All in the Family

OH, TO BE VIVITEK!

A start-up of Sun Chemical Corporation, the fast-growing printing supply business has seen its revenue grow from zero to millions in less than one year. And — get this — the Fort Lee, NJ-based company doesn’t have to employ its own sales force or invest in a single warehouse.

As a member of the Sun Chemical family, Vivitek enjoys strong support from the parent company’s existing infrastructure — accounting, human resources, legal, sales and marketing, distribution. Everything Vivitek needed to get up and running fast, efficiently, and cost-effectively was solidly in place when the start-up began operating in fall 2003.

Sun Chemical, with more than $3 billion in annual sales, is the world’s largest ink and pigment manufacturer. The corporation is trying to become a total solutions provider for the printing industry, and Vivitek was born of that strategy. With Vivitek, the recently acquired Rycoline, and other related businesses in its fold, Sun Chemical can offer commercial printers synergistic packages of products used in press rooms: inks, fountain solutions, blankets, safety glasses, measuring tools, and the like.

A HOUSE DIVIDED

Vivitek divides its business into four buckets: chemicals, dry goods, blankets, and equipment. The company purchases chemicals in bulk, brings them into a master distribution center maintained by Sun Chemical in Chicago, then repackages them into different container sizes for shipment to customers or to replenish satellite warehouses.

“We’ve chosen to keep the chemistries in Sun Chemical locations because Sun Chemical has expertise in handling that kind of product and because our warehouses are rated for flammable, combustible material,” explains Vivitek’s operations leader, Jim Putney. Vivitek serves as a sales agent for various equipment manufacturers, and their items are drop-shipped.

CLOSE TO CUSTOMERS

Sun Chemical has more than 70 warehouses across North America. Vivitek can potentially use all those locations, but it keeps inventory only in those six facilities that are closest to its customers: the master distribution center in Chicago, a warehouse in San Francisco, and four other locations around the Midwest.

Vivitek relies heavily on Sun Chemical’s shared services model, with one notable exception. Sun Chemical’s legacy systems couldn’t accommodate Vivitek’s needs for a Web site with an integrated Web store or its differing system of measurement. So, for its IT backbone, Vivitek started fresh with NetSuite, a hosted ERP solution that enabled the new company to get up and running inside of a week.

“Once we’ve got the process down of how to establish a distribution site, it’s easy to do another, because technology is not going to hold us back,” notes Bill Glass, Vivitek’s vice president of business development. “We don’t have to go out and train a lot of people, because the NetSuite system is easy to use. It’s hosted, so we don’t have to invest in servers or IT personnel. All we need to get into it is an Internet connection and a browser.”

DRIVING SALES TO THE WEB

Sun Chemical’s direct sales force currently places about 80% to 85% of Vivitek’s orders. The rest come in through the Web site. Vivitek is trying to drive more orders in through the site, which would allow salespeople more time to focus on selling. “We’re trying to get our direct sales force to move away from entering orders, because that’s non-value-added activity,” says Glass. “We don’t need a salesperson to take an order. Our customer service people can work with a customer’s procurement department to take the orders and process them.”

Orders placed through Vivitek’s Web site go directly into NetSuite. Sun Chemical facilities are not live on NetSuite, so phone and fax orders placed by salespeople funnel into a customer service center in Chicago where they are entered into NetSuite. Putney reviews and approves orders as they come in, chooses the ship-from location based on proximity to the customer and product availability, and then e-mails the order along with any special instructions to that warehouse.

“After an order is approved and I’ve set it up for fulfillment, a picking list is printed out of the NetSuite system,” says Putney. “Once the order is prepared for shipment, the [warehouse] generates a packing list. When the shipment is completed, they will fax back a copy of the picking list and shipping confirmation with tracking numbers on it, then I’ll enter that information into NetSuite to initiate invoicing. Our third-party warehouse is live on NetSuite and can do all of this for us right in the NetSuite system.”

