bringing technology to the forefront and helping distributors of all sizes,” Manno says.
Business service providers typically focus on the fact that promotional products are a sales-driven industry, and they are most likely to help you with solving problems directly related to that end. PPAI provides every PPAI member a license to SAGE, which includes order management and other features designed specifically for managing orders in the promotional products industry.
Mileage may vary on the uniqueness of a company’s problems, but the point stands that any company’s investment in software should be focusing on the problems they truly face or will face, and not specifically what their competitors, large or small, are doing.
In The Future
The nature of technology is that no advantage is permanent.
Digital solutions will continue to evolve, becoming both better and cheaper, which makes them more attainable for small firms. At the same time, maintaining data security becomes ever more important, as cybercriminals have increasing tech sophistication of their own, and security standards, such as PCI compliance, evolve in parallel.
This all combines to only deepen the need for ongoing investment and attention.
The larger firms and service providers add value to the promotional products industry by spreading the return from their tech investments among thousands of users.
This is the good fight. And in the promo industry, it is undoubtedly the battleground of the future.
“If you’re on a college campus today, they say every company is a technology company” Muzzillo says. “That’s the reality. That’s where the world’s going.”
Speaking Of Security
It may not be the sexiest facet of a company’s technology stack, but security systems play a vital role. This year alone, a handful of unfortunate instances show how distributors are at risk from cybercriminals.
- In May, Washington-based distributor Color Graphics reported multiple breaches when an attacker who had access to the company’s passwords cost it $35,000 in false orders.
- Also in May, HanesBrands – which does business in the promo industry as suppliers Hanes/Champion/ComfortWash and Alternative Apparel – reported a ransomware attack to the Securities and Exchange Commission.
- In September, Houston-based supplier Hirsch Gift reported two instances of distributors logging fraudulent orders from criminals posing as their past clients, each costing the distributor more than $50,000.