How Distribution Companies Are Using Enterprise Resource Planning (ERP)

Competition is high and distributors today often find their margins squeezed from all sides. While customers expect a low price and their orders filled faster and more accurately than ever before.

In these conditions, your inventory investment must be managed to work smarter and harder than ever before. Despite this, many distributors still rely on manual processes, educated guesses and intuition based decision making for inventory management. These traditional approaches reveal an opportunity, however, because eliminating excess inventory and fine-tuning the balance between idle assets and stock-outs can dramatically impact turn rates, fill rates, and carrying costs. So can the nimble use of cross-docking and related shipping techniques, which can reduce handling costs as well as time. Supply chain experts agree that masterful changes to your inventory management can make the all difference between the profit or loss of a distribution operation.

In this competitive environment, more distributors are realising that they must seize opportunities to develop innovative service agreements, re-packaging, re-manufacturing, or other value-added services that can capture customers’ orders and create a competitive advantage. Others have found that they can please customers and increase their own efficiency by offering online access to information such as order status, pricing, and product availability, or even take orders directly over the internet. Of course, such innovations themselves must be managed and you’ve got to control costs to keep profits in the black. Aside from better inventory management, however, most distributors have already plucked the low hanging fruit for reducing operational costs. The challenge is to continue to eliminate waste and continually improve efficiencies and productivity.

Meanwhile, manufacturers are moving offshore, spreading the supply chain over greater distances and introducing the global business issues of lead time, language, and currency. In addition, the explosion of global commerce means you have more competitors than ever, because location is fading as an influencing factor on the economics of customers’ buying decisions.

IT Challenges – connectivity, legacy technology and cost-efficiency

So, how can you meet these challenges and capitalise on the trends? Let’s go back to the idea of cost control. Many distributors look at information technology as an expense, and one they’d like to avoid, but think about the right business management system more like your inventory itself—it’s an investment that can make money for your company by helping you to overcome the challenges to take advantage of the competitive opportunities they represent.

Too many distributors have been forced to ‘make do’ with one system for accounting, another for orders, and another for labeling and shipping. The awkward interfaces between them, if any, waste time re-entering data and introduce the possibility of errors, and multiple warehouse locations may complicate record keeping enormously. Worse, management visibility into operational data is fragmented and really understanding what’s going on in the business, let alone the profitability of an individual product or line, is difficult and time-consuming, if not impossible.

A comprehensive solution can not only integrate internal processes and fragmented functionality and data, but interface smoothly with warehouse technologies, locations, and business partners.

Furthermore, small and medium-sized distribution companies need to be able to pay only for what they need, scale as they grow, and adapt the solution as the business or its added-value offerings change over the long-term.

An ERP solution can:

1. Maximise Inventory Value

Integrating inventory and sales information will give you visibility into the profitability of your largest asset. Robust tools for inventory planning and replenishment will help you accurately forecast demand and make better purchasing decisions. When you can see the big picture relative to your purchases over time, you can better negotiate pricing and terms with supply partners.

Better inventory planning also means you can maintain a more productive, cost-efficient balance between inventory levels—and the associated costs, including storage, shrink, insurance, and damage—with target fill rates and customer satisfaction. That way, you always fill customer orders, without carrying large quantities of stock that become a liability instead of an asset.

An integrated solution also helps you keep your inventory more accurate, because inventory is automatically incremented and decremented, without lag times for manual data entry.

2. Optimise your Warehouse

With clear insight and the ability to drill down to individual products and transactions, you gain better understanding of which products are moving, which products qualify as inactive inventory rather than stock you truly make money on, which goods might best be supplied as special orders, and how to adapt for seasonality and demand trends. And the time-consuming physical inventory and reconciliations becomes simpler—or may even be eliminated altogether—because your records are more reliable.

3. Streamline order fulfillment

An ERP solution should integrate your customer, inventory, and order information into a single database, so picking, packing, shipping and inventory proceed efficiently and updates roll through the system without manual re-keying. Automate manual or redundant tasks such as carrier assignment or customer invoicing.

In addition, deep visibility into fulfillment operations can enable you to balance workloads, identify and eliminate bottlenecks, and improve processes for greater productivity and success.

4. Empower employees and partners

Providing partners with internet access to key business information, including stock levels, pricing, order status or order entry, can increase efficiency, improve customer service, and streamline order cycles whilst freeing employees for more complex tasks. Suppliers and customers can rely on up-to-date information without compromising information security. You control access by defining roles and rights. Robust multi-language and multi-currency support smooths global business relationships and eases financial transactions and reporting across multiple locations.

An ERP solution for distribution can empower your entire supply chain to work more closely together for mutual benefit.

5. Gain insight for growth

Transform data into intelligence to analyse inventory profitability and trends, make wise decisions, and drive your business into the future. ERP solutions can simplify reporting with intuitive data access and key performance indicators.

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