Software Manufacturers Discuss How Tech Can Help Distributors
The COVID-19 pandemic has impacted many facets of life, including the availability of goods. The following manufacturer roundtable outlines how technology can help jan/san distributors monitor inventory in the post-pandemic world. It also addresses how distributors can track changes and fluctuations in the supply chain, and describes how comparison guides can help.
How can technology help keep track of inventory as it continues to ebb and flow in the wake of the COVID-19 pandemic?
Jagoe: As customer purchases dramatically fluctuate, there is a unique need to quickly identify inventory exceptions, increase fill rates and eliminate dead stock. Exceptional demand swings can skew your purchasing forecast, ultimately leading to critical stock level issues.
Lane: Proper inventory management is critical for distributors. Inventory is typically the largest asset of the organization and it's extremely important to manage it using an ERP software platform that focuses on maintaining the proper stock levels to support sales, while also reducing inventory levels of non-performing stock items. The key is the software algorithm that should run nightly, evaluating every stock item based on quantity on hand, current and average demand, seasonal variables and the class of stock items resulting in automatically-generated purchase order suggestions to the buyer.
In PIC ERP, distributors can choose the sales threshold levels for A, B, C and D class assignments and the system then manages the inventory accordingly. A items are the focus for achieving high fill rates, turning inventory and reordering frequently. ERP software should also provide a manual allocation process for selected items flagged for review, such as gloves, hand soap, sanitizers, wipers and personal protective equipment in the case of COVID. This process should allow staff to bypass the default stock allocation system and instead decide customer by customer how to allocate critical inventory. Providing a unique stock class designation for stock items that are classified as virtual, or available from a regional wholesaler on an overnight or next-day basis is sensible and once sold, the items should then progress in classification up to the A, B, C and D levels. Similarly, flagging Obsolete items for closeout sales is also important.
Hestenes: COVID-19 has disrupted the entire supply chain globally and two issues have come to light. One is we advised customers to come up with generic item codes for COVID-related items (for example, nitrile powder free exam gloves, size: large) rather than a specific vendor's item. Distributors have found that they may have dozens of different brands flowing in depending on what they were able to find. This way, whatever they have (even if from multiple sources), it's all in one spot in the computer.
The other issue is prioritizing who receives the product when it does come in. We added code so that distributors could easily see what type of customers were backordered so they could allocate an arriving shipment. For example, perhaps first responders and healthcare got priority over food service operations, etc.
Raffo: In this environment, a significant increase in product lines and decrease in historically significant lines is not unusual. Technology tools can be used to keep track of fluctuations in product categories or specific products, as well as track baseline comparisons to prior periods. This can help identify when or if the trends are changing and proactively react to those changes.
KPI's (key performance indicators) that should be monitored include product sales by category and location, and product sales trend on a comparison time period basis. Reports that keep track of open orders tied to metrics or product attributes — such as keywords and those that allow comparison to historical sales for the same time period — are an important tool. Reports and KPI's that track sale price against benchmarks such as list price are effective in guarding against losing margin on the new, fast-moving products that are the favorites of the sales force.
Given the existing market conditions sourcing and getting products can be difficult. A customer can place and order and either all or a portion of the order is back ordered for weeks or longer. The lead times can be significant. The technology needs to be able to handle the back orders, the fulfillment of back orders and provide the ability to keep track of the variations.
Similarly, how can jan/san distributors use software to monitor price changes as the supply chain continues to fluctuate and how can comparison guides aid the distributors?
Lane: Good ERP software will have flexible costing strategies to allow effective cost management, plus multiple utilities to help distributors enter new costs. The software should allow the entry of future costs and the selection of effective dates to make them live in the system, and a report to narrow focus on COVID-19 suppliers makes sense. Conversations with these suppliers should look as far ahead as possible to try and predict trends. It is also critical to have a robust contract cost management system that can easily be updated as the markets change.
Jagoe: An ERP system with the ability to monitor and automatically (or periodically with a review) change individual customer prices as costs change will drive a 2 to 4 percent annual margin boost.
For jan/san distributors, traditional price formula maintenance quickly builds into a cumbersome process that limits margin performance. Tailored pricing systems make your sales force more efficient and responsive, by eliminating the many steps needed to manually manage price structures for each customer and situation. Streamlined workflow and automation for future costs, contract prices, vendor rebates, cost loads, and commissions will keep your company profitable and frees up time to drive new business and address other priorities.
