Magazine Article | May 1, 2003

Do You Have The Guts?

ID Technology took a leap of faith in 2000 when it made the transition from reseller to manufacturer of bar code printer/applicators and has already achieved more annual sales revenue than it did pre-2000.

Business Solutions, May 2003
Written by: Dan Schell
Combine Printer/Applicators With Tabletop Bar Code Printers

ID Technology (Fort Worth, TX) (IDT) is primarily a printer/applicator vendor specializing in labeling, coding, and marking applications. However, the company still sells other AIDC (automatic identification and data collection) technologies such as bar code scanners and printers. "We sell approximately 200 tabletop bar code printers per year," says Alan Shipman, VP of sales at IDT. "Almost all facilities that use printer/applicators also have a need for bar code tabletop printers for manual packaging stations."

For 10 years ID Technology has sold tabletop bar code printers from SATO America, Inc. (Charlotte, NC). (IDT also uses SATO print engines in some of its printer applicators.) Shipman says the CL412e and the CL408e are the most popular SATO printers IDT sells. However, he says customers with multiple types of bar code labeling needs are showing interest in SATO's new M84Pro series of printers. "The majority of our clients need only 203 dpi [dots per inch] print resolution for their packing labels," states Shipman. "The M84Pro series has that capability, but also can accommodate 305 dpi or 609 dpi printheads. Those higher dpi printheads are for applications such as those in the pharmaceuticals market that require detailed graphics or 2-D bar codes."

The M84Pro series can print up to 4.1 inches wide and has 18 MB of memory. These thermal transfer/direct thermal units use a 32-bit RISC (reduced instruction set computer) processor for printing up to 10 inches per second at 203 dpi.

Would you have the guts to start manufacturing the same product that brought you the most success as a VAR or integrator? You would need to hire staff, maybe move to a larger facility, and risk losing the majority of your customer base to your previous vendor partner. While not an appealing business strategy for most channel companies, ID Technology (Fort Worth, TX) (IDT) took such a chance in 2000 when it became a bar code printer/applicator manufacturer.

During the past few years, the company maintained its previous client base by focusing on bar code printing/labeling solutions for real-time inventory tracking and compliance labeling initiatives. Furthermore, to help increase sales from new customers, IDT recently became part of a larger company that includes packaging-related businesses.

From VAR To Vendor/Integrator
Becoming a printer/applicator manufacturer wasn't a huge leap for IDT. Company President Bob Zuilhof started the U.S. division of the printer/applicator vendor IDT previously represented. Other IDT staff members also had experience with the design and manufacturing processes for printer/applicators. The sales force was obviously successful selling this technology since the company had been named distributor of the year in 1998 by its previous vendor partner. Finally, the building IDT occupied already had enough extra space to accommodate a manufacturing line. Only some assemblers for the manufacturing line needed to be hired. The real challenge was finding ways to maintain the company's sales revenue while making the transition to manufacturer.

Printer/Applicators In The Receiving Department
"Our sales revenue shrank by about $3 million from 1999 to 2001," explains Alan Shipman, VP of sales at IDT. "It was a difficult time because we had such a large install base that still used our previous vendor's products. We not only had to convince them to switch to our printer/applicators when theirs wore out, but we also had to find other reasons for them to buy additional units."

One way IDT accomplished this task was to capitalize on customers' desire for real-time inventory tracking. "We started to see a greater demand for printer/applicators in receiving rather than shipping applications," Zuilhof says. He explained that companies commonly print bar-coded sortation labels (used for warehouse storage) and manually apply them to a pallet of boxes at a receiving dock. IDT designs systems that integrate with conveyors used for off-loading items from a truck. The company sells fixed-station bar code scanners (attached to a conveyor) for reading the product ID bar code labels of unloaded boxes and pallets. That bar code data is fed automatically into an inventory tracking or warehouse management system, providing real-time inventory visibility. A printer/applicator then applies a sortation label or a shipping label if used in a cross-docking (i.e. the movement of goods directly from receiving dock to shipping dock to eliminate storage expense) application.

"It is important for us to understand the automation flow within a plant," states Zuilhof. "For instance, if a company is manually packing and sealing a product, it may not make sense to install a printer/applicator because the operator is already touching the product. He may as well put a label on it, too. A desktop label printer would suffice in this situation." Currently, IDT is working with at least 20 customers who are installing printer/applicators for receiving applications.

Don't Underestimate Compliance Labeling Expertise
Compliance labeling (standardized formats for bar code labels mandated by retailers or vendors) expertise is something IDT has always offered customers. However, in recent years, this value-added service has become even more important for both IDT and its customers. "Bar coding has continued to grow in the United States because of the power of retailers' compliance labeling mandates," explains Shipman. "Thus, we have to know the details of the major retailers' compliance labeling initiatives because of the fines involved for noncompliance. Probably 99% of our customers have to adhere to some type of compliance labeling mandate." The company learns about these mandates through the Uniform Code Council (www.uc-council.org), the organization responsible for multi-industry standards for product identification.

One example of when this know-how helped IDT with a sale was with a pharmaceutical company that wanted to use printer/applicators for labels that could be read for sortation prior to palletizing. The company's generic cases required a retailer's preprinted compliance labels. Initially, the customer thought it needed two labels - one for the sortation function and one for the retailer. IDT showed the customer how to eliminate the preprinted labels and use one new label with one bar code to accomplish both needs.

Partner For Leads
By the end of 2002, IDT's sales revenue had risen to $18 million from $14 million the year before. Hoping to continue that growth, Zuilhof decided to sell the company to Pro-Mach, Inc. (Atlanta), a conglomerate of packaging machinery companies. "Each of the Pro-Mach companies offers niche technologies for the packaging industry," Zuilhof explains. "We're able to continue to operate autonomously while benefiting from cross-marketing with our sister companies." In fact, Zuilhof says IDT has already closed some deals that came from leads from other Pro-Mach companies.

There's no doubt about it: IDT's situation is unique. The company has made the transition from VAR to vendor look easy, with an expected $19 million in sales revenue this year. But a lot of factors contributed to this success - the company's past printer/applicator experience, internal staff expertise, and the guts to make such a move.