How Can ERP Benefit The Distribution Industry?
October 28th, 2011 | 
Author: For companies involved in distribution, day-to-day tasks can be very varied. Setting a system in place to allow for these variations, yet maintaining a constant flow of activity throughout the supply chain is essential. Regardless of the business, distribution within that sector can be very timely and complex, ensuring efficient stock replenishment is an essential part of maintaining success here. Although there are many challenges faced by distribution, below lists some of the key issues that occur on a regular basis and distribution software would go a long way in minimising these problems.
| Global Sourcing Management | Sourcing products nationally and sourcing them internationally has a huge gap of difference. In international sourcing there can be much longer lead times; tracking visibility can be difficult as well as creating multi-tier distribution centre networks that support the inventory distribution. |
| Growth Management | Since the 2008 financial crisis, many wholesale distributors are managing their margins very carefully so as to create the best chances of profit gain. By diversifying product offerings, distributors are attempting to engage new customers. This growth and consolidation presents new challenges in the form of trying to create an optimal distribution network that can support these changes. To set in place a system such as this would help determine the best way to invest in inventory placement throughout the company and the supply chain. |
| Demand Management | Distributors are challenged with meeting continued demand as well as new and increased demand for products – despite uncertainty they must accurately predict demand and factor in lead times, logistical constraints and economic factors. |
| Transport & Logistics Management | Over the past years as freight costs have increased, distributors must now carefully rethink their strategies to address this. As well as costs, the freight industry has a weak infrastructure and with new government regulations and an increase in demand for better logistics data distributors must meet all of these challenges. |
| Competitive Differentiation Creation | In order to build loyalty with existing and new customers, many distributors are providing new services that include: warranty and repair services, replenishment, competitive pricing analysis and assortment optimization. |
For the distribution industry, a next generation fully integrated Enterprise Resource Planning (ERP) system can take over these responsibilities to ensure a fully compliant and fully working supply chain in the company. The ERP system can solve issues related to Customer Relationship Management (CRM) and Supplier Relationship Management (SRM) as well as planning, scheduling, manufacturing, financial management and product data management.
Some of these ERP features have been explained in more detail below:
Supply Chain Management:
Enabling all aspects of the supply chain to be linked and aware of each ones responsibility plays a vital role in the core function of a distribution company. Some distribution companies may already have specialist, point solutions to help maintain this but the benefit of a fully integrated ERP system is that it allows the whole company to become streamlined and working in unison with each department; a better visibility throughout, enabling potential issues to be resolved at the earliest stage and full control of the whole process from customer order to the finished product.
Look to procure an ERP system with a complete suite of Supply Chain Management (SCM) including sourcing and procurement functions, inventory and warehouse management, advanced materials management and purchase management.
Customer Relationship Management (CRM):
The CRM function controls every aspect of the communication between distributor and customer. From the initial lead enquiry right the way through development of the product, producing and shipping to payment of the product and even aftercare. CRM enables a 360° visibility throughout the whole process to all involved including the customer, suppliers and partners.
Sales Management:
Creating a streamlined sales process, from one central location you can access product, pricing and customer information. It is easy to generate orders with a minimal amount of effort. Sales Management allows for a more accurate quote to be generated as it can take the most up to date data from the system to prepare the quote. This reduces lead time and enables better sales productivity by being time and product effective.
Demand Management:
A very important factor in any business is demand management. We are now in an economy where shorter lead times and smaller more frequent orders have become the norm. Therefore it is vital that businesses learn to manage these higher demands in order to gain loyalty from customers. Demand Management is sensitive to these business conditions and responds by incorporating the requirements of Electronic Data Interchange (EDI) to help the company reduce lead time within the office thus enabling a speedier response to the customer. This gives the business the ability to respond quickly to fluctuating customer demands.
Kitting and Assembly:
The ERP system should enable you to create sales bundles to present to customers as ‘added extras’. These bundles should offer unique value-added services that are hard for competitors to match let alone beat. By providing these types of extras, you cement the customer to business relationship whilst also potentially generating more business.
Business Intelligence:
Enterprise Performance Management included in the ERP systems will provide flexible reports, KPI’s, pre-packaged analytics and dashboards that all support the business and bring a real sense of business to the day-to-day workings of the company.
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