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Discover how to use an advanced cloud ERP system to manage all aspects of your wholesale distribution business.
If you’re in the wholesale distribution game looking for an all-encompassing inventory management solution, then this article is for you. We’ll take a look at key challenges faced by wholesale distributors and how the features of leading cloud ERP software supports your business for the long term.
As one of the world’s most prominent success stories, Amazon has taught us the importance of remaining creative and constantly implementing innovative ideas. As distributors strive to make their own business improvements surrounding key areas like inventory control, receiving and shipping, and client management, the importance of investing in a modern flexible ERP solution cannot be underestimated. There’s no point in having fresh ideas if they can’t be actioned!
The role of wholesale distributors (or ‘distributors’) is to move products from manufacturers to the market. They buy products from manufacturers or suppliers, and sell to retailers (Business-to-Business, or B2B) or even to other distributors. Distributors typically sell products in larger volumes and at a lower price, so that retailers can then on-sell to consumers with enough margin to make a profit.
Of course it’s common for a business to be both a distributor and a retailer – selling to other businesses, and also selling direct to consumers. In terms of a business management solution, the best Australian ERP software systems will accommodate both. It is important to keep this in mind when doing your research, however, the focus of this article is purely on the benefits of modern ERPs for wholesale distribution businesses.
To maintain a financial advantage and remain competitive, distributors need to build strong supplier partnerships. It’s important to have all the information at hand related to each supplier to remain in control and successfully manage negotiations. This includes:
When it comes to purchasing inventory, distributors need to secure the best deals at the lowest prices. This involves negotiating pricing and discounts with suppliers – the lower the price, the higher the margins.
ERP systems track extensive product pricing information.
This includes a product’s purchase price, purchase currency, sales price and margins, to ensure you are choosing the right suppliers, and making calculated buying decisions. This information is managed in a price list that is associated to a product.
Modern ERPs will allow multiple price lists per product, such as a wholesale price list, a customer-specific price list, and an international purchasing price list. A product’s previous purchase price, quantity and date should also be available to view.
Quite often, suppliers will change their product pricing, and two common scenarios result here. Either it is a new price list price, or a one-time special price for a specific purchase order only. Effective cloud ERP software will accommodate both of these scenarios. When creating your purchase order you should have the option to change product purchase prices, and choose whether to commit it to the price list as well, if required.
To keep up with customer demand, time is of the essence when submitting orders – it’s important to have streamlined automated processes. Here are some ways distributors choose to place orders, and leading cloud ERP solutions should have the flexibility to accommodate your desired method:
The more your purchasing team can automate, the more time they’ll have to work on high-value tasks like sourcing new products, building relationships with suppliers, and securing better pricing deals, rather than getting bogged down with data entry.
Distributors can’t afford to have warehouses that are in disarray. You need total control and insight into your inventory. It’s a balancing act – anticipating your clients’ needs while holding the least amount of inventory and, most importantly, avoiding stock-outs.
Reflecting back on distributors Qdos has helped over the years, Mark Phillips (Chief Technology Officer) recalls:
“We were working with a major Australian wholesaler and minutes away from switching over to Qdos ERP…
Just days before this moment the Operations Manager had been expressing how disorganised their giant warehouses had been prior to implementing Qdos’ barcoding technology. Aisles were clogged with boxes to the extent they could hardly walk down them, and they really had no insight into what stock they were carrying and where it was located.
Now here he was, waiting in anticipation for the big moment.
We finally flicked the switch and his eyes lit up like a Christmas tree when he saw the product inventory information. He was literally overwhelmed with the level of detail that he could see before him – a real-time perspective of his warehouses, located nationally.
It was a moment of pure joy that I will never forget – seeing the look on his face and the problem we solved through Qdos ERP.”
It’s crucial to have a clear picture of stock levels at each of your locations, and your inventory management system should feature your desired replenishment approach to avoid out-of-stock and overstock situations.
ERP systems cater to very specific inventory management requirements such as:
Stock history is also pertinent information – review transactions that historically affected the stock levels, to determine when the item was last stocked.
Businesses continuously importing large quantities of inventory from overseas manufacturers need to keep track of shipments and associated landed costs. Importers and wholesalers need the ability to purchase and trade in different currencies.
The landed cost is the total price of a product or shipment once it has arrived at a buyer’s doorstep. Landed cost includes:
Your ERP system should be able to adjust the average cost price for all stock of an item based on the landed cost of the most recent order. For example, you might have 40 units stock on hand of an item you landed for AUD$4.57, and then a new order arrives for 200 pieces at the latest landed cost of AUD$4.86 due to a recent USD currency fluctuation. An advanced inventory management system will be able to set a new price for all stock on hand (240 units) based on the weighted average landed cost. This way, you can keep an accurate record of your profit for units sold.
Customer Relationship Management (CRM)
Cloud ERPs provide CRM features so distributors can understand customers’ needs as closely as possible and provide excellent customer service. This certainly helps to reduce operating costs. CRM features allow you to capture every customer interaction whether it’s a sales call, sales order history, or details of email campaigns.
