Effect the Next Generation has on the Family Business

Home / Effect the Next Generation has on the Family Business

When I met the president of a large electronics distributor, he told me that the reason he agreed to meet me was because I was was highly recommended by his accounting firm. Next, he informed me that in the past he had had a bad experience buying new ERP Software. His computer manager, who wanted to stay current with the new technology, talked him into buying complicated and expensive ERP Software that Fortune 500 companies use. Two years later, after spending a substantial amount of money, the president decided to cut his losses and use his old software because his personnel couldn’t learn the new ERP Software.

The reason why his accounting firm insisted he should buy new ERP Software was because a substantial amount of misplaced inventory was found in the warehouse when the yearly physical inventory was taken. It resulted in the bank decreasing his company’s line of credit, forcing the president to go to the secondary market and paying higher interest for the loan.  

Working on long term relationships, I maintained contact with the president and once a month we had dinner discussing his various business issues. At one of our monthly dinners he told me that his son, who had just gotten his MBA from an ivy league university, refused to join his business because the company had an outdated computer system and asked me to meet him. 

The meeting took place the following week. When I arrived, the president introduced me to his son and we went into the conference room. I was surprised to see all my published articles on the long conference table. When I commented on this, the son told me that his father had spoken highly of me, suggesting we should meet, and the day before he had spent a few hours reading my articles that had been published in prestigious magazines. When I told him that he was the first person I knew who had read all my articles he said, “I did my homework so I would know with whom I was going to meet.” At the meeting the son shared with me the issues that his father’s company faced that prevented him from joining.  

  • When new inventory was received at the warehouse, shelves were consolidated and the computer records were not properly updated resulting in inventory being misplaced. 
  • The lost inventory was not found until the physical inventory was taken at the end of the year and couldn’t be sold because the electronics world was changing rapidly. 
  • Incorrect items and quantities were shipped resulting in high returns and charge backs by the department stores. 

When his father heard this, he told his son, “I have been in business fifty years and it’s the cost of doing business.” The son, who was upset replied, “I didn’t get my MBA to work in a business that has an outdated computer system.” 

When I told the son that the company, I represent has modern ERP Software and that our clients achieved 99% inventory accuracy in the warehouse and reduced errors on orders shipped by 99.95%, he agreed to have the demo. It resulted in the president purchasing ERP Software from the company I represent and his son joining the business..   

The Results Achieved from having Modern ERP Software 

  • Inventory Cycle Count: on a weekly basis locations were scanned. If misplaced inventory was found, physical inventory was taken and the computer records were updated. That eliminated the need to close the warehouse at the end of the year to take a physical inventory.
  • Radio frequency guns: Inventory received, picked and shipped was scanned, and the computer records were instantly updated making the information available to the end users.
  • Sophisticated Website: Customers placed orders, revised them and viewed the inventory status. The remote locations and Sales Reps had real-time information of computer data. It resulted in fewer calls to the Customer Service Department enabling it to better address customers’ issues.
  • Analytic Information: The management team had real time dashboard information of every aspect of computer activities enabling them to make better business decisions.    

Acquiring New Companies

The son, realizing that the only way the company could grow was by acquiring competitive businesses, spoke with his father about this. At first his father was reluctant to do it, but his son explained that in today’s business environment it would be difficult to grow the company without doing it, and that acquiring new businesses would increase the company salesforce and customer base. 

In order to integrate the acquired companies’ information with the host computer, the son used the software house I represent to do the data integration. Today the company quadrupled its revenues achieving 99% inventory accuracy in the warehouse and reducing errors on orders shipped by 99.95%. The company success story became a model in the industry and the president, happy with his son’s performance, started taking long overdue vacations and letting his son run the day to day operations.     

About SMC & Dani Kaplan:

Since 1980, Dani Kaplan has worked with Manufacturers, Distributors, Food Distributors and Food Processors, Lumber and Pharma industries as the trusted advisor, helping them lower their operating costs, streamlining their operations and controlling inventory.

Dani can be reached via SMC – http://www.smcdata.com/contact