Michaud: Distributors to Benefit from Retalix Involvement

The firm's foodservice distribution specialists, all of whom migrated to their new venue from IDS, speaking at their first joint International Customer Conference here this week, assured the distribution community that their needs are critically important to Retalix, an Israeli-based designer of synchronized supply-chain software. So much so that American distributorships, which currently contribute 12% to the publicly traded company's revenues, are expected to expand their in-house significance at Retalix's projected internal growth pace of 22%, the executives said.

Todd Michaud, executive vice president of sales and marketing, a former IDS executive with two decades of foodservice distribution experience who transitioned to Retalix, emphasized that the global software developer is aware of the American industry's importance to its profitability.

"Foodservice distribution is where a lot of the growth is occurring in the food industry at large. One of the things that made IDS appealing to Retalix is the fact that IDS had a strong presence in the food industry," Michaud said in an interview with ID Access.

The conference, which was based on IDS' successful customer conference model, attracted more than 700 distributors, c-store operators, and food and nonfood retailers along with representatives of more than 40 technology providers.

In addition to offering their customers a glimpse at how it will integrate its software packages with those of IDS, and two other recent acquisitions, TCI (a c-store applications developer) and OMI International (a supply-chain specialist), Retalix introduced two programs that its IT staffers said would enhance supply-chain synchronization and coordination as well as drive costs out of the process.

During a separate full-day session with financial and technology analysts and the media, Retalix ceo Barry Shaked said the company's goal is not only to synchronize operations within the four walls of a company, which includes its warehouses and retail locations, but among all supply-chain partners. By bringing solutions that will eliminate inefficiencies from the supply chain, Retalix would help its participants make more money, Shaked said.

Echoing IDS's mantra of non-obsolescence, Shaked noted that customer implementation of new technology would be driven by evolution rather than revolution so that existing or previous-generation systems are not outdated.

Michaud clarified this point during his conversation with ID Access, saying, "We're focused on protecting our customers' investments not just in the applications but we also have to be cognizant that the skills they possess are probably a far larger investment. As we continue to make investments in new technology, our customers have to be aware of how we're going to allow our end users to come along in an evolutionary way."

Retalix, founded in 1982, is visible in all buying environments, according to Shaked. It has installations in 33,000 retail establishments and 700 warehouses in 50 countries. Sales are estimated to grow to $185 million this year from $6.5 million since going public in 1996. The company's stocks are traded on NASDAQ and the Tel Aviv stock exchange.

With three acquisitions in 18 months, Shaked indicated that the firm continues to be interested in acquiring what he called "missing pieces" that companies need to run their operations successfully.

The United States currently accounts for 70% of its revenue and Shaked's expressed goal is to drive international sales to match U.S. levels, while doubling its global footprint in three years. With its U.S. operation based on the IDS structure, Retalix is maintaining eight locations in this country, with its headquarters in Plano, Texas.

Admitting that Retalix had no direct experience with foodservice distribution, Shaked nonetheless pointed out "with the IDS acquisition we began to understand those customers' pain better." He described the IDS customer base of distributorships, notably foodservice ones, as the "anchor" that would spur Retalix to introduce and enhance dedicated products.

According to Michaud, foodservice distributors stand to benefit from this arrangement. Retalix's financial strength has already positively impacted dissemination of the Power Enterprise and Power Warehouse applications.

"Six months into the acquisition and we're already seeing that Retalix has become a platform for growth for the entire Power Enterprise software user community. We're licensing more Power Enterprise software than we would have done if we had continued to operate as an independent entity. Retalix has been very good for our business," Michaud observed.

Vic Hamilton, ceo of Retalix USA, a veteran of 35 years in foodservice distribution and an IDS alumni, said 40% of the 150 leading foodservice distributorships were IDS customers, including six of the ID top 10. Michaud added that today Retalix has business relations with 30 of the ID Top 50 broadliners.

"We're especially strong with midsize market, regional distributorships," Michaud said. "I can assure you that Retalix invested in our people and organization because management wants to grow our position, not disrupt it."

Michaud explained that the real benefit for distributors would come from Retalix' supply-chain management expertise, an increasingly important industry battle cry and process.

"The real win for distributors as well as our customers' customers is the ability to connect them together and give them the advantage of understanding the true demand patterns at the store level and the ability to create electronic connections with their customers," he said.

An operations executive from an ID top 10 distributorship, who participated in a customers' roundtable at the analysts/media session, said the front office and warehouse systems it uses are involved in processes ranging from procurement to the operators' locations. Moreover, Michaud said the company is in possession of technology to connect all of the links of the supply chain, including supplier, distributor, operator and consumer.

"We understand consumer demands and we're able to interpret those demand patterns and leverage that information to optimize inventory and other supply-chain cost factors," he said.

Initially, Michaud anticipates that the industry would see benefits from the firm's investments in research and development associated with workflow management, profit optimization, business intelligence, yard management, and supply-chain enabling technologies that complement distributors' investments in their software infrastructures.

With distributors increasing their purchases of IT in general, Michaud intends to grow distributors' current 12% share of the company's revenue through more installations of new applications in addition to acquiring customers who are attracted to Retalix because of its up and downstream expertise.

The firm's business growth will be supported by a $40 million research and development treasure chest, which Michaud referred to as being "an extremely sizable investment."

"It's something that distributors need to take advantage of in order to compete with national and regional competitors," he said.

Growth will also be supported through innovations, hiring qualified staffers who comprehend the foodservice industry, and providing better and faster service, he added.

Taking a broad look at distributors' adoption of technology, Michaud observed that regardless of their size they need certain tools, with which to run their companies.

"Small and medium-size distributors have the capability to make faster and more decisive actions as to technology. If they're going to have a competitive advantage, they'll have to be deploying the technology in advance of the national distributors," Michaud said, noting that the advantage will be in enhancing their relationships with their customers.

"We've witnessed that those who adopt new technology first are the ones who get the first advantage and if you've adopted it last, then you've ceded those advantages to your competitors."

By implementing supply-chain management software, Michaud estimates that a distributor can eliminate 20-25% of redundant costs from the process. The financial gain for distributors, their partners and suppliers would be enormous, he added.

Retalix introduced at the conference two applications, respectively called Demand Analytx (DAX), an inventory forecast and replenishment program, and InSync, which will be available to the foodservice industry in the not-to-distant future. According to the company, the effect of these applications would be a 10-40% reduction in inventory, 30-80% reduction in out-of-stock items, and 20-50% reduction in spoilage.

"As our Power Warehouse and Power Enterprise customers stay current with our applications, they are going to start seeing the results of our increasing investments in research and development just by staying current with the products. We'll have an evolutionary migration path for them that will ultimately see them taking full advantage of our modernization efforts," Michaud said.


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