So far, so good. “We’re roughly 97%, 98% accurate, as far as our picking,” Putney says.

Glass anticipates continued double-digit growth for Vivitek and the ability to handle that growth with ease. “The model that we’re using is very scalable,” he says.

Putney agrees, citing the system’s flexibility and speed. “Adding another Sun Chemical location is as easy as adding an inventory location into NetSuite and then putting material on the floor,” he says.

Dana Dubbs is a freelance writer based in Ensenada, CA. She can be reached at ddubbs@pacbell.net.

Chemical Reaction

Sun Chemical has built a fairly robust distribution and sales network across the country,” says Jim Putney, operations leader for Vivitek. His main concern, he says, was how to introduce a new product line into that network. Sun Chemical’s shared services model enables Vivitek to keep chemistries on designated racks within the parent company’s shared warehouses. Similarly, the folks who handle those materials are shared employees. “Our business tends to be very demanding in terms of short turnaround, particularly for some of the chemistry items,” says Putney. “Our master distribution facility for chemistry in Chicago and the third-party warehouse with all of our dry goods in Louisville, KY, are centrally located to our customer base. These Midwest locations put us within two days’ shipping of roughly 80% of the printing market in North America. We’re within three days’ shipping of about 90% of the market.”— DD

VIVITEK INC.

Headquarters: Fort Lee, NJ

Revenues: N/A

Total employees: 7

Phone: (201) 224-4600

Fax: (201) 224-0042

Web site: www.vivitekps.com

Master DC: Chicago

SKUs: 1,500

Volume: 160 orders per month

Third Parties

Dry goods such as cutting knives and masking tape are handled for Vivitek by Kuehne and Nagel, a third-party logistics provider in Louisville, KY. Blankets are cut to order by a separate vendor and drop-shipped. Vivitek’s operations leader Jim Putney explains,“We put those items into a third-party location because the issues with handling those products are nearly non-existent, and because third-party providers have greater expertise than Sun Chemical in terms of security and inventory management of those materials.”— DD

Suppliers

ERP solution: NetSuite Inc. San Mateo, CA

Labels: Certified Data Products, Hillsborough, NJ; iTech Automation, Mundelein, IL

Printer: iTech Automation, Mundelein, IL

Boxes: LabelMaster, Chicago, IL

Containers: TricorBraun, Charlotte, NC

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ALL IN THE FAMILY

When the holiday season draws near, magazines dispense healthy doses of advice on how to survive family gatherings. Clearly, these are hugely stressful events. Most of us have to endure them for only a couple of weeks (mercifully), but just imagine what would happen if you had to live with those people all year round. • Put a contact center within a distribution facility, and you’re in much the same situation. Disparate groups are thrown together, and they’ll fight tooth and nail to preserve their individual identities. Although the advantages of facility consolidation are numerous — ranging from convenience to lower cost to infrastructure efficiencies — the process can be difficult and disruptive. Handling it successfully requires meticulous research, swift action, and tactful management.

Consolidation is common nationwide, but in northern New England, national trends are usually slow to arrive and even slower to take hold. Vermont and its neighbors are hardly synonymous with cellular phones, wireless data communications, or high-tech start-ups. So when within one year three major mail-order firms asked Bread Loaf Corporation to put customer contact centers inside plans for new or expanded distribution facilities, we began to wonder if we were witnessing the birth of a new phenomenon or just catching up with the rest of the country.

Ironically, the first project we undertook involved the most arduous process of alternative evaluation, and therefore created a wealth of useful data for subsequent clients facing similar sets of challenges. The Vermont Country Store (VCS), a family-owned business headquartered in Manchester, VT, has graciously agreed to share some of the fruits of its labor with all of us, material that could save you weeks or months of data gathering, analysis, and rumination.

As a result of our work with VCS, I have endeavored to manipulate the resulting information to create a new unit of measure — looking at contact centers from a cost-per-station point of view. Analyzed this way, the data can yield useful shorthand for decision makers in distribution operations of all types.

