Distribution Companies Preserve More Profit
Posted Monday, January 23, 2012 by Don Kapuscinski
Distribution companies are under intense competitive pressure to offer more value to customers, sooner, and at lower prices. How do you preserve margins in this environment? An enterprise resource planning (ERP) system, tailored specifically to streamline your operations, solves this challenge.
Disconnected software systems, where the software in accounting, sales, inventory management, and other departments don’t mesh together, cause inefficiencies and process bottlenecks that drive up cost of operations. And, for a distribution company, this translates into a higher cost per transaction, impeding your ability to compete in today’s market with healthy profit.
The right ERP system equips your company to lower costs per transaction by creating efficiencies in these five processes.
1. Order Processing: What is your order-to-ship-to-cash cycle? Do you have any manual processes in this cycle that could and should be automated? Each manual workaround is a potential bottleneck in the cycle, stretching the time it takes to collect revenue on each transaction, negatively impacting cash flow. And order-processing delays lead to dissatisfied customers, who expect quicker response and delivery. When you automate manual processes with ERP, you shorten the order-to-ship-to-cash cycle, improving cash flow, reducing staff costs and contributing to greater customer satisfaction.
2. Inventory Management: Inventory that sits too long carries floor plan costs that eat into profit. Yet, when you don’t have enough of your fast-moving inventory in stock, you either lose the sale or are forced to buy the product at a higher price to fulfill the order. The right ERP system helps you optimize inventory levels with more accurate demand forecasting, comprehensive real-time status and efficient replenishment processes.
3. Purchasing: Chances are your purchasing department must manage relationships with dozens or perhaps hundreds of different vendors. Keeping up with these vendors to obtain order status, latest pricing, and so forth can get cumbersome and time-consuming, increasing risk of not having the right amount of product in stock at the right time and at the right cost. When properly configured, an ERP system streamlines the entire purchasing process equipping your staff to more efficiently manage vendor relationships, keep track of orders, and stay on top of myriad pricing agreements to ensure proper discounts so that you can preserve as much profit as possible per transaction.
4. Billing/ Accounts Receivable: Manual tasks and redundant data entry causes delays in invoicing and collection and increases risk for billing errors – all of which lead to potential cash flow challenges and higher administration cost per transaction. The right ERP system streamlines the billing process in a way that eliminates errors, lowers administration costs, and improves cash flow, shortening the days to collect.
5. Performance Reporting: How much time does it take to pull together performance reports from all the various departments and business units across your organization and consolidate that data into a single report? How much does that staff time cost to create those reports? What if you could drastically cut that time (and cost) – and actually gain more accurate and timely information to make sound business decisions? That’s what the right ERP system enables you to do. It seamlessly integrates software and data from business units and divisions throughout the company, equipping you to generate comprehensive and detailed real-time performance reports on-demand, quickly and easily.