Most of our clients are either manufacturers, distributors, or both. So we thought it was important to review the recent findings by Aberdeen Research illuminating what’s happening today in the wholesale and distribution arena, and how companies’ Enterprise Resource Planning (ERP) systems affect how they fare. You can access the full report here for free (according toAberdeen, “a $399 value”)
Today, roughly 80% of the wholesalers interviewed by the Aberdeenresearch teams indicate they are using an ERP system. That being said, some appear to have done so more successfully than others. We’ll look at that landscape in this and four more future posts.
In its research, Aberdeenlikes to categorize its wholesalers as either “Leaders” (the top one-third of aggregate performance scorers) or “Followers” (the bottom two-thirds). For scoring purposes, metrics are used that are relevant to the ultimate success of wholesalers and distributors, particularly:
- Ability to reduce operating costs
- Inventory accuracy
- Complete and on-time shipments
- Ability to reduce cycle times
Leaders naturally score considerably better in all the above categories, as we’ll review later.
The top pressures facing wholesalers and distribution companies today are not unlike those faced by most companies. But Leaders and Followers tend to differ in a few significant ways. I call this the Which Category of Problems Would You Prefer? category. The more successful Leaders are dealing with growth expectations they don’t currently have the resources to support. They tend to extract the most benefit from their ERP systems in ways Followers do not – i.e., making the best of what they already have. Followers, by contrast, have often struggled with their implementations, or don’t have adequate business managements systems at all.
These Follower companies end up having more difficulties, say, in tracking products across multiple locations, or keeping costs low.
While Leaders use their ERP to gain operating efficiencies, a more subtle operating advantage is gained from the fact that their ERP systems give them more visibility into real-time data enabling them to make better, and especially, more timely decisions. This ability, in turn, allows Leaders to react more quickly to market changes.
And today, all distribution companies, including both Leaders and Followers, are doing everything they can to focus on their customers, and to be easier to do business with. Here again, the Leaders use ERP to do just that, and thus gain competitive service advantages.
We’ll explore how Leaders leverage their ERP systems, and explore these issues in more depth, in our next four posts. Stay tuned…