3 Trends Driving Growth in the Wholesale/Distribution Industry

September 3, 2015

Wholesale Distribution TrendsDistribution businesses have become increasingly complex with ample opportunities to serve many different customers globally. In the United States alone, wholesale/distributor sales equal approximately $3.2 trillion, which also accounts for roughly 7% of private industry GDP since 1987[1]. The reason for such staggering numbers is partially because distribution spans many large market segments, ranging anywhere from grocery and food-service to furniture and home furnishings. Driving this growth are 3 factors that distributors are finding increasingly important:

(1) Investment in Technology:

Many distribution business owners are beginning to realize the importance of making data-driven business decisions. Unfortunately, many companies are currently stuck using older software systems which are not providing relevant information in a timely and effective manner. As a result, the focus has shifted to implementing truly integrated software that will tie the different facets of the business, (such as order taking to warehouse management to accounting) together. The result for companies who move in this direction is a system that provides real-time information across departments in a timely manner to facilitate effective decision making. For example, a salesperson on the road will need access to updated pricing, product availability, and customer information among many other pieces of information. This highlights the importance of a system that will provide information to all areas of an organization, be it in the warehouse or on the road at a customer’s location.

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Beware the RFP When Evaluating Wholesale Software

August 28, 2015

RFPYou may have heard the term RFP before used in a business setting, or perhaps your company has even considered issuing one.  For those unfamiliar with the term, RFP stands for “Request For Proposal” and according to Wikipedia is “a solicitation, often made through a bidding process, by an agency or company interested in procurement of a commodity, service or valuable asset, to potential suppliers to submit business proposals.” RFP’s are often preceded by either an RFI or RFQ  – or sometimes both.  An RFI is a Request for Information and an RFQ is a Request for Quote.

RFPs are used in a variety of industries and can be submitted when companies wish to receive information about specific wholesale ERP software.  In general issuing an RFP informs the software vendor that your company is actively searching for a new system and provides additional information such as:

  • Background information on the company and how it operates
  • What prompted the search and where the need for software derives from
    • This includes information on current challenges and opportunities
  • What specific functionality is required
  • Who will be competing for the final sale
  • The process for making a decision

Due to the amount of information included in a typical RFP, the documents themselves are quite long.  Taking this approach to finding a new software solution may seem beneficial, but these types of documents are becoming less and less common and are not ideal for smaller businesses.  Below we have highlighted some important factors to keep in mind before deciding to issue an RFP, RFQ or RFI.

Are you able to document your existing processes in significant detail?

Small businesses may not have formal procedures in place to document and submit as part of an RFP.  In this situation it is often while working through the sales process and having discussions with software vendors, that businesses are able to better identify their existing processes and areas for improvement.  Many small businesses take advantage of speaking with software vendors to get advice on how to best improve their existing processes and how software can help them achieve this.

In addition, for businesses coming off of introductory type systems, they may not be fully aware of all the features available to them as part of a proper wholesale solution.  This can make documentation difficult and time consuming and can result in incomplete information.

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Which food distribution software do you need?

August 26, 2015

Food Distribution SoftwareOver the years we have had discussions with many companies in the food wholesale and distribution industry who were looking for software suitable for their business.  Most of these companies were looking for capabilities which are commonplace in many food distribution solutions including lot tracking/traceability, landed cost tracking, flexible pricing and multiple units of measure.

Although these features will fulfill the requirements of many in the food wholesale and distribution industry, depending on the specific activities and product mix of your business, there may be additional requirements.  The biggest differences amongst appropriate software solutions is when it comes to “catch weight” functionality.  Companies dealing with canned foods, frozen or dry goods can benefit from ERP software with food distribution specific features.  However, when speaking with food companies that deal with meat, fish, poultry, produce or dairy the term catch weight often becomes part of the discussion.

Catch Weight:

If used in your business, catch weight may be the key determinant in which software you choose.  Commonplace in businesses dealing with produce, meat, poultry and fish this term generally refers to the specific weight of a specific batch of product which is close to the average or standard weight used for that product.  For example you may sell a 16lb case of lamb chops, but depending on the actual cuts of meat in the case it may only weigh 15.7lbs or maybe 16.3lbs. You could have 20 – 16lb cases each with a different actual weight.  How will these be stored in your inventory?  Will you sell them each for the same price or will they be sold by their precise weight? Will you break open a case and sell by smaller weights? When it comes to catch weight functionality it is important to know your requirements, as this is only one version of catch weight and there are many others out there. A potential software provider may tell you that their system can deal with catch weight, but if they define it differently than you do, it may not meet your needs.  In order to avoid any confusion, make sure you have a clear understanding of your requirements and be as specific as possible when speaking with software vendors. If you do require catch weight functionality make sure that it becomes an integral part of your search, and don’t waste your time looking at software without it.

For those businesses dealing with canned, frozen and dry packaged goods, in which the weights and sizes will be standard each time, it is unlikely that you will require catch weight functionality.  This can potentially provide you with more software options to choose from with lower price tags.  In this situation an integrated ERP solution with specialized food distribution features such as the following is likely what you will need to run your business.

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Inventory Management Techniques: Cycle Counting

August 18, 2015

cycle counting in the warehouseCycle counting often comes up in discussions surrounding proper inventory management, but what does it mean and how do you incorporate it into your business processes? In this article I’ll attempt to demystify the term and further explain how regular cycle counting is important for small and large companies, for better inventory management.