Raffo: Increased demand and logistics disruptions impact product cost, placing pressure on prices and price contracts. Software that allows rapid cost updates, translation of the cost changes to price, and communication to salespeople and customers permits continuity and structure in the process. The use of substitute products or alternate vendors can temper the effect of the cost changes. Accurate monitoring of margin fluctuation and rebates can assist in decisions whether price changes should or can be passed on to the consumer.
Hestenes: The number one thing we do to help distributors is have a margin preservation feature. Consider vinyl gloves. Pre-pandemic, distributors were paying under $20/cs. Now they are lucky to get them for $75/cs. With every customer typically having a special price on every item, imagine how much time would be consumed in keeping up with all these wild cost changes.
How can using distributor software help maintain good customer service during difficult times?
Hestenes: Be able to easily see not only what's in stock, but what is currently backordered for any given customer.
Raffo: Customers are experiencing the same restrictions, burdens from working at home and general tension as everyone else. Active engagement with the customer to reinforce the feeling that you are still there for them is important. Integrated CRM (customer relationship management) software will help keep track of customer concerns and the lines of communications open. The software also needs to track service level and fulfillment on all products to help ease tension and frustration created by the delays of high-demand products. The BI (business intelligence) system can be used to aggregate large amounts of data into easy-to-understand, actionable items. KPI's can be used to alert specific situations or trends. Some of those KPI's include, but are not limited to, stock on hand, inventory turnover, inventory carrying costs, declining product trends, short stock products, over stocked product, and more.
Lane: Quality ERP software has many capabilities to maintain excellent customer service. We found that an integrated Warehouse Management System (WMS) provides a 99.9 percent level of inventory and delivery integrity. A real-time ERP allows inventory to be reserved immediately at order save, and should be able to further reserve inventory from specific warehouse locations when sent to a scan gun for picking. Ideally, this would allow cycle counting to occur all throughout the day, even while receiving, picking and shipping is in process.
Jagoe: Providing customers with the right information at the right time strengthens relationships, incites loyalty and proves your company's ability to deliver superior service over a competitor. Having an embedded CRM allows your team to access detailed customer information regardless of who picks up the phone or meets them at the counter. CRM that includes personalized customer engagement tools, purchase and price history, and a sales opportunity pipeline keeps customers top-of-mind and puts valuable information at your fingertips, enabling teams to easily act on sales opportunities, while solidifying future orders.
What feature offered by most forms of distributor software do you think benefits jan/san distributors the most and why?
Lane: Most forms of distributor software provide the basic ability to manage inventory (asset #1) and accounts receivable (asset #2). With that said, an often overlooked software feature is real-time processing. A well designed ERP platform should have every component running in real-time with zero batch processing involved.
There are many benefits to real-time processing, the most important being that any displayed record is accurate, up to the second. Another is the use of associate/date/time stamping and log recording of every stock move, from receiving, location to location, picking, shipping and delivery. When staff understand that this is done to assure top customer service, your team starts working together and rowing in the same direction.
One additional huge benefit of a well-designed ERP system is the inventory management process and the algorithm itself. Can the buyers and management easily understand why the system is recommending the quantity displayed? Are seasonal variables taken into consideration? Can buyers easily modify demand to adjust for new or lost business? It's critical that a distributors staff have faith in the system itself, otherwise they will develop workarounds which, while well intended, might have adverse consequences.
Jagoe: Having the ability to elevate the retail experience by getting customers in and out quickly with an outstanding, streamlined POS system is an ERP feature that strongly benefits jan/san distributors.
Allowing team members to accept contactless payments from customers anywhere in your location with handheld payment devices, connect electronic cash drawers, POS receipt printers, and payment card terminals set you up to operate a tightly controlled and secure point-of-sale environment while providing personalized customer service and leaving a lasting impression on buyers.
Another key feature is the ability to view customer order history, pricing information, and product analysis from a centralized easy-to-access screen.
Jan/san distributors also benefit greatly from having the option to multi-task from a single screen.
Lastly, having a system that studies your customer's buying history and determines the products your customers are "due-to-buy" empowers distributors to react to changes in purchasing patterns.
Hestenes: Probably on-line order entry. Things are as wild and out of control for the customers as they are for the distributor. Anything to allow customers convenience is helpful. Way faster to enter an order on-line than to call it in.
Raffo: Overall, the primary feature offered by an effective distributor or ERP system is full integration between the different functions of that system allowing all modules to share data whether it be the online ordering system, Salesforce automation, etc. This provides up to date information driving efficiency, accuracy and customer satisfaction. On a singular level the ability to access the ERP system in an online cloud solution has been particularly important in the time of working from home during the pandemic. This is a trend that needs to be embraced more so now than ever.
In what ways might the current global situation we find ourselves in lead to changes in distribution software and why are these changes necessary?