Room to grow

The Vermont Country Store sells hard and soft goods through an expanding number of catalog titles, the most famous and longstanding of which is “Voice of the Mountains.” With annual sales pushing $80 million, VCS employs over 600 people. The operation includes two retail stores (the original in the mountains of Weston, VT, and another in Rockingham, VT, alongside I-91 in the Connecticut River Valley), each of which features the general-store ambiance so well communicated by the catalog. VCS’s corporate headquarters are nestled in the Village of Manchester; its DC is located in an industrial park just south of the Town of Rutland.

By the end of 1998, the number of customer service reps available in the Manchester area had diminished to a trickle, while the need to expand the company’s contact center was urgent in the face of relentless growth in demand and the impending introduction of Internet sales capacity. To meet these imperatives, VCS and Bread Loaf came up with a five-step strategy:

  1. Create a contact center for 175 stations and ancillary facilities to anticipate five to ten years of growth. The center’s total occupancy of 200 would include 25 trainees.
  2. Set up the facility as a satellite contact center located in or near a population center.
  3. Evaluate renovation of three existing commercial buildings in the Rutland downtown area.
  4. Evaluate two new-build options for stand-alone buildings.
  5. Evaluate three options for incorporating the contact center into an expanded distribution facility.

Built to last

During a year of sometimes frantic activity, The Vermont Country Store and Bread Loaf moved quickly to evaluate three existing buildings in the downtown area of Rutland, VT.

The first was a recently abandoned industrial printing building, roughly 40 years old. A single-story structure with adequate parking, this option was much larger than the 14,700 square feet required for the contact center, but VCS felt that the balance of the space could be leased out or used as ancillary storage for the distribution facility. This building was for sale only.

The second alternative was a partially occupied, 25-year-old industrial building. With two stories and adequate parking, this facility was also much larger than required, but VCS again felt that the remaining space could be sublet or used for storage. This building was for sale (complete) or lease (partial).

Our third option was a recently abandoned bank building in an urban center. Composed of three smaller original buildings of various vintages, the oldest portion had been built more than a hundred years ago. Three stories tall, and with an adjacent parking structure, this building was the right size for the contact center but had been extensively chopped up into small room-sized spaces on three levels. It was for sale only.

We also investigated two new-build options, each of a different quality and each on a different site, described below.

The first new-build alternative was located in an existing industrial complex alongside the railway line in downtown Rutland. The site is flat and mostly paved, and the building was envisioned as a typical pre-engineered metal structure with a low-slope gable roof and perimeter windows. Exterior dimensions were 100′ × 150′. The site already had the utilities — including water, sewer, power, and natural gas — necessary to support the requirements of a contact center.

New-build option two was a gently sloping, fully wooded lot owned by VCS and adjacent to its DC in suburban Rutland. This construction was envisioned as a more substantial commercial building with a masonry exterior, flat roof, and perimeter windows. Exterior dimensions were also 100′ × 150′, but this site had only water supplied to it. We would have had to absorb the costs of on-site septic disposal and fuel tanks, as well as the extension of the neighborhood electrical lines by 1,000 feet.

Workers unite

Another possible strategy was to incorporate the contact center into a proposed expansion of VCS’s present distribution facility. We considered three ways to do this:

  1. Build the contact center as a single-level addition (105′ × 40′) to the outside of the distribution center. This approach would provide the contact center a somewhat separate identity from the rest of the building. It would also require an exterior roof surface for the contact center and consume real estate on an already crowded site.
  2. Incorporate the contact center into the shell of the expanded DC on the first level. Since the distribution center roofline included a 26′ eave, such an addition would “maroon” the space above it by creating a massive “chase” above the ceiling of the contact center. (A two-story contact center was rejected because it would be too difficult to manage from a manpower and logistical perspective.)
  3. Construct the contact center on a structural mezzanine within the same space as the DC. The cost of this option would include that of the mezzanine and the lights and HVAC below it.