What is cycle counting?

Cycle counting is used as a tool to monitor variances in inventory.  It involves regularly counting a small subset of inventory at a specific location on a specific day, with the intent of cycling through the entire inventory over a period of time, and then repeating.   With any wholesale distribution company, there will often be some sort of variance between the inventory items you have on file vs. what you physically have in your warehouse.  This is a result of product getting misplaced, extra items being sent out with bulk orders, human error, shrinkage, etc.

Determining this variance only at the end of the year can result in greater discrepancies and therefore shock from management.  Regular cycle counts help your business keep a closer eye on this variance and make necessary process changes according to the results.  Ultimately, regular cycle counting should result in detailed procedures that yield very low variance levels and a high level of inventory accuracy.

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“I can’t afford wholesale inventory software, it costs too much”

July 14, 2015

wholesale-software-costsWith any major purchasing decision, budget is an important factor. When it comes to purchasing wholesale inventory software, sticker shock is common for those moving off of introductory systems or manual processes.  However, as with any capital expenditure, buying new software should be a decision made on more than just cost – if you want to make the right investment. The same principles apply as if you were such as seeking new warehouse space. So how come cost continues to be used as a deal breaker? Before you narrow down your software options based on cost, consider the following:

Too expensive compared to what?

Expensive is a relative term.  When it comes to software, make sure you think about what you’re comparing the cost to.  Most comparable Tier 2 systems will fall within a similar cost range, so it’s important to first identify which Tier will have functionality to meet your needs. Many companies start off with an arbitrary budget based on what they feel they should spend, and not on any real world frame of reference.  Are you comparing the cost to other systems? To hiring additional employees? To purchasing more equipment?

How much will it cost you to do nothing?

Another cost to consider is the cost of doing nothing.  Businesses who do not take this aspect into consideration are falling prey to omission bias – the tendency to judge harmful actions as worse than equally harmful inactions.  Not purchasing software can affect costs directly by resulting in a new hire or indirectly through lost productivity. When it comes to hiring employees, good software should replace the need for additional staff which will save you more than just the cost of a system in the long run.

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Food Distribution Software: What to Look For

June 22, 2015

food-distribution-wholesale-softwareThis post outlines specific functionality that one should reasonably expect from Food Distribution Software.

The food distribution industry is very unique in a number of different ways. With numerous standards and regulations set by governing bodies in place, as well as an overall level of quality that must be upheld to customers, it is important to employ a software system designed specifically for food wholesalers and distributors. Most software packages have similar standard inventory and accounting functionality that users have come to expect in a true ERP software system. However, it is the additional food industry specific features such as lot tracking, landed cost tracking, multiple units of measure, and flexible pricing that make a system optimized for the food industry.

Key Features:

  • Lot Tracking
  • Landed Cost Tracking
  • Multiple Units of Measurement
  • Flexible Pricing

Lot Tracking

This facilitates robust product traceability functionality in order to keep records of which customers received specific groups of items or shipments. The supplier and the date that items were purchased are also referenced, allowing managers to track an individual group of products throughout the supply chain, ultimately from supplier to end customer. This functionality is especially important to food distributors as it is a key competency in achieving FDA/ISO/CFIA compliance. Many companies in the food distribution industry rely on lot tracking to track internal and external lot numbers, manage best before and expiry dates, as well as simplify product recalls and warnings in case of an emergency.

Landed Cost Tracking

Landed cost tracking allows a food distribution company to account for all the costs associated with getting inventory from a supplier to their warehouse. This allows a company to arrive at its ‘true inventory costs’, which may include duty, brokerage, freight, insurance, and storage, in addition to the cost of the inventory itself. Landed cost tracking provides important information to business owners and decision makers when making purchasing and pricing decisions, as well as aids in maintaining target gross margins by accounting for the total inventory cost, and not just a sub-section of it.

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The Dangers of a Developing a Custom ERP System In-House

March 27, 2015

problems-with-homegrown-softwareIn theory, developing a custom ERP solution in-house to manage your wholesale and distribution business may sound like the perfect solution. However in practise it rarely is.  Even though the system would be designed with your specific business processes in mind, the benefits gained from a completely customized solution are often outweighed by the resources necessary to maintain such a “perfect fit” system.  It’s preferable to work with an industry specific software company, who can meet most of your software needs out of the box, and provides the option to customize as well. Working with an ERP software vendor who becomes a trusted business partner ensures you get the best of all worlds – a solution that is designed for your specific business type, maintained by a team that provides expertise is the areas of software development and management, and provides guidance and insight into industry process improvements. It’s often the smaller vendors who look to build these types of relationships, as it benefits them in the long run as well – working closely with customers means they get first-hand insight into industry specific requirements, and that enables them to continuously enhance the software to better meet the needs of their target market.  Below we take a closer look at the dangers associated with developing a custom in-house system:

First and foremost, as a wholesale distribution company, your core competency is not in creating ERP solutions, nor should it be.  One of the problems with developing a system in-house is that it eats up a lot of resources and requires a large investment into the technology and skills needed to keep the ERP application up and running.  Even if this task is assigned to an IT department, it still takes time and other resources away from the activities that contribute to the businesses core competency.

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