Distributors

The importance of proper distribution software & technology

Distribution is sometimes seen as a low-tech industry. You take product X from Manufacturer A and B and distribute the product in a traditional manner to customer Y. However, competition is increasing and, like most other businesses, traditional distributors are being forced to adopt new technology to keep up or be left behind.

This article focuses on Distribution ERP Software, however, there are other avenues of technology to consider as well including:

  • Warehouse Management System (WMS)
    • Although quite costly, a WMS can be extremely beneficial, particularly for distributors with especially large warehouses
    • This technology includes Radio Frequency Identification (RFID), sophisticated warehouse layout planning, as well as picking, packing and put-away.
    • Note: many ERP systems contain WMS capabilities, so a full WMS may not be necessary, especially for small-medium distributors
  • Warehouse Automation Technology/equipment
    • Often used in conjunction with a WMS or ERP system, warehouse automation technology helps eliminate errors in the warehouse and improve efficiencies.
    • This technology includes bar code scanners, flow racks, and conveyors.
    • Conveyors may only be necessary for rather large distributors while most can make use of bar code scanners.
  • ERP Software
    • ERP software includes a broad range of applications that are intended to accommodate business processes across the entire business.
    • Typical functionality includes: accounting, inventory management, contact management (CRM), order entry, invoicing, eCommerce integration and more.
    • Note: all distributors should be making use of a proper ERP system, although many try to get by on a mess of separate systems.

The importance of proper distribution software cannot be overstated. In fact, many distributors are not only seeking cost reductions through technology, but are also aiming to create additional revenue streams via eCommerce platforms as well. Of course, fear is common when considering eCommerce for distributiors but again, the alternative is to get left behind as more of the industry begins to hop on board and eat up market share in this space.

The reality is that customers are demanding more everyday (across all industries). They want more products, faster and for less money than ever before. Customer experiences provided by goliaths like Amazon push expectations to other segments—even B2B distribution! The only way to meet these increasing demands is through technology and business automation.

Proper distribution ERP software can help you achieve this automation via a number of key areas. Let’s explore each one in turn:

Accounting

Beyond the basics like accounts receivable/payable, general ledger and bank management, ERP software can allow for multiple currency conversion, tiered/contract pricing, and landed cost tracking.

Customer-Specific Pricing

Customer specific pricing cannot be more straightforward; it is simply the ability to specify pricing on a per-customer basis. Some customers may receive discounts or specific preferential prices on all products they purchase, while others may receive discounts (or contract prices) on particular items. Pricing rules should also be able to be applied at a per-item level for all customers and for varying volume levels. Appropriate software will also allow you to set prices based on different units of measure (each, box etc.) as well as in different currencies.

Landed Cost Tracking

Landed cost tracking may be most relevant for distributors that import their product, but is still an important part of identifying the true costs associated with a product; right up until it is sitting on your shelf. These costs may include brokerage, duty, freight and more. Without proper landed cost tracking your inventory costs may be inaccurate or may require an abundance of manual work to arrive at accurate costs.

Automated Reports

Sophisticated systems will allow for the automated delivery of reports to key decision makers in your organization. These detailed reports can be scheduled to be sent on a daily, weekly or monthly basis and will allow you to pin-down exactly where your money is going and identify problem areas.  In particular, exception reports delivered automatically facilitate timely and focused action to deal with these problems.

Inventory Management

As a distributor, inventory is your bread and butter. However, without robust inventory management software, your bread and butter may be costing you more than it should.

Lot Tracking (Traceability)

Useful for distributors in many industries, lot tracking or traceability software allows for the fast and easy recalling of product when necessary.

Units of Measure & Bills of Materials

Most distributors have some requirements by way of various units of measure or require the ability to create bills of materials. Used primarily by businesses that require product assembly, tracking this information can be cumbersome in manual or introductory software systems.

eCommerce Integration

It may not seem like an inventory issue at first but if you are beginning to get your feet wet in eCommerce, you will certainly bring on a number of inventory-related headaches without the appropriate back-end system in place. Do not settle for anything less than full end-to-end integration between ERP and eCommerce or you may find yourself in trouble when the orders beginning surging in.

Hopefully this article has helped you discover the advantages of utilizing distribution technology and the ways in which you can automate your business and improve efficiencies as well as establish a sense of urgency for doing so in an industry that is already surging forward.

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