Raffo: Many trends in place have only accelerated as a result of the current situation. Adoption of working from home is here to stay in some form. Access to cloud solutions to facilitate working from home will be important even more so going forward. Online ordering, customer engagement online, and providing content to the customer online will continue to gain prominence with the successful distributor. Integrated ability to allow customers to pay by credit card or eCheck via access to a payment portal will play a greater role as the payment processing via eCheck and ACH gain acceptance. Artificial Intelligence will gain prominence in areas of vendor managed inventory to ensure that minimum stock levels are maintained.
Hestenes: This is the first time in our lifetime of seeing a worldwide major disruption to the entire supply chain. Even manufacturers that have nothing to do with COVID items are compromised. COVID common sense rules imply factories need to keep employees farther apart, which means fewer people working at one time, which lowers output. Then, if a COVID outbreak occurs, the plant might find itself shut down for weeks.
Then with the COVID specific items, there are only so many factories set up to produce them, (all with the same issues above), and the demand is up 1,000 percent. Then look at the problems that occurred when all the liquor distillers tried jumping into the hand sanitizer market. We got lots of comments from distributors about terrible products. So there's not much software can do in predicting when and from whom distributors will be receiving products.
Jagoe: In March, an almost immediate shift to digital purchasing occurred for every consumer. It became critical for distributors to have a web platform that gave the customer a complete view of their purchase history, customer-specific pricing arrangements, invoices, and online payments. The ease-of-use of an online platform that reflected the same information as if the customer had face-to-face contact keeps orders flowing remotely. Distribution software must evolve to be cohesive: offering an anywhere, anytime product catalog, ordering desk, customer service, and payment portal, and warehouse management system is crucial. The remote worker and remote consumer are here to stay and distribution software must evolve to be an extension of each distributor's business whether at the distributor's physical location or on their webstore.
Lane: The current global situation has shown us several things. One: the world can change in an instant, the question is can your business change as quickly? Two: Your business software must technically be capable of meeting not only your needs today, but the needs you may have tomorrow, next month or next year. Companies like Amazon, Grainger, Staples, Home Depot and others have targeted your business, either overtly or covertly. Can your business software compete?
For this and other reasons, distributors in every industry should be taking a hard look at their existing software platform and e-commerce solution and make a decision. Ask yourself:
I. Does your ERP software ever freeze up? Have to reboot the server to restore service to your staff? This is not a good thing and indicative of systems that do not run in real-time and get too busy batch processing files on the back end. Consider looking for new software, ideally software that runs in real-time and can properly support your business no matter how large your company grows. PIC ERP scales up as your business grows, deploying additional application and database servers as needed.
II. How secure is your ERP system? If someone in your office were to accidentally click on a Ransomware link, are you out of business? If your server is local in your office and networked, the answer is probably yes. On the other hand, if your ERP was on a server in the cloud stored in an ISO Registered data center with top notch security, you would probably only lose that one computer. Your data is completely safe.
III. Is your ERP software automatically backed up in real-time onto a server located in the cloud? If no, how quickly could you recover in the event of a server crash? How many days of business transactions would you lose if that happened? If your ERP was in the cloud, recovery can be made quickly from a real-time server, ideally located in a ISO registered data center on the other side of the country.
IV. Is your ERP and e-commerce platform is hosted on a server in your office? If so, why? In addition to the security and backup issues highlighted above, the speed at which your e-commerce platform opens pages for shoppers will be a major deciding factor going forward for today's younger buyers who expect pages to load in about 2 seconds. Google recommends under 2 seconds and shoots for under 1⁄2 second on their platform. Distributors can easily test their own website response time. In a browser window, navigate to https://gf.dev/website-audit and enter the website URL in the address bar. The site will analyze page load times and other critical aspects of the website.
In conversing with your jan/san distribution customers over the last couple of months, what topic seems to come up the most?
Raffo: There are many recurring themes we hear from our customers. These seem to be the most prevalent:
- Working from home and the challenges it provides.
- Having a true cloud solution is critical in the new work age.
- Sourcing products and cost controls seem to be a common theme.
- Having a good online system for customers to place orders has been one of the main objectives of our distributors.
Hestenes: Interestingly, the number one comment we heard across the board is that they are wasting half of their day, every day, calling around trying to find products. So nothing to do with software, just how their work lives have changed!
Jagoe: For most jan/san distributors, 2020 has proven to be an unexpected, unpredictable, and unprecedented year with the need for cleaning and sanitary products skyrocketing across the U.S. As a result, many were forced to account for variable supply and demand as well as unusual sales spikes. Those distributors with an intelligent ERP in place to help identify sporadic and unusual demand while maintaining customer pricing had a strong advantage over the competition; ultimately leading to better control over their inventory, increased margins, and a more seamless, profitable year.
