Businesses strive to optimize the management of their inventory to control the amount of cash tied up in that inventory and to satisfy customer needs. Too much inventory translates into insufficient cash to operate the business, whereas too little inventory reduces a business’ ability to respond to customer orders in a timely manner.
Treating inventory management solely as a cash flow or customer issue, however, precludes consideration of the business’ relationship with its suppliers as a component of inventory control. It also increases the prospect of an adverse relationship between a supplier and the business.
A centralized distribution enterprise resource planning (ERP) system gives a business the tools and information it needs to manage and control all aspects of its inventory and distribution operations while maintaining strong partnerships among customers, suppliers, and the business itself.
Distribution ERP and Supplier Management
Distribution ERP helps a business to increase cooperation and to coordinate shipments of supplies from suppliers in at least three ways:
- Distribution ERP defines criteria that will be used to select suppliers.
If they are not given robust or evolving standards or criteria, employees tasked with procuring supplies will trend toward using the same suppliers that have been used for long periods of time with little or no objective reasons for continuing to rely on them.
Distribution ERP systems motivate businesses to select multiple suppliers and to notate supplier experience for different shipments. The distribution ERP system also directs employees to the best source and saves them time that might otherwise be wasted as they look for a new source.
- It helps a business to monitor each supplier’s performance.
Just as manufacturing ERP tracks every step in a manufacturing process, distribution ERP tracks and records all stages of a supplier transaction, from ordering, through delivery and billing, and payment.
Distribution ERP provides a dashboard of analytics to measure supplier performance, as well as alerting purchasing managers to inventory levels that have fallen below desired minimums. This changes the supplier relationship from a buyer-seller model and into more of a partnership.
- Distribution ERP provides tools to audit and build a supplier relationship and to give objective feedback to suppliers.
Suppliers benefit from a business’s distribution ERP with audit and tracking tools that show them how their supplies are being held and utilized in real time. This enables suppliers to better anticipate a business’s needs and to respond more effectively to prospective supply orders.
Using Distribution ERP to Meet Customer Requirements
The value of a distribution ERP system is even more apparent on the customer side. Distribution ERP gives a business the complete ability to track and control inventory through customer fulfillment, including showing whether goods are en route or still in a warehouse.
The system can be automated by incorporating bar codes and RFID tags into products, giving managers an unprecedented ability to trace and account for order flow while simultaneously feeding data and records to accounting and billing departments to expedite payment schedules. Automating the entire customer fulfillment process with distribution ERP also eliminates manual entry errors.
Lean Operations and Cash Management
A centralized distribution ERP system thus gives employees the information they need to make more intelligent decisions on both the supplier order and customer order fulfillment functions of a business.
The business then holds the optimum amount of inventory and better satisfies all aspects of customer and supplier requirements, which frees up cash that can be used to expand the business and to improve other areas of its operations.
Without distribution ERP, a business can only speculate on its inventory needs, leaving its relationships with suppliers and customers wholly up to guesswork.
