Gearing Up for the Holiday Season – Wholesale & Distribution

November 27, 2012

increased-holiday-demand-wholesale-distributionAs I write this on November 28th, it’s clear that the holiday season has already started – at least for shoppers, and consequently for retailers and their suppliers. In the U.S., Thanksgiving and Black Friday officially kick of the start off this season of consumer frenzy.

For many businesses, the holiday season can be a bittersweet experience; on the positive side, there’s a substantial spike in revenue, but on the other side this can cause more than a few logistical headaches. The holiday season can make or break a business. The good news is that small businesses are likely to see a 4% increase in sales this year (2012). But that’s only good news to you if you’re positioned to take advantage.

If you’re not prepared for the increased demand, you’ll have to turn away customers. There can be a rather fine line during the November/December months between carrying too much inventory (risk: being left with dead inventory after the season), and not carrying enough (and therefore losing sales and customers). This risk is more pronounced for business that rely on manual processes and use poor inventory/accounting systems. Companies that tend to get the inventory levels just about right are typically using appropriate, well implemented distribution inventory software.

It is at a time like this that any cracks in  the inventory management system become very clear, as revenue and customers fall through those cracks. On the other hand, if you’ve proactively put proper systems in place that will allow you to capitalize on the increased demand that the holiday season brings – and save money in the process!

It’s  little late to implement new wholesale inventory software for this season. However, it can always be added to your wish list to have in place by next season. As a business owner, would you appreciate a gift that helps your business to serve more customers, and give them better service, while keeping costs down and increasing revenue? Or would you still prefer those striped ties and funky socks?

How Much Does Inventory and Accounting ERP Software Cost?

November 22, 2012

Once you’ve decided that your business needs a proper inventory and accounting (ERP) software system, the selection process requires a large investment of resources, but presents huge opportunities for future growth and cost savings.  One aspect many companies struggle with during the software search is trying to determine an accurate budget for the new inventory and accounting ERP system. Many start off with an arbitrary cost estimate based solely on what they believe they should spend, and not based on any real world frame of reference.  Adding to the cost confusion anhow-much-does-inventory-accounting-erp-software-costd budget issue is the fact that many ERP software vendors are not transparent with their cost structures, using “bait and switch” tactics. This contributes to the sticker shock experienced by many companies when moving from an introductory system to a more advanced system.

Let’s review some information relevant to determining the true cost of an ERP system; the different software price tiers and factors that are included in and influence the cost of an ERP system.  For more detailed information download our ERP Pricing Guide.

So how much does inventory and accounting ERP software cost?

There are 3 factors that almost always have an impact on cost: (1) the number of users, (2) the level of functionality and (3) whether or not your business chooses to implement via the cloud (hosted) or on-premise (in-house).  Depending on the number of users and functionality needed, costs can vary significantly, and choosing to implement via the cloud will significantly reduce the required upfront investment.  Other advantages/disadvantages in choosing to implement via the cloud are discussed in the ERP Pricing Guide.

Let’s consider 3 different ERP software tiers: introductory systems, middle tier systems and top-tier systems.  Each tier provides different levels of functionality and can accommodate from only a few users to many millions of users. These different systems can range in price from $1,000 (or less) for a basic system for small and start-up businesses to millions of dollars for those larger businesses serving markets around the world.  The ERP Software Pricing Guide contains more detailed pricing information.

It’s important to understand not only the costs associated with different software tiers, but also those factors that contribute to cost.  These include license fees for on-premise implementations and monthly fees for hosted, maintenance fees, implementation fees, external consulting and customization costs, infrastructure upgrade costs and internal costs.  Many of these costs vary significantly depending on the ERP vendor and needs of the business, but according to industry experts maintenance fees for on-premise solutions are typically 15%-22% of license fees, and license fees can range anywhere from $2,000-$5,000 per user.  License fees and the cost of infrastructure upgrades are cost savings with cloud implementations, but all other costs are pretty much the same for each implementation type.  Sometimes components that are not usually included in out-of-the-box software packages are available as needed at an additional cost, and can most often be added at any time.  Examples include lot tracking and eCommerce solutions.