An obvious hot-topic is the need for a more robust eCommerce platform. Consumers expect substantial online content with multi-level attribute filtering to reduce the time it takes to locate products of interest. They need full access to their past orders, shopping carts, pricing, payment options, and advanced capabilities such as approval levels.
Lane: I find distributors are pleased at being classified as a "necessary business" and allowed to remain open, however they are justifiably concerned about the economy, the effect that the lockdowns are having and their business as a result. Some distributors are reluctant to make investments in their business right now, preferring to wait until the all clear signal comes someday. More savvy distributors have realized that this is an opportune time to shore up their business and invest in critical infrastructure to improve their overall level of service. Upgrading business software is a critical component of that process. Most distributors are aware of the intrinsic advantages they have over an online seller like Amazon (professional representation, floor and packaging equipment sales and service, warewash and laundry programs and service, facility audits etc.) and they also realize that the buyer of today is a technologically savvy individual who will place online ordering ease as a higher priority than older buyers traditionally have. So in effect, it's time to pad your bets and make a plan to offer a higher level of service online as well as locally. That requires a modern, responsive e-Commerce solution integrated with a modern ERP platform hosted in the cloud. And if you don't have an Amazon account and the app on your smartphone, swallow your pride and do it. Learn from this new breed of competitor.
What improvements do you think distribution software as a whole has been in need of in maybe the last two years, and when do you think those changes will be made?
Raffo: Distribution software has made great strides in visibility of information and content to the customer user, but it will continue to make progress in that area as the consumer expects a retail like experience. To address price shopping, distribution software needs to allow multi-channel sales if it does not already do so to permit the sourcing to customers through multi-sites. Adoption of integrated transactions between distributor and customers and vendors though technologies like Punchout Level I will continue to be expected and required by trading partners.
Hestenes: Probably what COVID exposed more than anything is weak backorder management. A lot of systems had limits on the number of backorders an order could have.
Jagoe: Probably portability. It has taken some time to develop technology that can adapt to the small size of smartphones and deliver adaptable touch screen capabilities with the power of live inventory and advanced order tools. Jan/san distributors are always on the move and will benefit greatly from an ERP software that can deliver both industry-specific functionality and full-featured mobile software.
Lane: Many distributors in North America are running older software platforms (not necessarily ERP software) which is probably PC-based software hosted on local servers in their office (the majority) or running newer-technology cloud ERP software that provides many more benefits than the older PC based systems. There are quite a few distributors who have told me they sold their businesses in recent years to much larger firms in part because of their unwillingness or inability to keep up with the rapid change in technology.
Why is now an exciting time to be in distribution software?
Raffo: We have been fortunate to hear a number of stories from distributors that their business increased multi-fold. We are mindful of one recent narrative in which the distributor gross sales increase three-fold literally overnight and we were just thankful that our software and system enabled them to do so with no increase in staff many of whom are working from home. The technologies and platforms that are available to us for use in development continue to get better. We are excited that we are in a position to pass those improvements to our customer – partners to assist them to thrive and excel.
Hestenes: Since most distributors have experienced a huge increase in order volume, COVID exposed how weak and unhelpful generic accounting packages are. We have had numerous customers buy STEP1 this year because their generic packages simply could not keep up with demand. We're handling customers from $1 million to $50+ million in sales, all of whom are humming along growing their businesses!
Fucci: Having a single-source solution for CRM, online sales, and daily operations management allows wholesale distributors to offer customers a personalized experience; driving sustained loyalty and consistent new business. The ability for multi-channel selling and anytime/anywhere access to your products is what empowers distributors to maintain business-as-usual, despite various challenges they may face. Fast approaching technology advancements including Inform's Mobile Sales for smartphones will put ERP in the hands of every salesperson and further emphasize the advantage in service and product expertise an independent distributor can deliver in the onset of large digital competition.
Lane: Well, for all the reasons I have previously iterated, the proper ERP platform can indeed transform your entire company staff from being a group of people occupied with "busy computer work" to a group that has a real-time ERP running in the cloud with many automated tools to do the busy work, freeing them up to do some really exciting things. Like Inside Sales, calling new customers to qualify as new accounts. Offering better clerical support to their sales staff, many of whom while having tremendous experience and relationships with customers are not very adept with newer technology. Becoming proactive everywhere in your operation instead of reactive to issues that happen and probably should not. This is an exciting, transitional time to be in the jan/san business. By far the best time ever for me over the last 40 years.
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