Distribution Software: What Systems Should Wholesale Distributors Be Using?

By
Johnny Marx
June 10, 2016

If you’re a growing wholesale distribution company, deciding which business management software adds the most value to your technology stack can be a tricky business. In an ideal world, you’d have unlimited budget, but in the real world, you have to decide which applications are going to bring you the most value at the most competitive price. It’s important to note that small and medium businesses spend almost twice as much on technology, in terms of revenue percentage, as their larger competitors. A recent study by consulting firm Alinean indicates that companies with less than $50 million in revenue spend 6.9% of revenue on IT. Midsized companies spend 4.1%. Larger companies spent just 3.2% of revenue on IT. This finding underscores the need to choose the right applications for your needs to maximize return on investment. Here are seven types of software that we think wholesale distributors should be thinking about as they grow.

Distribution Software: What Systems Should You Be Using?

Financial Management or Accounting: Whether part of a full ERP suite or a standalone application, this is a critical application for any company, including distributors. ERP and financial management applications provide visibility into your business’s most important back office functions, and allow you to reduce administrative costs associated with manual processes. In addition, these applications provide insight that can lead to business process improvements. The ability to pinpoint your financial situation as your data flows through invoicing and accounts receivable through purchasing and accounts payable means knowing at a glance where your company stands financially and what areas are doing well or in need of intervention. It means the ability to determine where to spend and what to cut. Procurement and Vendor Management: Of course, in order to sell products, you’ve got to have products to sell first. That means sourcing and purchasing the products and parts you need. In one sense, managing vendor relationships may be even more important than managing customer relationships, given that your ability to fulfill customer demand depends to such a large degree on your control of purchasing and sourcing functions. Today, procurement software also includes eProcurement that allows distributors to place many of their orders to suppliers online. These applications are also often tightly linked with accounts payable software and financials to streamline the procure-to-pay process. Inventory Management: Managing inventory is one of the most critical business processes for wholesale distributors. Inventory management puts discipline around the inventory management practices happening in your warehouse, eliminating inaccurate paper processes, encouraging more accurate counts. It provides greater flexibility to adjust manufacturing processes and purchasing to meet customer demand, with fewer problems with overstock and out-of-stock items, and better forecasting of customer demand cycles. All of these lead to better customer satisfaction, reduced inventory holding costs and fewer lost sales. Sales Order Management: The ability to efficiently process orders is table-stakes for success. Your business model depends on being able to do this without a hitch. Order processing brings multiple advantages to distribution companies, including time-savings, better customer service, ability to deliver better insight and data to customers, and lower administrative/accounting costs. B2B eCommerce Software: B2B and wholesale distribution companies are increasingly turning to eCommerce to grow their businesses and provide modern ordering experiences to their customers. eCommerce facilitates online ordering from your online B2B portal and/or mobile application, and can be integrated with other applications such as your sales order platform, ERP, and warehouse management to streamline all the processes around placing orders, fulfilling them, and getting them into the hands of your customers. Fulfillment or Logistics Management: After you’ve sold the order, you’ve got to be able to get it to the customer. Logistics management allows you to control costs around this important process to be able to meet or exceed customer expectations around on-time deliveries. Warehouse Management: Warehouse management includes and extends beyond the processes related to inventory and logistics. It includes everything from picking stock from shelves and selecting an appropriate shipping container, to how the products are stored and moved around the warehouse, to how they will make it to their ultimate destination. Marketing Automation: Most distributors with a website are aware that they can track visitors and send automated emails to visitors that perform certain actions, such as visiting a certain web page or abandoning a shopping cart mid-purchase. However, unlike B2C eCommerce firms that have made major investments in marketing automation in recent years, many distributors are still not aware of everything marketing automation suites can do. Marketing automation allows distribution companies to generate, qualify and assign leads to sales reps online or off and automate the process of sending emails, gathering leads online with landing pages and sign up forms (or at tradeshows), and more.

What About Distribution Software Suites?

Another approach, rather than implementing the applications on a stand-alone basis to fulfill each specific business requirement, is to look at a packaged distribution software application. Typically, a distribution software suite includes several of the software types outlined above. Several vendors offer packaged distribution software, including Microsoft Dynamics’ NAV-X platform, NetSuite, and SAP. The issue with most of the packaged distribution software applications for many small and medium sized distributors is cost: many distribution suites are priced out of range for small and medium businesses. These companies instead may look for smaller systems that can be configured and linked together with APIs or other integration tools at critical integration touchpoints to support their business needs. It’s also the case that these suites often cannot adequately meet every need that a distribution business may have––more and more companies are looking to best-of-breed solutions (for sales order management or B2B eCommerce, for instance) for the best return on their investment. If you work in distribution, we want to hear from you: which distribution software applications are most critical for your business?