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Posts Tagged ‘ERP in Wholesale/Distribution’

In our previous four posts, we’ve looked at what Aberdeen Research has learned by surveying wholesalers and distributors about their use of ERP in the management and operation of their firms.  In our series, we’ve highlighted key pressures on these firms, key decision drivers, strategic actions these firms are taking, and in our most recent post, trends that show how companies are best utilizing ERP today.

In today’s fifth and final post on the topic, we briefly reprise Aberdeen’s “Key Findings and Recommended Actions”. 

Aberdeen reveals two brief conclusion sets – one for “Followers” (defined earlier as the bottom two-thirds in terms of operational performance in four key areas) and one for “Leaders” (the top third).  Their conclusions…

“Follower” Steps to a Successful ERP Strategy include:

  • Provide decision makers with automatic notifications.  “Managing to exceptions only is not necessarily a good idea.”  Immediate notification about key events and conditions allows for proactive management.  Leaders are 85% more likely to do this!
  • Continuously improve.  It simply leads to better performance.
  • Plan and forecast demand.  Leaders are 1.5 times more likely to have this ability, and Followers need to attain this capability.  Errors here lead to missed opportunities or increased costs, and distribution, as an industry, is particularly susceptible to miscalculations here.

“Leader” Steps to a Successful ERP Strategy include:

  • Enable mobile access to ERP.  It’s a 24/7, web-enabled, mobile business environment.  Make agile decisions, combat adverse events and grab strategic opportunities by giving decision-makers all-the-time access to information.
  • Measure returns on investment.  More firms are beginning to do it, and Leaders gain profit advantage by doing so.  Fine-tune your ERP by recognizing its flaws, and build improvements in.  The cost-savings over time will pay for it.
  • Look to wholesale and distribution specific modules and extensions of ERP.  Requirements planning, warehousing and forecasting capabilities optimized for distribution enable managers to gain further operational control and greater visibility over their business – and to capture the profits that follow.

We hope you’ve profited from this series of posts.  ERP today is a critical strategic tool for any SMB in the distribution business.  Neglect the lessons of either the Followers or the Leaders cited in this series at your own peril. 

Any way you slice it: ERP systems today are one of the best – and most mission-critical – investments any firm can make. 

And one final time, to give credit where due: You can access the full report here for free (according toAberdeen, “a $399 value”)

DO YOU HAVE questions or comments about ERP in the distribution environment?  Drop us your comments and questions below… we’ll be sure to respond.  And thank you for your attention!

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While Aberdeen Research’s latest report on the current state of the wholesale and distribution sector’s use of ERP to improve performance contains lots more data, we’ll close out this five-part series with just two more posts.

Readers of the full report will find all sorts of compelling and corroborating evidence that proves that ERP systems, when fully implemented, maintained and utilized, provide significant, measurable strategic leverages to the firms that use them.

A few key takeaways from Aberdeen’s report…

  • REAL-TIME visibility into operations and transactions is becoming increasingly important in today’s business as a competitive driver – better info leads to better analysis which leads to better managerial execution… all of which leads to better profits, and a top survival strategy.

 

  • Access to technology – 24/7, from any place at any time – is the new normal.  Users and decision makers increasingly demand access to their systems from mobile devices, via web browsers, from any laptop or desktop computer… and they increasingly use aids like triggers and alerts to manage exceptions, processes and events.  It will only increase.

 

  • Measurement leads to optimization.  Fewer than half ofAberdeen’s surveyed organizations are currently doing this.  But those that do are able to identify where their ERP is lacking – and optimize it further.

In our next and final post in this series, we’ll look at whatAberdeenitself concluded were its key findings and recommendations…

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In two previous posts in this series – here and here – we noted that so-called “Leaders” in the distribution/wholesaler business sector outperform “Followers” according to a recent survey by Aberdeen Research, and in doing so are better utilizing their ERP systems.  While there’s no certainty of causality here (Do Leaders outperform because they better utilize their systems?… Are they more inclined to better use their systems because they are already performance Leaders?…) – some observations either way are in order.

According to Aberdeen’s research results earlier this year…

“In response to these pressures [business pressures cited in our previous two posts] wholesalers and distributors are enacting a series of strategic actions to improve their organizations’ performance…”  Those strategic actions include:

  • Standardizing business processes
    • Cited by over 60% of all firms
  • Streamlining and accelerating processes to improve efficiency and productivity
    • Cited by over 50% of all firms
  • Providing visibility to business processes across functions and departments
    • Cited by over 40% of all firms
  • Modernizing technology infrastructure and applications
    • Cited by over 30% of all firms

“Leaders” in performance in the distribution / wholesale sector use their ERP systems to help them make serious inroads in business standardization.  In particular, companies are standardizing enterprise-wide procedures for procurement, cash collection and financial reporting, as well as order management, delivery & fulfillment, and demand planning and forecasting.

The ability of these firms to do demand planning based on data within their ERP systems means “Leader” firms are “avoiding expensive holding costs and never missing out on times of high demand because they do not have enough product on the shelf.

Most tellingly, Aberdeen reports: “Leaders are 48% more likely than Followers to have this capability in place, which has led to higher revenues and profits.”

A word to the wise…

 

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In our previous post we started looking at wholesalers/distributors and how they can utilize their ERP software systems to gain competitive edge.  We base our comments in this series on research done recently by Aberdeen Research, who surveyed nearly 70 wholesale firm for their latest findings. 

You can access the full report here for free (according toAberdeen, “a $399 value”)

In this post, we’ll look briefly at the “business drivers” impacting ERP strategies for those in the distribution business. Aberdeen has, we noted in the prior post, divided respondents into two categories: “Leaders” (the top one-third in terms of critical distribution-industry key performance metrics), and “Followers” (the bottom two-thirds). 

Following are percentages of each who cited these criteria as being their leading business drivers:

  • Need to manage growth expectations:   [Leaders: 48%     Followers: 20%]
  • Need to be easier to do business with:    [Leaders: 38%     Followers: 43%]
  • Must reduce costs:                                          [Leaders: 24%     Followers: 32%]
  • Work across multiple locations:               [Leaders: 19%      Followers: 34%]
  • Ability to react to market changes:         [Leaders: 19%      Followers: 9%]

Note the large disparity in the first category, having to do with managing growth expectations.  Those companies who are doing the best in key performance criteria, i.e., those who have been most successful in reducing operating costs… those who have the highest inventory accuracy… those with the most complete and on-time shipments… and those with the shortest cycle times – these “Leader” firms are the ones most concerned about managing growth expectations – because they are already growing fastest!

As Aberdeen’s research bears out upon deeper analysis, these Leader firms have been using their ERP systems to a deeper and broader extent than the Followers… they have utilized more components of their systems… and unlike the Followers, they are simply doing a better job of making the most of what they already have – and they’re maintaining, upgrading and replacing their systems to improve their competitive advantages even further.

In our next post, we’ll look at how they’re doing it…  Stay tuned.

 

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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.

Top Pressures

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…

 

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