After reviewing these alternatives, VCS decided to incorporate its new call center as a second floor on the north end of its expanded distribution center. Cost was never the sole determining factor, but it did not impede the selection of this approach as it was far from being the most expensive or time-consuming.

Still, by the time the cost data for the project was in hand, time was of the essence. As an old construction hand, I would encourage all jobs to be expedited to the extent possible, because construction duration adds value to nothing. However, this job was finished in record time — the 64,000-sq.-ft. addition to the DC took slightly less than five months to construct. Design was formally authorized in February 2000, construction began in May, and the first order was taken in the new contact center on Sept. 8. The first Internet order, placed by Vermont Governor Howard Dean during an official ribbon cutting later that month, signaled the official completion of the work.

Ties that bind

The rewards of combining contact centers with distribution facilities are many. When they are part of DC projects, the cost per station of contact centers drops considerably, primarily because of the economies of scale of industrial park construction and shared infrastructure. Real estate also tends to cost less in industrial complexes than in equivalent isolated parcels. Furthermore, the industrial parks in which most DCs are built are usually close to densely populated areas where the available labor market is strong — an advantage for customer contact centers, which are always looking for staff.

Convenience is another plus. Distribution facilities are likely to be built on large sites with ample parking; contact centers have a very high density of occupation (one employee per 70 square feet) and require a lot of parking space. DCs, by contrast, usually need not as much parking as building (one employee per 1,000 square feet). Combined, the two needs are compatible. This proved to be especially true in the VCS case because the project fully utilized the remaining land area of the parcel.

Most fulfillment companies have upper-management positions that are responsible for “operations,” usually referring to both distribution and customer contact facilities. Placing both functions in the same building makes life much less scattered and distracting.

In addition, having both sets of employees in the same location enhances cross-training possibilities. Although such programs are controversial in terms of their ultimate benefit to a business, the ability to experiment with and evaluate them is at least possible when the two populations are under the same roof.

Nevertheless, don’t underestimate the downside of bringing together people whose values and attitudes may be fundamentally at odds. Putting traditionally white-collar positions in a blue-collar environment can be highly disruptive to a company’s sense of itself. VCS had the luxury of creating a satellite facility, so its current contact center staff was not forced to relocate from the headquarters building.

In a wise move, however, the new stations were designed to be exact duplicates of the existing ones. VCS also has a policy of stations “belonging” to a specific employee, so that each CSR always reports to work at the same station. Therefore, there is a spirit of professionalism among the VCS contact center staff that may be difficult to replicate in other customer interaction operations that share equipment and space among multiple employees.

Remember, too, that distribution and contact center facilities have different types of people working at different times of day. Separate entrances and exits, sophisticated security systems, and personal safety are all real considerations that need to be carefully explored. The two major kinks are employee theft and employee security, and these should be worked out thoroughly during the design stage to eliminate blunders and costly retrofits.

Code blue

Most prevailing building codes make significant distinctions between warehousing and office occupancies. Do not assume that you can jam 200 (or more) people into a distribution center environment without major changes to egress rules, ADA provisions, and/or sprinkler and alarm requirements. These are subtle things that can push up your expenses considerably, so make sure to pick an appropriate design and construction partner and get all of the costs clear before you begin.

Do not scrimp on environmental considerations, either. Ensure that you understand the minimum standards you need to achieve in terms of ergonomics, sound transmission coefficients, and lighting (natural and artificial).

Likewise, bring your management skills up to par. VCS has been very pleased with the cultural evolution that this move has fostered, but it has come as a result of attention to detail and devotion to continuous measurement. Remember that your CSR is the all-important “first touch” with your customer, while the DC team has the last say. Both groups deserve to be treated seriously and provided an environment of dignity and professionalism.

