Greater visibility, lower inventory costs, stronger financials and improved customer service – these are the kinds of metrics wholesale distributors seek as they strive to improve business performance.
Recent research from SL Associates has found that a growing number of wholesale distributors have improved these metrics and more by moving to cloud-based, integrated ERP platforms that also include CRM, supply chain management, project management, and business intelligence.
SL Associates surveyed NetSuite distribution customers on the key performance indicators (KPIs) they use to measure their performance and how those KPIs have changed since moving to NetSuite.
According to the research, distributors running NetSuite reported KPI improvements in five main categories:
Integrating disparate business systems increases visibility into data and business processes. Distributors on NetSuite’s integrated platform found that their overall visibility into business performance and operations rose between 50 and 80 percent, according to the research.
“360 degree visibility and actionable insights increased 50-80%”
This category includes the following KPIs: collection time for accounts receivables, revenue performance, gross margin performance, time to close financial books, days sales outstanding and accounting staff productivity. All of the KPIs that were tracked improved, with changes ranging from increases in gross margin performance of 1 to 5 percent, to reductions in the time needed to close the financial books of 30 to 55 percent.
“Accounting staff productivity increased 30-50%”
Inventory management is critical to the success of a distributor. In the survey, respondents measured their inventory management successes using four KPIs: inventory costs, obsolete inventory carrying costs, fulfillment rates and back orders, and planning cycle times.
All of these relate directly to a distributor’s ability to see and respond to supply chain orders, inventory, and customer orders. The improvements were significant.
Costs went down by 20 to 30 percent; obsolete inventory carrying costs decreased 20 to 40 percent; fulfillment rates and back orders rose 75 to 85 percent; and planning cycle times went down 20 to 30 percent. Those KPI improvements translate into real money for distributors.
“Inventory carrying costs decreased 20 – 40%”
Shipping and fulfillment has a big impact on customer satisfaction since it’s the one measure that every customer experiences. So reducing those KPIs translates into happier customers overall, and of course more sales and lower costs to the distributor.
In the study, average shipping times went down 60 to 80 percent, while delivery efficiency was increased by 75 to 90 percent. Those KPIs represent savings for the customer who’s waiting on the order, as well as for the distributor who incurs overhead the longer the fulfillment process takes.
The third KPI – the number of customer back-orders, decreased 60 to 80 percent, according to the study. That means higher customer satisfaction and a greater likelihood they will buy again.
“Delivery efficiency increased by 75-90%”
IT costs were the biggest savings. Distributors who moved to NetSuite’s cloud software no longer had to pay the cost of hardware and software upgrades and other IT management.
Specifically, IT support costs went down 50 to 75 percent, the cost of buying and maintaining servers decreased 100 percent, and disaster recovery costs decreased 50 to 75 percent, according to the study.
“IT support resource costs decreased 50-75%”
Having a credible, quality ERP cloud provider with a comprehensive and integrated ERP platform clearly had a major, positive impact on distributors’ operations and business performance.
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This piece has been adapted from an article written by Ranga Bodla, Wholesale Distribution Industry Lead at NetSuite, and originally appeared on NetSuite’s blog here.