We must approach advice given with a solid dose of humility. I cringe when I hear someone state a business problem and the first words that come out are “that’s easy…”. The pains and struggles of running a distributing business are real, complex and not easily fixed. This rules out the “it’s easy” propositions. Unlike you, I have not personally experienced the challenges you face with your business, however, one does not have to necessarily live your experiences to have a good idea of the problems and their solution; any doctor can tell you that.
Miles ran a Pet food distribution company. Between Peachtree FilePro and Excel, he managed inventory, purchases and accounting. The company had a number of issues to deal with:
- inventory was not always true to report and data was stored in spreadsheets;
- the catalog of products did not reflect what they were now selling;
- there was no way to measure supplier performance, and
- accessing any information was time consuming.
Products came from China and were shipped out to major outlets, his competition, before shipping goods to his organization. The biggest pain point of all was dealing with back orders. Since the sales team did not have access to real-time information, reps frequently oversold the same products. One order had back order quantities. Dealing with back orders was done through a number of processes that were manually created because neither system was effective at managing it.
As a wholesale distributor this story probably rings true to you. Without adequate business applications, it is difficult to run your business effectively. But having a good system is not enough. After all, spreadsheets are a very good business tool and QuickBooks is a very good accounting tool too. Many issues arise because these two systems are disconnected. Each does its tasks well but fails to render the bigger picture of the organization.
The solution lies in deploying an integrated system - an Enterprise Resource Planning (ERP) software. Many people, when they hear ERP, think of complex and expensive software. They are complex if you tackle all business functions at once because they do it all - inventory, CRM, accounting, vendor management, supply chain, logistics, HR. But when you work in your own sphere, they are not complex. Secondly, they are more expensive then your entry level accounting package. What many fail to understand is that when you deploy an ERP solution, countless hours of manual labor have been eliminated. So your accounting package may cost you only $600/year but it also requires one to two full-time employees to handle all the manual workarounds. For example, at $50K/year, your software may now cost $50,600 or $100,600.
What good can really come out of an ERP solution? The best way to explain it is to take Miles' example and see how his business changed. Managing the inventory brought the biggest relief and savings. When goods arrived, they were received in the ERP solution and it triggered a payment to be processed. The sales team, when they were quoting customers, consulted a database with live inventory and were able to sell what was on hand without going into back orders. As soon as a sales order was confirmed, the product was deducted from inventory and when a product reached the safety stock limit, a purchase order (PO) was suggested to the Purchasing Manager. Tracking all POs to their supplier made it easy for them to adjust to the supplier’s delivery pattern and in one case, eliminated the supplier altogether. Once a quote was turned into a sales order, there was an instant notification to the warehouse and the goods were picked, packed and shipped and as soon as they were marked shipped, it generated a notification to invoice the customer. Many of the steps that are now automated were manual; this automation freed up time to fine-tune the business. The Purchasing Manager was able to use real data to decide on suppliers, the Sales Director had real-time data to track their best customers and the executive team had real data to make smarter business decisions.
An ERP solution will improve forecasting, cashflow, fulfillment rates, purchasing, supply chain, and accounting, ultimately optimizing your business. Too big of a dream you may think. Not so, we’ve done it over and over and quite possibly for one of your competitors. You too can reap the benefits of an integrated business system that manages 360 degrees of your business.
See how an ERP solution benefits your organization. Contact us online or give us a call at