Steve Harris is a senior vice president at Bread Loaf Corporation, a full-service provider of planning, architecture, and construction services based in Middlebury, VT. Harris specializes in facility planning and has worked directly with more than a dozen fulfillment companies in his 18-year career with BLC. He can be reached at www.breadloaf.com or at 802-388-9876, ext. 215.

Personal Space

The VCS contact center had to include space for 150 stations in an area that would allow for incremental increases in numbers. We would start with 75 and add the furnishings and cables as required. The facility would contain on-floor team leader stations (one per 12 CSRs); two enclosed offices on the perimeter for upper-level managers; toilet facilities to support 150 stations and up to 30 trainees; training space with an attached sample room; three conference rooms (two for six people each and one for 12); mail room and coat closet; electrical closet and data closet; controlled access points provided with receptionists; and adequate storage for clerical and training supplies.

Guiding Light

After a lengthy design evaluation, the plan on the left became the accepted template. Interior space characteristics were specified to include the highest ceilings possible for acoustical absorption, carpeted floors with data and power provided from above the ceiling, and good exterior lighting control to eliminate screen glare. Generous use of interior windows (re-lites) would permit effective visual management of people, meetings, and activities, and carefully engineered artificial light would prevent glare and hot spots. Air conditioning and heating systems would be properly sized and virtually noise-free.

Out of Sight

The 52″-tall custom furniture maximizes the use of available space but prevents face-to-face orientation. This design remains efficient while allowing CSRs to maintain a feeling of privacy.

Fitting In

The Vermont Country Store and Bread Loaf evaluated three ways to include a contact center within a proposed expansion of VCS’s existing distribution facility.

VCS CONTACT CENTER COST ANALYSIS
OPTION COST PER STATION TIME TO ACQUIRE
Existing Building 1 $29,000 12.5 months
Existing Building 2 $25,000 10 months
Existing Building 3 $19,000 14 months
New Build 1 $23,500 9 months
New Build 2 $35,000 9 months
Distribution Center 1 $18,900 6.5 months
Distribution Center 2 $13,000 6.5 months
Distribution Center 3 $16,200 6.5 months

Bill Me

The figures above were calculated on a cost-per-station basis. Costs of parking 180 cars include excavation, paving, circulation, curbs, lighting, and striping. In cases where the contact center is part of a larger structure, the cost of the 15,000 square feet attributable to the contact center is isolated. Design, engineering, construction, and permit acquisition charges — as well as the cost of furnishings, wiring, and cables for the first 75 stations — are included, although prices of desktop monitors and keyboards are not. Environmental conditions are assumed to be the same for each alternative: full air conditioning, appropriate lighting, and full acoustical separation from surrounding noise generators.

The Balcony Scene

The Vermont Country Store decided to incorporate its new contact center as a second floor on the north end of its expanded distribution center. The cost of this option therefore included the cost of the mezzanine and the lights and HVAC system below it.

PiŁce de RØsistance

The finished contact center provides CSRs abundant space, light, and comfort. The total area of the facility equals 14,700 square feet, with the CSR floor taking up 10,800 square feet. Each service rep is allotted total space of 96 gross square feet and 70 net square feet.

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All in the family

This month’s question

What are the benefits and drawbacks to working in a family business?

It’s said that the family that plays together stays together. But what about the family that works together? The small catalogers we contacted this month, all of whom work or have worked with spouses or relatives, point out certain challenges: avoiding favoring family members over nonrelated staff, for one, and making sure family members pull their own weight. But many also say that working with family can bolster their personal relationships.

Larry Woodward is general manager/CEO of Dogwise, a Wenatchee, WA-based catalog that sells books and other merchandise for dog owners. Annual sales, about $2.5 million; annual circulation, about 350,000.

I run the business with my wife, Charlene. The freedom and flexibility you have in a family-run business is great. And if you do it right, it can really help build a good relationship, especially between spouses. Once you get past the child-rearing age, it’s almost like a shared hobby.

