What is distribution ERP? This is a specific type of ERP software that’s designed to meet the needs of companies within the distribution industry.
In addition to basic operational components, such as accounting and HR, distributors also gain access to unique features that apply to their industry.
Today, we’re covering everything you need to know about distribution ERP software, including how it works, what benefits you can realize, and what the future holds.
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Why do Distributors Need ERP Software?
On a basic level, distributors and manufacturers have similar needs and similar ERP requirements. Both are looking for ways to optimize order processing, improve supply chain management, and improve customer service.
However, distributors are different for a few main reasons. For example, on a day-to-day basis, distributors handle a greater quantity and volume of orders than manufacturers do. Even small distributors deal with a greater number of transactions than their manufacturing partners.
As such, distributors need ERP software that’s capable of supporting a robust order volume. In addition, they need a platform that can help employees manage the following functions:
- Fleet management
- Shipping and transportation
- Inventory tracking and management
- Chargeback management
- Product demand forecasting
- Shipment monitoring (on-time, in-full requirements)
- Electronic Data Interchange (EDI) communication
- Landed cost calculations
- Marketing and outreach
- Sales-based royalties and vendor commissions
- Supply chain planning and control
Inefficiencies in any of these areas can affect a distributor’s profitability and bottom line. However, with a distribution ERP system, users can gain real-time access to the information they need for quicker and more accurate decision-making.
Additionally, if the system includes or integrates with capabilities such as customer relationship management (CRM) and business intelligence (BI), users can improve the customer experience by predicting buyer behavior.
Which Distribution Companies Need ERP?
Anyone who works within the distribution sector can benefit from a distribution-specific ERP solution. With the right solution in place, companies across sectors can improve their internal collaboration using real-time data.
From the wholesale sphere to medical device distribution, many sectors can benefit from enterprise technology regardless of their business model.
Basically, distribution ERP systems are well-suited for a variety of distributors and wholesalers, including those that perform any of the following functions:
- Sell primarily to big-box retailers, like Wal-Mart
- Sell primarily to small, independent retailers
- Directly ship goods from suppliers to retailers
- Serve as drop-ship vendors for online retailers
Each of these functions requires a solution that keeps track of logistics to better navigate variables, such as supply chain cost spikes and ever-changing customer demands. In a global market that is increasingly unpredictable, the ability to access real-time and predictive data is a major plus.
6 Benefits of Distribution ERP Systems
Now that we’ve covered what these systems include and why your organization may need one, let’s look at what you can expect once your system is live and fully adopted.
1. Instant Issue Notification
Issues and errors carry a higher risk for some industries, and distribution is one of them.
If your stock suddenly runs out or a key delivery milestone is missed, then retailers aren’t the only ones affected. These issues also influence customer loyalty, which can negatively affect your profitability and future partnerships.
With a modern solution, stakeholders are notified immediately when an issue occurs, so they can act as soon as possible. Not only can this save your reputation, but it can save you a significant amount of money!
2. More Effective Price Monitoring
There are certain tasks that are incredibly difficult, if not impossible, to manually perform. Most distributors know that price monitoring is one of these.
With so many nuanced changes that occur on a near-constant basis, it can be overwhelming to forecast and stay ahead of demand. However, comparisons such as price elasticity of demand are much easier to complete with a distribution ERP system.
This software can be integrated with the rest of your business data, so users can enjoy real-time access to sales and revenue information. With this level of transparency, they can more easily spot cost variances, identify patterns, and allocate the right resources where needed.
3. Organized and Centralized Business Data
Chances are, you have various legacy systems within your distribution office. Unless these systems are synced, they’re each running their own version of the “latest” data.
Duplicate, incorrect, or missing data can affect system performance and decision-making. Without access to a single source of information, business leaders may make decisions based on faulty or outdated insights.
Meanwhile, employees are left scrambling to do their jobs, unsure which data to trust. This can lead to inefficiencies, poor performance, and costly downtime.
A distribution ERP system gives you total visibility into every facet of your operations and unifies your business data into one central database.
4. Easier Inventory Management
Whether you’re at the helm of a small distribution company or a large enterprise, inventory management can be a time-consuming task. When performed manually, it can take up a good chunk of your employees’ time and energy. In addition, there is always the potential for human error.
When you implement distribution ERP software, you gain access to automated inventory management tools that simplify this process. With these capabilities, users can keep track of data in real time, even across multiple different warehouses. This means you can always stay up-to-date on where your inventory is and how much it costs.
5. Better Customer Service
Are your customers happy? Are you managing to upsell and attract new leads? If you’re shaking your head “no,” then improving customer satisfaction should be one of your highest priorities.
A distribution ERP platform can help you handle logistics in-house, so you can consistently deliver on customer expectations. This technology facilitates easier communication while allowing you to fill orders, meet delivery demands, and impress customers at every turn.
6. Long-Term Business Growth
Where do you see your distribution company in five years? What about 15 years? If you plan on growing your customer base, then you’ll need an enterprise software solution that can keep pace.
Companies that can’t scale effectively will struggle, while those that have implemented the right technology will soar.
Without modern technology, it’s easy to get overwhelmed with rising overhead costs and labor requirements. An ERP software implementation can enable you to create a workplace that’s as smart as it is efficient.
What Does the Future of Distribution ERP Look Like?
Around the world, new technologies are disrupting the traditional supply chain and rendering distribution ERP systems more necessary than ever before. To keep up with their competitors, distributors must be forward-thinking and ready to embrace modern digital solutions.
As tools like radio-frequency identification (RFID) help create speedier and better-informed inventory management, other forms of warehouse automation are also entering the scene. Moving forward, expect to see more warehouses employ robotics and drones to solve common supply chain issues and facilitate easier delivery, transportation, and logistics.
If you plan to take advantage of such technologies, then you’ll need a centralized platform that can help these components work together. An industry-specific ERP system can serve this purpose and help you stay on the cutting edge.
What is Distribution ERP? [A Summary]
If you’re a business leader in the distribution industry, then it’s time to take control of your data, gain greater visibility into your supply chain, and improve customer and partner relationships.
What is distribution ERP and how can it help? Put simply, this software streamlines your processes, while providing you with industry-specific functionality, such as inventory management, demand forecasting, and more.
Our ERP consulting firm can help you understand your current state, define your goals, and evaluate potential solutions. Contact us below for a free consultation.