Just as there are various factors that contribute to inventory and accounting ERP costs, there are also several factors that can help businesses decrease these costs.  For example, implementing a hosted (cloud) solution will significantly reduce the amount of up-front capital investment required, and being selective in the amount of data that gets migrated to the new system will also help to control costs.

Even though ERP software requires a large investment of resources, the benefits and cost savings gained as a result of implementing a new system will enable you to run your business more effectively and even allow you to repurpose staff or eliminate the need for new hires.  Understanding how much inventory and accounting software costs will allow you to formulate an appropriate budget for the project. We remind business owners to treat a new software system like any other major investment (e.g. a full-time employee, truck, machinery).

Download our ERP Pricing Guide for the detailed answer to how much does inventory and accounting ERP software cost?

Inventory and Accounting managed by exception

November 19, 2012

exception-reports-scheduled.Many people ask us about using email alerts to help manage their business more proactively or effectively. Email is so readily accessible that there’s a temptation to use it as the main (or only) communication tool.

Now I’ve said this before, so I guess this counts as “saying it again”:

  1. Yes, these days you can get email alerts on just about anything pertaining to your wholesale business as long as you have suitable inventory / accounting software, BUT:
  2. No, you should not get set up to receive alerts on any and every exception in your business. There’s a better way to manage exceptions.

So what do I mean by exceptions? In a typical wholesale / distribution business, two of the most common daily events that may require corrective action are:

  1. Price overrides and margin exceptions: your sales people override the default price, and / or give the customer a price that reduces your actual gross margin below an acceptable level, and
  2. Inventory levels falling below the required minimum quantities.

Both of these (and many others) can be included in reports that you print on demand, but if you don’t print the report for a few days then you receive the information too late to do anything useful about the exceptions. On the other hand, if you receive an email alert each time an exception takes place, you may end up with so many emails in your inbox that you don’t have time to read them all, much less take remedial action.

The answer, my friend, is in scheduled exception reports. Taking our second type of exception, if during the day 10 different SKUs fall below minimum, instead of getting 10 separate emails during the day, you’d get one email listing all ten at the end of the day. Much easier to deal with.

But it gets even better: let’s say there were also 6 SKUs from yesterday’s report, that you had not yet placed an order for. These could show up again on today’s exception report, as a reminder that you still have to deal with them.

My best advice on email alerts is to avoid all but the most important and time-sensitive ones, and for all other exceptions, use the scheduled exception report approach.

Magento Integration with ERP Software

November 13, 2012

Guest blog: Ben Burmaster, owner of SnuggleBugz, speaks about Magento integration with ERP software.

At the time we decided to go with Magento there were a lot of, I would say almost, bigger plays in the market than Magento. The unique thing about Magento was that it appeared to have a very active community and the following around it seemed to be rmagento-integration-with-erp-softwareeally growing. They also had raised a lot of money and it looked like they were going to be serious about moving forward.

The gift registry component that they offer for us was by a third-party and I think that is one of the unique things that gave us the ability to do what we needed to do. It also identified that there is a much tighter developer community around Magento and a lot more third-party companies creating add-ons to the package or allowing you to do things that the base package wouldn’t do because Magento is open source.

Working with Demac has been extremely beneficial to us. The relationship that we have with them has helped us grow and succeed at the rate that we have and Blue Link and their ERP system, has given us the flexibility. It has allowed us to allow us in this integration process to do the things we wanted to do.

So the integration between Blue Link and Demac happens on two levels:

  1. One is inventory, where inventory is updated and synced with the Blue Link ERP system. Everything from descriptions, colours, attributes, pricing – as they change they are automatically synced.
  2. The second component is orders, where an order comes in to Magento, those orders are automatically created via the integration in Blue Link and then the entire shipping process of that order is automated. Once an order comes in, Blue Link owns that order and then Magento is sort of an afterthought at that point, and Blue Link manages that order and then the sync goes back the other way to update Magento. If the customers check their information online they will see the status of the order, that it has been invoiced, the tracking number and that type of information.

