Distribution companies are under pressure to re-establish their value and find efficiencies along the supply chain to meet today’s rising demands of custom-built products, fast shipping, and digital experiences.
Distributors have traditionally sat in the middle of the supply chain, providing the connection between manufacturers and consumers. Now, we’re seeing manufacturers and customers choosing their own distribution and consumer platforms, sometimes eliminating the conventional distributors’ role altogether. But according to a recent study by McKinsey & Company, the distributors embracing this trend are coming out on top. These movers and shakers create more value by building scale, making drastic improvements towards operational excellence, and digitizing to create the seamless, omnichannel experiences that customers now demand.
One of the fastest ways to join these innovative wholesale and multi-channel distributors is by taking advantage of the advanced features that come with distribution ERP software. Distribution software specifically built for your business operating through multiple merchants and retailers can help you better manage your operations in numerous ways. In this blog post, our experienced distribution solution experts have pooled their industry knowledge to share insights about what to consider before investing in any technology and dive into the benefits of integrated distribution software.
Do I Need Distribution Software?
If you are running your operations on generic accounting and inventory management systems, the short answer is yes. Separate business applications that don’t work with each other will slow you down in an environment that demands proactive change and instant, seamless insight into all your inventory and sales channels. Manual processes and lack of visibility impact your ability to see exactly what’s going on in your business and make improvements quickly.
Distributors also require particular functionality that the average accounting system does not offer. Core business functions like inventory management, purchasing and procurement, customer relationship management (CRM), warehouse management, eCommerce and merchant integrations, and electronic data interchange (EDI) are all essential to your industry. As a result, these purpose applications are commonly purchased as disparate, standalone systems that don’t integrate with each other.
Over time, the acquisition of disparate systems piles on itself to get further away from cohesive, effective business management. Inventory gets overstocked and kills the bottom line. Supply shortages occur that feed your competition. Add the cost of returns and mis-shipments, and all of a sudden, profit margins are squeezed too tight. That’s why more and more distributors see the value in integrated distribution ERP software.
When we talk about distribution software, we refer to ERP software specifically built to manage the logistics of a multi-channel distribution company. Distribution ERP software is a complete business application that manages the front and back-office activities of wholesale distribution and omnichannel businesses. Effective distribution ERP software brings together your core business processes in one platform, including key functionality like sales, accounting, customer service, commerce, purchasing, inventory, warehousing, and logistics.
In one of our most recent articles, we gave you the top 5 reasons to consider investing in ERP software. From gaining more control over your operations to accelerating revenue growth, these reasons are relevant to your situation today. Still, they don’t quite tie into your specific industry pains as a distributor. That’s why we’re going to dive a little deeper into how you may benefit from distribution ERP software and justify a new system. Distribution ERP software is used to:
- Determine product demand
- Lower logistics costs
- Reduce order times and errors
- Improve customer service and satisfaction
- Gain real-time visibility into orders, inventory, current pricing, and shipping across multiple merchants
- Manage product cost, pricing, discounts, and profit margins
- Improve vendor relationships
- Automate warehouse management tasks like picking, packaging, transferal, and physical counting
- Analyze the financial and operational performance of your company
Important Considerations to Take Before Buying Distribution ERP Software
2020 was a year of twists and turns for all distributors around the world. Some companies have experienced enormous drops in demand while others, like toilet paper and cleaning products, have struggled to keep up with demand. Looking into the new year and beyond, your focus should be on stability, which can be easily achieved with distribution software that helps you properly and proactively manage your supply chain to meet consumers’ fluctuating demands.
Before you invest in a full-suite distribution system, it’s essential to take the necessary steps to help you select the right technology. If you don’t, you could wind up spending excess money and time on a system that doesn’t work for your organization. To get started, here is a list of the top considerations when buying distribution ERP software:
- Align Your Goals
This might be an obvious one, but the key to a successful ERP implementation is to get your entire team, from your executives to your everyday users, on the same page. Identify all the ways you expect an ERP system to add short-term and long-term value to your business.
- Identify Must-Have Features
The purpose of an internal process review and requirements gathering is to discover what functionality you need to continue doing business without disruption. In this phase, you work with your project team to differentiate between your most important features and your “nice-to-haves.” This will make it easier to develop selection criteria to identify what distribution ERP solutions will fit best with your needs and compare them.
- Assess Your Budget
While cost is an important factor of every significant technology investment, it shouldn’t be the only factor. When you start comparing different vendors, you’ll discover a wide variety of costs. While your instinct might be to go with the cheapest option, make sure you factor in your business goals, growth objectives, must-have features, and your team. A basic warehouse distribution software system uses bar codes, mobile readers, and a wireless network, while a more advanced system requires investing in an extensive infrastructure and hardware. The point is to be realistic about your needs and set your budget accordingly.
Get a no-charge distribution ERP impact assessment to calculate the true business case, with personalized numbers, for your organization.
- Evaluate Your Options
This is where ERP software selection gets interesting. Armed with your organization’s specific business goals, selection criteria, and budget, you’re ready to start researching products, meeting with partners, and booking demos. There are many solutions out there, so it will take some time to narrow it down to a shortlist of contenders. Once you have that shortlist, you can start to get a feel for each system with a product demonstration. A personalized demo will give you a better picture of what the software and the partner can deliver.
- Get Product and Partner References
Before you invest in a distribution ERP system, ask for references for both the product(s) you have chosen and the partner(s) you are considering. Every vendor and partner will tell you that their product is the best. But the truth will come from an actual customer who has gone through the implementation process before and is currently using the product. We’ve put together 8 expert tips to help you select the right ERP partner with the relevant skills, distribution industry experience, and product knowledge to match your business.
- Develop a Realistic Implementation Plan
Distribution companies are a little more complex than most businesses, and so is the ERP software that you will be implementing. After you select a product and an implementation partner, you can work directly with their experienced team to layout a realistic timeline that includes milestones for planning, installation, customization, testing, and training.
- Make Time for Training
The speed and success of adoption depend on how well your employees prepare for the new system. Due to the nature of distribution software, there will likely be a learning curve before you can get started. While some systems are more user-friendly than others, your partner’s training and support play a crucial role in your ROI.
As we mentioned, doing your due diligence before investing the time, money, and resources into a new ERP implementation is essential to successful adoption. To help you get more familiar with some of the more common hiccups or mistakes made during this stage, read this whitepaper on selecting ERP software for your distribution and manufacturing business. It includes some valuable information on the benefits of cloud ERP and 7 common mistakes to avoid during ERP software selection.
Trust Your Distribution Software Selection to Industry Experts
As ERP and business process experts with over 30 years of wholesale and multi-channel distribution industry expertise, we believe that there is no one size fits all option when choosing distribution ERP software. The technology you choose will depend on several factors, including:
- Your business goals
- The size of your company
- The complexity of your distribution processes
- The scope of your requirements
- Your infrastructure
- Your employees
- Your budget
At Clients First, we are not tied to a single product. To meet the demands of your customers and strategically scale your operations, we offer a selection of reliable, integrated distribution ERP solutions that can efficiently plan, manage, assemble, ship, and deliver orders on time and in good condition. From Acumatica and SAP Business One to Microsoft Dynamics 365 Supply Chain Management, we would be happy to learn more about your distribution business, walk you through a product demo, and help you select a solution to match your objectives, requirements, and budget.
We also believe that the first step is not addressing what you should buy; it’s addressing if you should buy anything. Book a no-charge business impact assessment. We’ll walk through your numbers, inventory details, returns, and mis-shipments to determine the scale of magnitude centralized distribution management would bring to your bottom line, and if there is a business case to consider the investment.