Sales Representatives (‘owners’) can be assigned to customers, customer contacts and sales orders, to track performance of sales teams.
ERP software gives you tools to efficiently manage customer orders and tailor orders for each customer. You can set up customer default information which is applied to all their sales orders – specify a price list, a standard discount, and from which warehouse location the order will be fulfilled.
Credit limits and putting customers on hold
Offering credit to B2B customers is necessary in order to remain competitive. However, to minimise risk exposure, distributors should set customer credit limits. Modern ERPs alert you when the credit limit has been reached and sales reps can either be prevented from creating any subsequent sales orders (until payment is received), or alternatively receive a warning message.
This feature is commonly used by wine retailers and helps build customer loyalty. Let’s say you have 2 boxes left of a particular wine vintage, and you know that one of your customers always purchases this wine. You can allocate the 2 boxes to the customer (keep the boxes aside) and next time you create a sales order for that customer, the ERP will automatically prompt you with the allocated stock so it can be added to the customer’s order.
To secure deals, customer discounts can be achieved in several ways:
Volume discount pricing
This highly effective pricing strategy provides financial rewards for purchasing a product in large quantities. Volume discount pricing encourages larger orders instead of a series of smaller ones, and helps cement positive relationships with your wholesale customers. In fact, volume discounts help close more deals, bring in new customers, and they’re a great way to beat the competition.
It’s win-win. You make a bigger wholesale sale, and your retailers snag a significant discount to improve their sales margin.
Manage complex promotions
ERPs should have the capability to manage a range of promotions. But advanced cloud ERP systems will be able to manage more complex promotions such as ’Historical Product Quantity Promotions’, such as those offered by Qdos’ beer industry client, Colonial Brewing Company (CBC).
When this promotion is applied, every Nth ordered product quantity is at a 100% discount, for example ‘buy 8 get 1 free’. This promotion is applied over the customer’s historical sales quantities rather than just the current single order. This type of promotion is a great way to entice customers to order larger product volumes, in order multiples that trigger the bonus deal.
Of course, there are various ways to take sales orders from wholesale customers. There’s huge value in offering an online account ordering portal that is fully integrated with your cloud ERP. This means that B2B customers can log into your eCommerce website from anywhere, view and select products and place their orders on account. Sales Reps can also log into the portal and place orders on behalf of customers.
A slightly different scenario is whereby distributors manage inventory that is actually owned by their customers. The inventory is stored in their large warehouses. The customer logs into the eCommerce portal to view their products and inventory levels and place a sales order. The wholesaler arranges for delivery of the requested stock and charges the customer for storage of their own inventory.
All website sales orders flow through to the integrated cloud ERP software for central management and accessed by warehouse staff for processing and dispatch.
Warehouse management software provides the efficiency distributors need to move stock fast. For large busy warehouses, consider using bin management and barcoding technology to streamline processes.
There’s a wide range of warehouse management software solutions on the market, and two of these are discussed below.
A mobile handheld device, when attached to a Grabba, acts as a barcode scanner. Using a Grabba, warehouse staff can complete tasks including:
Scan and Pack software can also be used to pick, pack and dispatch thousands of sales orders per week. Warehouse staff are guided on the best pick paths, packaging information, and it’s fully integrated with couriers such as Australia Post eParcel and Couriers Please. The beauty is that the manifest is auto-uploaded to Australia Post and sales orders are bulk dispatched for quick shipping.
Whether you’re using your own transportation methods for delivering orders, or you have working relationships with shipping companies, an ERP produces the required documentation with delivery instructions.
The best ERP systems will include an accounting module. Distributors need to send customer statements efficiently. Rather than sending statements individually, you can use the bulk send statement feature. At the end of each month, use the automated feature to batch send customer statements by email.
When processing customer payments, it’s much more efficient to process these payments in one hit, rather than individually. Let’s say you have received multiple EFT payments from ten different customers for ten different sales orders. The best ERP systems will allow you to select the ten customers, and choose which sales orders to apply the payments to, all from within one screen.
Distributors need accurate reporting information to make pertinent business decisions. Reports commonly used by distributors include:
Your ERP software should offer real-time reporting, ability to export reports in various file formats, and extract data for uploading into Business Intelligence software.
As wholesaler distributors grow and expand, new business requirements will emerge. Your ERP software system must have the flexibility to cater to your business as it evolves.
To give you an example, recently Qdos’ client Colonial Brewing Company secured a new customer – supermarket giant Woolworths supermarkets. It is a Woolworths requirement for pallets to have SSCC logistics labels placed on them. Colonial Brewing Company can now produce SSCC logistics labels from Qdos ERP.
Wholesale distribution is a complex business with many challenging facets including inventory, suppliers, clients, accounting, multiple warehouses, sales teams, and eCommerce. Distributors must continuously strive for business improvements and innovation, and to do so they need the backing of a powerful inventory management ERP that can manage end-to-end processes across the entire business.
Make smart decisions now: enhance operational efficiencies and you’ll be well on your way to a thriving distribution business.
Qdos provides cloud inventory management software that helps distributors thrive. Get in touch or call 03 8644 4080 to find out how Qdos can transform your distribution business.