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Digital Inc. When Todd Gifford’s grandfather incorporated Dee Electronics Inc., in 1959, Eisenhower was president and the United States was competing with the Soviet Union in the space race. Forty years later both Ike and the U.S.S.R. were history. But in Cedar Rapids, Iowa, a Dee Electronics distribution center was operating much as it had in Gifford’s granddad’s day. Of course, the company itself — which distributes industrial electronic, electromechanical, and electrical components — had changed dramatically since Dee Gifford had managed the business with a handful of employees, 3,000 to 5,000 items in stock, and 20 local customers. By 1999, Dee Electronics was a $23-million business with 62 employees and was selling 50,000 items, such as switches, fuses, and circuit breakers. It had a range of large and small customers, including computer makers and telecom companies. But though time had marched on, Dee’s nine Cedar Rapids warehouse workers still shelved, retrieved, packed, and shipped parts the old-fashioned way. Todd Gifford, the company’s president, sums up the essence of the low-tech process in one word: paper. Every component that Dee sold generated its own trail of documents, from the part’s arrival at the plant until its shipment to a customer. With 35,000 items in stock at any one time, the business produced tons of records. Lose a record and you’d also lose the part associated with it; you’d know only that it was somewhere in the cavernous 37,000-square-foot facility (if you knew it existed at all). And with thousands of components and thousands of pieces of paper moving around the warehouse every day, parts went missing or were shipped in error too frequently for Gifford’s taste. He viewed the lost time not just as a private headache but as a stumbling block in the race to keep customers satisfied. The company also needed to keep costs down in order to maintain competitive prices. “But you can only get so cost-effective by moving paper around,” Gifford says. “You can’t do it faster or you’re going to make more errors.” At the same time, Dee’s customers — which, to keep their own manufacturing costs down, were no longer warehousing a large inventory of parts — increasingly demanded that the materials they needed be shipped to them on a just-in-time basis. They didn’t like delays. And they wouldn’t tolerate mistakes. In 1996, Dee had taken a step toward modernizing its inventory management by instituting a bar-code identification system. But that effort quickly proved inadequate. By 1999, Gifford decided he needed a 21st-century solution to his warehouse process — something paperless and wireless. His nonnegotiable criterion: 100% accuracy (or as close to it as possible) from shelving to shipping. His ideal solution required several distinct components: It had to include handheld computers and use a wireless network so that employees could work from various locations throughout the warehouse. It had to be Web-based and capable of updating records in real time. It had to be rugged, since the handhelds all needed to withstand heavy daily use and the occasional tumble to a concrete floor. And it had to be easy and intuitive so that employees could quickly learn the new system — and would actually want to use it. After researching several wireless-system vendors, Gifford chose Intermec Technologies Corp., based in Everett, Wash., a $620-million manufacturer of automated data-collection systems. Intermec’s product fit all his requirements, including his budget. Plus, although many data-collection systems run on software that requires extensive user training, Intermec’s network operated with two widely used technologies, Microsoft Windows CE and the Web, which Gifford’s employees were familiar with. Intermec outfitted Dee with a wireless LAN, accessible throughout the warehouse, and a dozen 5020 handheld computers, each a little larger than a large flashlight and weighing just 20 ounces. Training took about an hour. With little employee resistance and almost no learning curve, the system was up and running literally overnight. “We opened the boxes, installed everything, and the next day we were beta testing,” Gifford says. Within two weeks the Cedar Rapids distribution center had converted to all-digital record keeping. Now a new 11-point real-time tracking system captures data about each part as it moves through the distribution center. Anyone in the company — a warehouse worker, a customer-service rep, even Gifford himself — can log in to the Intermec system and determine the precise location of a particular item or order. Gifford figured it would take about a year to recoup his $65,000 investment in equipment, software, and installation. But he saw dramatic results and returns earlier than he’d ever expected. Since the new system was installed, order-processing time has decreased by 35% to 40% and shelving errors dropped by 90% because the handhelds’ built-in alarms help prevent workers from putting parts in the wrong places. Meanwhile, shipping accuracy is close to 100%. Says Gifford, “We don’t ship to the wrong place anymore, ever.” With improvements like that, Gifford says, the system paid for itself in just five months. But the biggest benefit was utterly unexpected. Warehouse workers and IT staff began suggesting new ways to save still more time and money. They started developing and testing their ideas on the company’s desktop PCs even before the Intermec equipment arrived, and later incorporated their innovations into the handheld system. In one case, workers suggested installing what they called a “dock cam,” a network of cameras that monitor the company’s loading docks and transmit live video to the company’s Web server so that employees deep inside the warehouse know when shipments are arriving, just by glancing at their handheld screens. Somebody else pointed out that the handhelds were two-way devices, capable of receiving information as well as sending it. “So we created an instant-messaging system,” Gifford says. “There’s a series of approvals that needs to happen before shipping. That’s all done by instant messaging now.” Dee’s employees also created an application that automatically sends E-mail messages to customers when products are shipped and provides instructions for tracking the packages easily. To date, the company’s workers have created about 40 such applications, with a new one being introduced approximately every three weeks. Gifford’s investment is still transforming the business more than two years after the system’s launch — an unusual life span for any high-tech initiative. “You get your hands on the tool, and you think, ‘I can do other things with this,” Gifford says. Equally important is that workers now feel invested in the system, Gifford says. “There’s no better way to gain employee acceptance than when a person in the warehouse comes up with an idea, we implement it, and a couple of weeks later we’re running with it,” he says. Anne Stuart is a senior writer at Inc. The Whole New Business Catalog IncQuery: My Business Is at a Crossroads Design: Not Just a Pretty Typeface Hands On: Picture This Digital: Going Mobile Search: December 2002 Strategies: The Don’t-Take-It-to-Market Alternative Hands On: (No) Casual Mail Please e-mail your comments to editors@inc.com.