A Wholesaler Computerizes: A Case Study

Optical Distributor increases business 15 % with same staff, reduces errors 80 % with new order entry system.

Installing an automated order processing system has helped BIG Optical handle 15% more business with the same staff and cut shipment errors by 80%. BIG Optical is an optical distributor that provides next day delivery of optical products to optometrists, ophthalmologists, and opticians throughout the United States. The order entry process previously used by the company was paper-based until the invoice was created. So it was dependent upon paper order forms which could be damaged, lost or misread. Switching to a computer-based system handling order entry, billing, inventory and shipping has given the company 50% more order processing capacity without adding more staff. Even more important, the ability of the system to automatically check the accuracy of each shipment has cut the error rate from 1% to 0.2 %, greatly improving customer satisfaction.

By representing a wide range of optical product manufacturers, BIG Optical gives its customers the opportunity to obtain all their optical needs with a single phone call. The company has an outbound telemarketing staff making calls to generate stock sales but the vast majority of orders are incoming calls for specific patients. The majority of the company's business involves contact lens orders that are shipped from stock the same day. Nearly all of the balance are shipped the next day after overnight delivery from the manufacturer. This high level of service has helped the company grow to $36 million in sales from its beginning in 1981. The company now has 120 employees.

The previous order processing system was very paper intensive. Orders taken by the inside sales staff were written down on three inch by five inch forms. These forms were accumulated in a pile and periodically delivered to the warehouse. A clerk would use each form as a pick ticket and walk around the warehouse, select items for shipment and put them in a box. Each box would be brought to another room where billing clerks entered the product code for each item into a computer terminal. Product descriptions and prices were stored in a database and automatically entered on the invoice. The billing clerks also entered the customer's name and address and print the invoice and a shipping label. The invoice was then placed in a box and delivered to another room for shipment by courier service.

This system handled the company's early years very well but began to be overtaxed as the number of orders rose to more than 2000 per day. Occasionally the order forms would be lost. Other times, the inventory clerks would pick the wrong items from stock. Things got particularly complicated if an optometrist ordered four items and two were available from stock but two others had to be ordered from the manufacturer. This meant that the order form had to be saved until the next day when the out-of-stock items arrived. Another problem was the difficulty of determining whether items were in stock or not. Since inventory control was performed on a manual basis, the only way to know for sure was to intercom into the warehouse and ask a clerk to check. This was a time-consuming task for both the inside salesperson and the warehouse clerk.

In the rush to ship out the day's packages, it was difficult to verify that each package was correct. An average of 20 packages per day had some type of error. Likewise, the possibility of losing an order form, especially if it was not shipped on the same day, was always present. An additional concern was invoicing the customer for the wrong item which was possible because of the lack of a verification system. Another problem was that the only way to keep track of inventory levels was physical counting which was an enormous task since the company handles over 250,000 SKU's. The manual purchasing process was also paper-intensive and prone to errors. It was normally not possible to check incoming orders against purchases because of the huge number of shipments and difficulty in finding the matching purchase order.

In 1994, BIG Optical hired a computer consultant to study the company's operations and recommend a method of automating the entire order processing and accounting system. The consultant spent a month studying Wise's operation, made a list of all the required features and compared it to an independent survey of integrated order entry and accounting systems. According to the survey, there were three packages that provided the needed features. Wise invited dealers for each of these packages to make a presentation and selected the SouthWare Excellence Series® from SouthWare Innovations, Inc., Auburn, Alabama. The Excellence Series was selected because of its strength in sales and order entry, inventory and purchasing as well as it's strong financial accounting features.

Another reason for selecting the Excellence Series was its maturity. It was first released in 1984 and has been continuously upgraded and improved over that time. The Excellence Series runs on many different platforms including personal computers. UNIX terminals were selected for 65 of the users of the system because most of the company's employees do not need a personal computer and the cost of a terminal is much lower. The other 10 users run the system on PCs in terminal emulation mode. The local SouthWare Reseller was selected to customize the package to Wise's specific order entry processing needs. The new ordering process begins when the inside salesperson types in the customer's shipping address and alerts them to any credit difficulties. As the customer specifies each item, the inside salesperson types in the item number and can immediately determine how many of the items are in stock. This is a major advantage because some customers do not wish to order unless they are sure they will be able to receive their item the next day. The system also calculates the shipping cost so that it can be reported to the customer. If the item is not in stock, entering the order will automatically generate a purchase order to the appropriate manufacturer.

When the inside salesperson finishes the call, the list of items ordered prints out on a picking ticket in the warehouse. Orders from customers who are on credit watch print on the credit manager's office for review and disposition. The clerk picks each item as before and places it in a box that goes to the shipping area. The shipping clerk enters the picking ticket number into a terminal and removes each item from the box and passes it through one of 24 bar code scanners. The software compares the picked item to the order and issues an error message if the wrong item or wrong quantity has been scanned. The clerk enters a command after the last item has been scanned and the terminal then issues a message if any item is missing from the shipment. This system has reduced the number of orders shipped incorrectly to less than 5 per day. Since each error has a cost, shipping the incorrect items back to Wise and possibly annoying a valued customer, the savings from this improvement are huge.

If anything is wrong with the order, the checker goes back to the warehouse and obtains the necessary items. Only when all the correct items have been scanned in, will the printer in the shipping area print the invoice. The program that controls the scanner, written by the SouthWare dealer, is selected from the SouthWare menu and executes exactly like other SouthWare programs. Another custom feature added by the dealer is a routine that automatically determines the preferred method of shipment for each item based on the shipping destination and the time of day the order is placed. The time of day is important because each courier service picks up at specified times and the system selects the courier service that will be picking up next. Prior to each courier pickup, the system prints a shipping manifest for the service which helps to insure that no items are misplaced prior to shipment.

Purchase orders are automatically produced for any items not in stock and the order is held in the computer. At the same time, purchase orders are automatically issued to replenish stock based on preset minimums and economic order quantities. This provides for greater control over inventory levels thus reducing stock-outs and cutting the amount of time needed for physical counts. The purchase order is faxed or sent via EDI to the manufacturer around noon and the manufacturer normally ships the items to arrive the next day. Additional pick tickets are then printed out and remainder of the order goes through the same checking process as the original.

The dealer assisted with user training and the system went live in May 1995. An additional three months were required to enter all of the 250,000 item descriptions and corresponding UPC/OPC codes. The excellence Series has proven to be an excellent tool for working with the huge numbers of orders processed by Big Optical. The company maintains 250,000 SKU's and processes 1,400,000 invoice line items per year. The system provides excellent response time.

In summary, the new SouthWare order processing and accounting system has greatly improved efficiency at BIG Optical, setting the stage for its continued growth. The inside sales staff can now provide better service because they have all the correct information they need at their fingertips. Accounts receivable management has been improved and credit problems have been significantly reduced. Inventory control has been improved which has increased the percentage of orders that can be shipped the same day. Shipping errors have been greatly reduced which improves customer satisfaction and cuts the expense of correcting mistakes. Finally, management of the firm has better access to information which helps them to identify problems and business opportunities and make corrections and take initiatives faster than before. As a result, the company expects to continue on its growth path while adding far fewer people than would otherwise be necessary.

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