Archive for the ‘Wholesale Distribution’ Category

One of the items we frequently run into working with manufacturing and wholesale distribution companies is the concept of attributed inventory.  More specifically, attributed inventory means that a given inventory item has a series of parameters (i.e., attributes), which further describe that item.  A very simple example that people can relate to is an item like a shoe, which would have attributes of size, color, and width.

Generally within legacy systems, manufacturers and distributors have fully described their inventory at a SKU level where every applicable combination and permutation of the product and associated attributes are specified for each given SKU.  Some may have decided to use intelligent part numbers in conjunction with this approach where their product ID might be SHOE-BLACK-12-EE for a black size 12EE shoe.

Alternatively, the manufacturer or distributor may decide to leverage attributed inventory within a strong ERP software solution.  In this case, the same product as above would have attributes defined as Color, Size, and Width.  Therefore, the product noted above would be SHOE with attributes of Color = Black, Size = 12, Width = EE.

While there are numerous ramifications to using attributed inventory rather than merely specifying product numbers for various combinations and permutations of items, one of the main advantages that can be managed easily with attributes is customer pricing.  As a simple example using the product of SHOE, if the standard pricing for a pair of shoes were $79.00 for all widths except EE for which there was an additional charge of $5.00 per pair, then pricing could be setup such that SHOE = $79.00 with the incremental pricing for Width of EE = $5.00.

While the above is a very simple example, when products have dozens of attributes, such as a steel coil, managing the product via any other manner besides inventory attributes would be impossible.  For example, one might specify the inside diameter, outside diameter, width, tolerance, etc. for the coil.

Even in cases where there are relatively simple products with a limited number of attributes, when companies embed the product configuration into intelligent part numbers they rarely are as straight forward as the example above – SHOE-BLACK-12-EE.  Instead, the coding process might be 1254-1C6, where the shoe is product “1254” with the next “1” meaning black, the “C” meaning “12,” and the “6” indicating “EE.”  The challenge is that using this type of part number is only passed along within the given organization via tribal knowledge, where employees only know the methodology through years of exposure.  This type of process makes it nearly impossible to easily train new employees to understand the company’s intelligent part numbering methodology.

Strong inventory management systems, such as TGI’s Enterprise 21 ERP, enable manufacturers and distributors to manage products in their preferred manner including via attributed inventory.  By using attributed inventory, these organizations make it much easier for personnel to perform sales, customer service, inventory management, and warehouse management functions rather than relying on an antiquated intelligent part numbering methodology.

Today, wholesale distributors are looking for ways to continue to protect their existing customer base, to hold or increase profit margins where possible, and to look for opportunities to grow their market presence through selling additional products and services to existing customers and by finding and attracting new customers with whom to do business.

One way in which distributors can continue to maintain existing customers and add new ones is by continually asking, “What can I do today to make it easier for my customers to do business with me?”  What is it that customers are looking for in the first place?

Customers want to buy the products and services they need from their supplier.  They don’t want to hear that their supplier can provide certain products from a given manufacturer’s product lines but can’t provide others because “we don’t stock those items.”  They may even be looking for suppliers who are willing to place consignment inventory of certain high-moving or highly critical stock at the customer’s premises for easy consumption.

Customers want straight forward and accurate pricing.  They also want to understand their suppliers’ ability to deliver the given products they’re looking to acquire in the time frame within which they need them.

Once they’re ready to place an order with their supplier, they want to be able to do so as efficiently as possible.  They want to be able to minimize their work efforts while providing their supplier the precise information they need to be able to receive the products in the exact quantity they’ve ordered, and to be invoiced exactly what they expect for those products.

Customers want to be able to choose their preferred methods of placing orders – either via eCommerce, EDI, fax, email, or phone – and want to get back an accurate promise date from their suppliers the first time, every time.  They likewise want to receive communications from their supplier in their preferred manner.

When the products they’re acquiring are delivered, customers want to receive the expected quantities on the date and time frame in which they were promised by the supplier.  They may also want their suppliers to perform value-added services including applying correct product labeling and price marking of the products to the customer’s specifications.

Finally, customers want to work with suppliers who can resolve any issues that may arise when transacting business together in an expedient, professional manner with a first-time resolution.  They also want their suppliers to take the data arising from problem resolution and make continuous improvements to minimize or eliminate the possibility of the given issue arising again in the future.  They want their suppliers to make it easy for them to get the information they need in the manner in which they need it to be able to transact and analyze their on-going business.

The bottom line is that customers are looking to do business with suppliers who “say what they do, and do what they say – period.”  Customers want to work with suppliers who are looking out for their customers’ best interests while continuing to grow their own businesses.  By leveraging wholesale distribution software solutions, like TGI’s Enterprise 21, wholesale distributors can meet and exceed their customers’ precise expectations.

I was involved in a recent discussion with a wholesale distributor which can be a very common scenario.  A member of the distributor’s management team described that while they stock a portion of their various supplier’s product lines, they can sell virtually any of the products those suppliers offer in their product catalogues.  The distributor’s sales process generally starts via quotes.  Some of the items being quoted may be stocked by the distributor, others may not.

