It was 1983 when floor covering retailer Terry Wheat of Tuscaloosa, Alabama, decided that there must be a better way to manage his retail store. That’s when he set out to develop the perfect software package. The result of that effort was RFMS, which in 2022 acquired by Compusoft + 2020.
I have been puzzled for years why technology in the flooring sector has been so slow to catch on, which is why I called Terry to get his take on the subject. The following are excerpts of the resulting conversation we had with Terry on this topic, which you can listen to in its entirety below.
TalkFloor: Many guests over many years on this podcast have made the statement that, from a technology standpoint, retailers in the floor covering industry have lagged behind their counterparts in other industries. What are your thoughts on that question?
Terry Wheat: There is a great deal of truth to that. From a technological standpoint, I don't think we've advanced as well as we should have over the last 30 years. When you go into the average floor covering store and look at the technology being used it is definitely behind many other industries. In turn, go into a restaurant and you most likely will see the server taking orders on some kind of an electronic device. Entering an automobile dealership, you would find everything done with an electronic device. We still do a lot of things the old paper and pencil way and, yes, I would say we are behind a lot of other industries.
TalkFloor: What percentage of flooring retailers would you estimate use industry-specific software and not QuickBooks or similar accounting packages?
Wheat: That's a hard question to answer really, but if I had to guess, I would say it would be in the 45% to 50% bracket.
TalkFloor: Now how about the Floor Covering Business to Business (fcB2B) system. What would you estimate as to the percentage of retailers on that system?
Wheat: Unfortunately, that number is probably more like 15%. It's not a high number that are really using it as efficiently as they could, it has been a hard thing for many to adopt to it, getting away from the old way of picking up the phone and calling somebody or sending an email.
TalkFloor: Talk about the advantages to retailers of using industry-specific software.
Wheat: It really helps retailers control their businesses, giving them the ability to do the things that need to be done when they need to be done. As the founder of RFMS, I’ll say it was built in to help retailers continue to grow. Having industry-specific software that speaks the language of the industry and provides efficiency while being able to produce an order and then transfer the data without touching it or altering it is very important. Numbers don't get transposed. Whatever was sold to the customer is going to get ordered because the skew came from a product catalog distributed by fcB2B, the vendor’s skew number. You don't order 32 feet when you're meant to order 23, because the system puts the number out there correctly. Because the product catalog is used to produce the order that product catalog is producing the information on the purchase order. The quantities sold are the quantities ordered. It just eliminates so many errors.
Once the sale is processed and the order has been put together, you push a button, and the PO is sent within seconds. Better vendors are responding and sending the dealer the information they need. At Central Alabama Flooring, we're processing about 50% of our purchases via fcB2B.
TalkFloor: Talk about the advantages a retailer using industry-specific software has over his counterpart that does not.
Wheat: What impacts Central Alabama Flooring is our ability to control the whole process, the delivery, the purchasing, and having the tools that let us know what we need to do and when we need to do it. And it works seamlessly. I don't know how we would be able to manage a project like the floor covering industry creates if we were not using RFMS.
Adding the fcB2B component to industry specific software is tremendously efficient in getting the procurement process completed, processing accounts payables, getting the correct cost assigned to the order and proper postings to the general ledger—all of which are very critical functions. Let me also add something that has been very critical over the last few weeks and months with the tremendous amount of cost changes and price increases we have seen. Being able to get those changes done electronically and being able to process them so their showroom is properly priced ensures retailers don’t lose margin. I don't know how anybody over the past few months that doesn't have the ability to get their product catalogs integrated into their system and price their product electronically could be able to keep up with costs and avoid margin shrinkage because costs as you know have gone up unbelievably and not just in flooring.
TalkFloor: What would you estimate the advantage at the bottom line for retailers with industry specific software?
Wheat: I think there is a 2% to 3% difference at the bottom line. And I know one individual that has been very successful using our software, he would put it 4 to 5 points on the bottom line by being able to implement the processes. But like anything you have to take the processes that are there and use them. If you try to circumvent situations, you may not be any more successful. The system needs to be used as it was designed, and dealers have to apply fcB2B functions. If that is done retailers will see huge opportunities and will become much more efficient and proficient, all of which contributes to their bottom line.
