Like many companies, Lawson Products, an industrial distributor of maintenance and repair products, operates its own supply chain and is a part of other companies’ supply chains. In both cases, technology makes a big difference.
Lawson, a $275 million Nasdaq-listed company, sells things like nuts, bolts, fasteners, and chemical products. At customers’ production sites, Lawson maintains a supply of its products that customers use regularly enough that they would risk production shutdowns if they ran out.
Lawson sales reps scan the product bins with a Motorola device to determine how much product a customer has on hand. The device interacts with custom software that automatically generates an order. “The rep doesn’t have to manually input anything or do anything other than scan the bin and transmit the order,” says CFO Ron Knutson. “It’s a seamless process.”
At its warehouses, Lawson uses a type of scanning technology called CubiScan, provided by software firm Quantronix. Lawson scans all of its products—it currently has 55,000 SKUs — to record their dimensions and weight. Then, as orders come in, the software selects and sends to the packing line the appropriate shipping box to accommodate the size, shape, and weight of items included in the order. “This is fairly new technology, and if CFOs aren’t using it, they should be,” says Knutson. “It avoids a lot of labor cost.”
The company recently began cutting additional labor costs through a process known as cross-docking, which Knutson says has been growing prevalent at distribution centers. Cross-docking is a system by which high-demand products are shipped out almost immediately after their arrival without ever being stored.
“It limits the number of times we touch the inventory,” the CFO says. “How much you save depends on how much you can cross-dock, which might be only 5% to 10% of your inventory. But that’s the way distribution companies drive earnings, by taking out nickels and dimes.”