If you own and operate in wholesale distribution company, you probably feel as if the industry is becoming more challenging. For example, you may have heard from peers that:
  • Increasing market competition 
  • Shrinking margins 
  • Increased product complexity 
are all taking their toll. It’s now harder than ever to see how to be profitable and prepare your enterprise for a successful sale. In this, you are not alone. Our wholesale distribution clients all seem to have similar objectives:
  • Grow revenue 
  • Add lines of business 
  • Improve gross margins 
  • Increase EBITDA 
  • Develop and use intellectual property to operate their businesses 
  • Eventual exit 

The Challenges Wholesale Distributors Face

Does this look at all familiar? 

Here are some of the challenges we hear from clients and how an ERP solution can be applied to address them: 
  • Shipping Errors and Returns 
  • Outdated Technology 
  • Slow Reporting 
  • Inventory Management 
  • Direct Sales to End-Customers 

Shipping Errors and Returns 

We’ve seen how costly shipping errors and returns can be. They involve additional processing, administration, and fees. For customer service’s sake, I expect that you are bearing these costs whether your team or the customers is responsible for the errors. 
 
However, as I’m sure you’ve observed, accurately fulfilling orders is becoming more challenging. Customer orders are becoming larger, more complex, and nuanced. Compounding the issue is the need for speed. You hear from customers that they want products fast to meet their customers’ demands, so your front-line teams must make correct decisions quickly. 
 
You may feel that enhancing your ERP capabilities is the only way to address this issue, however, it’s only part of the solution. Your business processes must be defined (and perhaps refined) first. Then your ERP system, once properly implemented, must support those business processes. With good system/business process fit, it’s far easier to accurately fulfill customer orders and deliver the products they need when they need them. 
 
Result: You avoid the headaches and wasted time and effort associated with shipping errors and returns while retaining satisfied customers. 

Outdated Technology 

We often hear from many prospective clients that maintaining an existing legacy ERP system is the safest, least-cost option. Using a familiar platform gives you and your team peace of mind; when you see things go wrong, you know how to fix them.  
 
As you may have observed in other industries, being stuck in the past comes with real costs. When you rely on legacy systems, you aren’t taking advantage of the functionality, economy of scale, and security of the latest technology. This is especially true if you’re running your legacy ERP or simple accounting system in your office. 
  
You may have already heard about peers (or competitors) implementing cloud-based ERP systems like Microsoft Dynamics 365 Business Central. There are some significant advantages in doing so: 
  • Reduced I/T costs as Microsoft maintains the platform and periodically updates the software 
  • Secure mobile and browser-based access 
  • Seamless integration with other Microsoft products 
  • Subscription pricing 
These help you to confidently coordinate with other members of the supply chain, planning both procurement and distribution to better meet the needs of your customers. Newer ERP solutions easily connect to eCommerce retailers, manufacturers, and strategic partners to provide you with a more comprehensive overview of your business operations.  
Result: Lower, predictable I/T costs, reduced risk of system downtime. 

Slow Reporting 

Have you heard complaints from your team about slow or inefficient reporting? We commonly see this situation among wholesale distributors due to: 
  • Inefficient paper systems 
  • Simplistic accounting solutions 
  • Spreadsheet-based operational and management processes 
  • Silos of data in disparate systems
 As a result, wholesale distribution companies suffer with: 
  • Inventory balances that are too high or too low 
  • Available to promise 
  • Delayed or inaccurate financial reporting 
  • Poor visibility of sales and operations 
As a CEO, how much more effective could you be in your role if you could see precisely what was happening in the organization at any point in time? How much more effective would your executives and managers be if they had timely, accurate information with which to make good business decisions? 
 
A properly implemented ERP system can help by providing comprehensive, timely, and accurate information. The objective is to increase the rate at which executives, managers, and functional teams receive critical information to make sound decisions to further the company’s growth. 
  
Result: Improved visibility, delegated decision-making, and control over sales and operations 

Inventory Management 

As a leader in the wholesale distribution industry, you already know about the importance of stocking the right items at the right levels in the right locations. If inventory balances are too high, it hurts cash flow and increases the risk of excess and obsolete stock. If inventory balances are too low or in the wrong locations, orders cannot be fulfilled in a timely fashion and customers will eventually take their business to a competitor. 
 
Do you feel like you spend a disproportionate amount of time managing inventory (or managing personnel to do that for you)? Here are some common issues:
  • Lack of end-to-end visibility on inventory levels 
  • Lack of integration with supply chain and logistics 
  • Warehouse teams that can’t locate items 
  • Poor visibility of stock levels as data is out of date 
  • Unable to provide customers with product availability and time to delivery 
 A properly implemented ERP system can help in this disruptive, post-pandemic environment. For example, you can:
  • Track inventory in real-time 
  • Create accurate multi-channel forecasts  
  • Plan for purchases just in time to fulfill customer demand 
  • Have fast consolidated reporting such that, at a glance, you get up-to-the-minute information on what’s really going on in your operation 
The ultimate objective of an ERP system implementation is to re-engineer inefficient processes and leverage the ERP system to support those processes. 
Result: Reduced inventory carrying costs, increased customer satisfaction, and revenue retention 

Direct Sales to End-Customers 

In general, distributors purchase products from manufacturers and sell them to retailers who, in turn, sell them to consumers. However, distributors are increasingly selling directly to consumers, via commerce. Of course, deliberate steps (e.g., pricing parity) must be taken to address channel conflict. 
  
Wholesale distributors must reconsider their business models and the capabilities of their business processes and ERP systems. For example, integrating your ERP solution to an e-commerce platform creates an opportunity to shift your operational model to include direct-to-consumer transactions.  
 
Result: Additional sources of revenue, increased margins. 
 
Strategic Systems Group is a Los Angeles-based I/T consulting firm and experts in Enterprise Resource Planning (ERP). We specialize in the implementation and support ERP solutions for wholesale distribution companies. We use a well-designed, repeatable process that enables clients to eliminate wasted time and effort, conserve financial resources, and reduce business risk in their organizations. 
 
For more information, please call (310) 539-4645 or click here to schedule time to speak with one of our experienced consultants.