TalkFloor: When a retailer using industry-specific software decides to use fcB2B, what sort of advantages do you think they may see at the bottom line?
Wheat: If you have to pick up the phone and place an order, a real-time study shows that its costing somewhere between $15 to $17 per purchase order (PO), including the time you are on hold and get everything handled, by the time you get it done, you still have things that need to be keyed in. The same thing is true with email. If you take the time to email the order, wait for an email response, monitor the email response, and key in the email response information. We found this method costs between $10 and $12 cost per PO.
If the retailer is able to enter the PO electronically with fcB2B, you're looking at most a cost of $3 per PO, and that really is the cost of building the order line. The savings of using fcB2B are substantial. The same thing is true for vouchering and inventory. The process is so much faster than doing it manually even though you may be using technology.
All this rides however on getting the product catalog—that’s where it all starts. At the beginning make sure your suppliers, manufacturers, distributors, or retailers can get their product catalogs electronically, that is the key to controlling the process of costing and pricing your floor. All that needs to be controlled. The product catalog is critical.
TalkFloor: We talked about the advantages a retailer can enjoy by using fcB2B, what about the manufacturer? What sort of savings can they realize by using fcB2B?
Wheat: You would really need to talk to them to get an accurate reading, but if they can receive a PO electronically instead of having an individual read an email or pick up a phone and then respond to a request any of us can reason what the savings would be. How many POs can a manufacturer's customer service person manage in an hour? If they have to open an email, respond, gather the information from their ERP system, then give it to the dealer. The question is how many can they do in an hour? Ten? One every 10 minutes, one every five minutes? I don't know, but software can be written on the manufacturing side that can fully process it within 30 seconds. It’s just a matter of doing the math. Anybody can see what the savings would be. Unfortunately, there are only three players in the industry certified by the fcB2B standards and they are RFMS, Dixie and Mohawk. It would be great to see more participating fully with fcB2B.
Currently manufacturers are making efforts to move dealers to place orders on the manufacturer’s website, which means dealers have to key all of the same information into their system, leaving the dealer with the same work as phoning in an order. Granted the dealer keys in the product, the catalog will find the skew, so it most likely will be correct, however it will not keep the dealer from transposing 52 into 25. These types of errors still remain. Plus, the dealer has to key in the information twice. The manufacturer and distributor may save time with this approach but look what it's costing the dealer. With fcB2B everybody wins. And, because it's done electronically on both sides, no one is doing the work for the other.
TalkFloor: Why has the adoption of technology in the industry taken so long? Why do retailers and suppliers resist moving to industry-specific software?
Wheat: You have to remember, the floor covering industry has a lot of older owners and managers. There is however a new generation coming into the industry and we are seeing them adopt technology much more quickly than the older folks. It's often difficult for the older generation to really understand what the technology is doing and really get comfortable with it. The good news is, most every older person currently has some kind of a smartphone, which brings them better understanding from a technological standpoint. Going to trade shows today helps everyone see how a lot of people our age are learning about new technology, how to use new apps and new technology. Often, it’s not an easy process for baby boomers.
Look around the manufacturing sector, there is still a sizable amount of older people controlling and running things. But as the newer younger generation comes into the picture things are changing.
It has been amazing at RFMS over the last three years with the younger group taking control, what that company has been able to do with the production of new apps that really reflect the thinking of a younger generation. I feel moving forward, we will be seeing things change considerably. But until the older group moves along and the younger group comes in, we will continue to have a bit of resistance to the technology that's available today.
TalkFloor: FcB2B has been around 15-plus years. It's in place with both the buyers and sellers. Basically, somebody could click a switch and change this overnight by perhaps offering dealers a discount for placing orders via the system. Why hasn’t the manufacturing sector made this happen?
Wheat: That's the $64,000 question, and that's something they would have to address. Many of them have done a great deal to promote it, but I think the real key moving forward is to get to the position where the product catalog is readily available to people for their apps so they can use it on their iPads and devices of that nature. I do think you'll see a move in that direction. I know from what I can see happening in the industry and what I can see happening at RFMS, I know having the product catalog available to applications is a goal everybody wants. That means a great deal to the dealer. In our stores it's amazing how quickly anybody we hire under 40 years old adapts to the technology.