Our Sales Reps Receive “Accurate” Inventory Counts Every Morning

November 12, 2012

When I hear that a wholesale distribution company is providing accurate inventory counts to their Sales reps every morning, I have to wonder why they use the word “accurate”. The moment a product is shipped, received, or adjusted in any manner, the report is no longer accurate and the sales rep has a worthless document (a waste of paper).

sales-reps-accurante-inventory-countEmpowering your sales reps with the right tools can help them to build better relationships and, in return, generate more revenue for the business. However, providing them with data that will likely be inaccurate in a very short time, such as “Daily Inventory Counts”, could have an adverse effect. If a sales rep thinks product is available and relays that information to their customer, when the product turns out to be unavailable the customer will not be happy, and the relationship could become strained. Even worse, the product that was not sold by your company might now be sold by one of your competitors as the customer might go to them to purchase the product.

In order to provide your sales staff with accurate inventory levels at all times, here are two must-haves:

Perpetual Inventory

Perpetual inventory is the ability of your operational software to maintain an accurate account of your inventory throughout the day while product is being shipped, received, ordered, adjusted etc. If there is any movement of a specific product, your perpetual inventory system will be able to account for that movement and when requested, provide you with the accurate information you need.

As part of perpetual inventory functionality, most ERP software will provide you with information such as “Units on Hand”, “Units Available”, “Units on (Purchase) Order”, and even “Units on Back Order”.

This information will allow you to manage your inventory throughout your day-to-day operations.

Access to the Information

If your sales reps are in the office, access to this key information is normally as easy as opening a panel in your software to review the applicable product and note the quantities. If you have external sales reps or salespeople on the road, it is still possible to provide then with direct access to your ERP software through devices such as laptops, iPads / tablets, and even your cell phone.

Not knowing what inventory is in your warehouse, or when you expect to receive a shipment, can cause customer relationship problems and a loss of sales revenue.

In today’s world, a sales rep does not have to be kept in the dark.

eCommerce and ERP Integration: Getting Started

November 8, 2012

ecommerce-ERP-integrationConsumers have come to expect pricing and inventory information from retailers in real-time, so having a quality eCommerce website is increasingly important.  eCommerce provides a channel for customers to access information and purchase products 24/7, 365 days a year and has potentially huge implications for increasing sales volumes for both B2B and B2C companies.  However, many companies fail to realize that having a strong front-end eCommerce site is useless without integration with a strong back-end ERP system.  In order to be successful in an online marketplace and to keep up with increased demand, your eCommerce strategy must include proper inventory management software. The best approach to Getting Started with eCommerce is to implement a fully integrated eCommerce and ERP solution as a joint project.

The information contained in this blog post is a high-level summary of the information that can be found in our eCommerce ERP Integration Guide.  For more detailed information download the guide.  

ERP eCommerce Intergration GuideB2C and B2B eCommerce differ: in the B2C industry, companies are selling directly to the end consumer using an Amazon-type interface and with B2B, businesses are selling to other businesses either through Amazon-type stores, or more frequently through online web portals.   Many other aspects of eCommerce are quite similar between B2B and B2C, and only certain website features may vary.  But before beginning to assign valuable resources to an eCommerce and ERP integration strategy, companies should first determine if they are ready for eCommerce by answering the following questions:

  • Does your company have the time to set up and manage an eCommerce site? Will you need to hire additional people or outsource the management of your eCommerce store to a third-party?
  • Does your company have the budget to implement a fully functioning, competitive website?  Costs can vary greatly depending on the needs of your business. 
  • Does your company have a fully robust ERP system to deal with the back-end processes as demand increases? A reliable back-end ERP system will help automate processes such as inventory management, replenishment and customer invoicing.
  • Is your company prepared to treat eCommerce as a separate business?  One of the biggest mistakes companies make is not treating eCommerce as a separate business with its own staff, reporting, marketing strategy and budget.