In situations where supplier catalogues are not stored electronically within the distributor’s wholesale distribution system, customer service personnel will spend a lot of non-productive time looking through supplier catalogues – either paper-based (which may have outdated data) or on a supplier’s Web site – or interacting with supplier personnel to find the desired items for their potential customers.

Furthermore, many wholesale distributors allow their sales or customer service personnel to place purchase orders directly with suppliers to fulfill the non-stock items on sales orders.  This process can result in numerous issues.  Sales and customer service personnel may buy the wrong quantity of items at a higher price than necessary because the distributor’s overall purchasing power with the given supplier may not have been accounted for in the given transaction.

A strong wholesale distribution system will provide sales and customer service personnel with electronic access to their suppliers’ most up-to-date catalogues online.  By enabling business rules about minimum profit margins for given product lines or customer groups, sales and customer service personnel can easily quote both stock and non-stock items in alignment with the management team’s targeted metrics.  When non-stock items are quoted, purchasing personnel can be notified electronically as to the existence of the given quote line items.

When the distributor’s customer elects to purchase the products on the quote, the sales and customer service personnel can convert that quote to a sales order, either in part or in whole based on those items desired, and have the system manage the committing of inventory for those items which are stocked by the distributor simultaneously with generating the purchase requisitions for the non-stock items.  These purchase requisitions can then be reviewed by the distributor’s purchasing personnel – those people the company has entrusted to work with its suppliers – to turn the purchase requisitions into purchase orders within the wholesale distribution system, and then transmit those purchase orders to the associated suppliers via the supplier’s preferred method of interaction – either printed paper, facsimile, email, or EDI.

By leveraging the capabilities of strong wholesale distribution systems, such as TGI’s Enterprise 21, wholesale distributors can enable their customer service personnel to work with their customers and their purchasing personnel to source products from their suppliers.

Businesses across all industries strive to gain and sustain a competitive advantage in their respective marketplaces. And, this is certainly just as true for wholesale distributors. One of the ways in which wholesale distributors strive to gain a competitive advantage is to deliver value-added services in conjunction with the products they source for their customers. Strong wholesale distribution software must enable distributors to perform and record these activities just as they do purchasing, warehousing, picking, packing, shipping, and invoicing the products they distribute.

There are a variety of methods by which distributors strive to differentiate themselves to their customer base. Distributors may allow their customers to buy products as a kit, where by a series of items can be specified and ordered via one SKU or item number. Wholesale distribution software like TGI’s Enterprise 21 can enable distributors to sell both predefined kits to their customers and configurable kits where the customer can select those items which are included in the given kit being ordered. Distributors can elect to price these kits to their customers at the parent kit SKU level or by a combination of prices for those items making up the kit. The latter method is especially good for configurable kits. Furthermore, distributors may elect to perform kitting via simple picking operations or as a work order-based process when they desire to capture the costs associated with their kitting operations.

Another value-added service which distributors commonly perform is repacking. In this case, distributors may buy a given product in bulk quantities and repack it into smaller quantities for their customers to purchase. As was the case with kitting operations, some distributors will elect to capture the labor costs associated with these operations while others would not.

For wholesale distribution software that includes strong manufacturing functionality, distributors can perform assembly or light manufacturing operations. In these cases, the system’s traditional manufacturing bill of materials and routings (or bill of operations) can be used to define and execute the series of operations and associated components being consumed in assembly or manufacturing. As was true above with the kitting operations being performed via work orders, wholesale distributors can capture the associated costs of these operations. The actual material, labor, and overhead consumed at each point in the routing can be recorded with the associated costs rolled up across the various operations to produce an overall product cost in the system. Alternatively, the distributor may elect to record material, labor, and overhead at a standard rate of consumption via a simple backflushing method. Furthermore, distributors can elect to reflect product costs via their preferred costing methods including actual LIFO, actual FIFO, standard, or average.

In addition, distributors may have outside, third-party companies perform outsourced operations on their behalf. Strong wholesale distribution software will enable the distributors to source the components to be consumed for the outside processor, purchase and track the shipment of these components to the third-party, cut purchase orders for the performance of the outside operation’s services, receive the completed products back from the third-party, and pay the respective vendors for their products and services. Taking advantage of the manufacturing functionality within a strong wholesale distribution system, the material, labor, and overhead associated with the outside operations can be recorded just as it would be if the assembly or manufacturing were performed in-house by the distributor. These outside operations can also be daisy-chained in a manner that one third-party may receive certain components and perform specific operations, then ship the subassemblies to another third-party for secondary processing, and so forth, until the finished product is either delivered to the distributor or direct-shipped by the last third-party in the chain to the distributor’s customer.

Wholesale distributors may also elect to place consignment inventory at a customer location. In this case, the inventory is owned by the distributor until the customer consumes the given inventory. Strong wholesale distribution software will enable the distributors to place and manage the inventory at the customer location, receive the appropriate signal that the inventory has been consumed, trigger the appropriate customer invoice processing, and manage the level of consigned inventory based on the preferred replenishment methodology for that inventory at that customer location. Consignment inventory can also be used with third-party operations for managing component inventory until it is consumed in production runs.

Through leveraging strong wholesale distribution systems like TGI’s Enterprise 21, wholesale distributors can gain and maintain a strong competitive advantage in their industries by delivering value-added services to their customers.