On the other hand, working in a family business can be tough for the other, nonfamily employees. They need to know whom to talk to. A lot of family businesses just wing it organizationally, and I think that can create confusion for your employees. When we had our first employees, there were times when an employee would ask me something and, if he didn’t like my answer, would go to Charlene – just like kids do. We really had to establish who had decision-making authority in the company.

Dick McWilliams is president of Harbor Farm, a Little Deer Isle, ME-based cataloger of home furnishings. Annual sales, more than $1 million; annual circulation, more than 100,000.

My parents, my wife, and I run the business together. I’m the president, but I certainly spend a lot of time listening to and acting upon the advice of my mother, or my wife, or my father. My parents have extensive business backgrounds and have held senior management positions in the automotive and advertising industries. So they bring a lot of hard experience in many areas to the company.

The trick is each of the players gets to do something that he or she knows and is good at, so that everyone is satisfied with what he or she is doing. My wife is very good at finance. My mother is good at advertising and product promotion. I’m a people person, and I sort of make things happen. My father is a product person, but he’s also a marketing guy. So we all do these different things, and then collaborate on projects to move toward a common goal.

Andrea Rideout owns Dallas-based Nostalgic Warehouse, a catalog selling vintage door and cabinet hardware designs. Annual sales, about $1 million; annual circulation, approximately 50,000.

Generally when you hire family, you can trust that they’re not going to consciously cheat you. I think that’s one of the biggest benefits.

But family members can rip you off subconsciously. They tend to take more advantage. They’re more likely to call in late, take time off, and so forth. If you’re working for someone else, you don’t tend to do those things as easily. But as a manager, it’s hard to say no to your brother or sister.

There also can be a power struggle when you have family working in the business. It’s hard to say, “I am going to have this policy about such and such,” when your mom is peering over your shoulder saying, “Do you really want to do it this way?” It’s harder, when you diapered that person when he was little, not to question his authority in the business.

It’s also difficult to let a family member go. I hired my brother a few years back when his business was not doing very well. It was obvious to me very quickly that it was not going to work out, but it took me three months to finally say so. Of course, by then he was very upset, and so was I. If he’d been someone off the street, it would have been easier to ask him to leave.

Eleanor Edmondson is president of Bas Bleu, an Atlanta-based book cataloger. Annual sales, $6 million; annual circulation, more than 4 million.

I started Bas Bleu about five years ago. At the time, my husband, Charlie Edmondson, was in the process of selling Charles Keath Ltd., a gifts catalog he founded, to The Mark Group. Charlie is now in graduate school pursuing a Ph.D. in economics, and he works with me, but it’s not the traditional mom-and-pop business where a couple works together day to day.

In this business, my strengths are primarily in driving the concepts of the catalog. I’m an avid reader and also a good copywriter. I also like motivating people, so I’m a fairly good manager. Charlie’s expertise is in the financial area and the nuts and bolts of the business.

The drawback of being in business together is that it’s hard when you have a conceptual difference about something. Both in Charles Keath and in Bas Bleu, it has not been an equal partnership between us, and I think that’s what’s helped, because one person has always had the final say.

Dan Vaccaro is president of The Printers Shopper, a catalog based in Chula Vista, CA, that sells printing and graphic arts supplies to printers, artists, and desktop publishers. Annual sales, $1.5 million; annual circulation, more than 250,000.

My wife and I work together, and although we have a wonderful working and personal relationship, at times it’s difficult to separate business from our personal life.

In general, family members are harder to deal with than other employees. You have to deal with a parent, a sibling, a spouse, or a child in a different way, because it’s not only on a business level, but also on a personal level. And we have to set an example for nonfamily employees. Family members, while they deserve some consideration, are still employees of the company and have to pull their weight. Otherwise you can cause nonfamily employees to have bad attitudes. Besides, most family-run business aren’t cash cows. You can’t just expect to show up and draw a paycheck. You have to contribute to the success of the business.

I think the major benefit of running a family company is that you’re working for yourself, and so you control the business. You have the opportunity to make or break your own situation.

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