After you’ve adequately addressed these questions, the next step is to decide which eCommerce platform to use.  This can be difficult, as there are over 500 platforms with “shopping carts” in the midmarket to choose from. Therefore it is important to determine what platform features are most important to your company.   Aspects to evaluate include:

  • Design flexibility
  • Degree of ease/automation with Search Engine Optimization (SEO)
  • Level of support for multiple category and product templates
  • Source code
  • API documentation
  • Number of payment gateway options and shipping provider integrations
  • Size of the user community

Before deciding which eCommerce platform to implement, you’d want to evaluate your ERP system and its ability to integrate with each potential platform.  This may mean you need to update your existing software system, but the benefits of having the two systems integrated will almost always outweigh the costs.  Some benefits include:

  • An automated eCommerce inventory management system, where, as orders come in from the web store inventory levels are tracked and updated automatically and any changes made in an inventory management system will be automatically reflected online. This will prevent you from “selling” products that you cannot deliver.
  • Automatic notifications to customers – an integrated system can automatically notify customers when orders have been shipped and allow them to track the delivery of products. 
  • A reduction in errors and the need for manual workarounds as demand increases, through automated processes.
  • Simplified price changes to inventory such as quantity or promotional discounts.
  • Increased order volume and decreased costs as customers can purchase more products, more often without the need for additional staff to deal with maintaining accurate inventory data and processing transactions.
  • Secure, online credit card transactions.  
  • Cheaper shipping through an ERP system component that determines the cheapest shipping method/carrier on each order.

As with any project, especially one as big as an eCommerce and ERP integration, there is a cost of being successful – setting up an eCommerce site is comparable to opening a new bricks and mortar store, and the costs will reflect this. In addition to licence fees and development costs, there are many other costs to consider, like:

  • The cost of financial transactions
  • The cost of hosting and security
  • Interface and architecture costs
  • Marketing costs
  • Customer relationship management costs 
  • The cost of integrating with ERP software

eCommerce is a business strategy not to be ignored by companies aspiring to grow and be successful in most markets today – and having your eCommerce fully integrated with an ERP system is crucial to being successful online.   The above information should be helpful for getting started with eCommerce and understanding the investment of time and resources needed to get set up properly online. 

How can you trust any ERP Vendor?

November 6, 2012

ERP-Sales-TrustworthyYou know that you need to replace your business software, and implement an integrated ERP software system to eliminate manual workarounds and duplicate data entry. You have a short-list of potential vendors, and you’re about to engage them to narrow down the list to 2 or 3 “finalists”.  This is usually a very daunting task, as it’s not something you do every day (or year – at least hopefully not).

It’s possible that all the prospective vendors will tell you that their solution will work for you. After all, they want to close a sale, so how likely are they top tell you that they’re not a good fit for you? Exactly! So how can you trust them?

The first thing to realize is that you face this same dilemma every time you embark on a major purchase, whether business or personal. How do you know you can trust the realtor? The car salesperson? The truth is you usually don’t really know, at least not until after you’ve done business with them. and by then, it may be too late.

There are a few general steps you can take to establish the trustworthiness of a prospective supplier in any area, including talking with existing customers (and more than just the one or two they’ll initially volunteer), or search the Web for the vendor’s name together with”complaints” or “trust” – some results you get from these are real eye-openers.

But with a complex technical interaction, like that for an ERP system, there are additional steps you can take to establish their trustworthiness. Here are three really good ones:

  1. Do they show or ask? A vendor who wants to sell you at all costs will typically lead with their product, their solution and their bells and whistles. A vendor who’s truly trying to understand whether their software and your business are a good fit is more likely to take the time to understand your business requirements in some detail, so that he / she can compare your needs with the software.
  2. Have they walked away? Any vendor who’s been around for a while will have encountered prospective customers for whom they were not a good fit. Ask if they can give you some examples, and perhaps even some references, for situations where after investing time to understand the prospect’s business, the vendor walked away from the opportunity because they realized they were not a good fit.
  3. Look for an honest “no”. Do your homework, explore the vendor’s website, and formulate a question about their capabilities where you know the answer should be “no”. See whether the vendor is forthright about this, ort tries to dance around the truth.

Of course there are honest, trustworthy ERP vendors out there – in fact, most that have been around for a considerable time probably fall into that category. But there are also many who will tell you what they think you want to hear. Hopefully, these tips will help you to weed those out.

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