There are numerous information requirements when it comes to performing time-phased inventory requirements planning (distribution requirements planning, or DRP), including customer demand, inventory statuses, inventory management business rules, and procurement and supply chain management business rules (and production-related data and business rules for manufacturers).  The area of focus for this article is on forecasting – specification of one’s best volume estimates as to the total requirements for finished goods to satisfy customer demand.

Within Enterprise 21, forecasts can be created externally and then imported into the system or can be generated within the system based on historical sales data.  A forecast can be defined as granularly as for a specific product, customer, servicing facility (i.e., warehouse or cost center), ship-to geography, and sales person; or it can be at some higher level of aggregation (i.e., all customers receiving a given product from a specified facility, etc.).

When using the system to generate a forecast, one can specify the number of periods to forecast, whether or not to apply seasonality to the forecast, one or more facilities, products, vendors, and buyers, and a range of dates to use for historical sales demand purposes.  When the forecast generation process is run, Enterprise 21 analyzes the historical sales demand data and a series of algorithms to determine the best fit formula on a product-by-product basis.  Forecast generation can be done separately for subsets of the product mix and then an overall forecast can be created by overlaying these separate sub-forecasts.

Once the system completes the forecast generation process, one can view a graph of historical and forecasted data and the associated best-fit algorithm (i.e., line, curve).  Also, the forecast can be reviewed and adjusted manually as desired.

It is common for distributors to work with a series of forecasts such as ones that depict worst-case, best-case, and most likely-case scenarios respectively.  A forecast can be used as one of the key inputs to a time-phased inventory requirements planning process for the generation of a series of purchase requisitions for the procurement of finished goods in the case of wholesale distributors (and components and/or ingredients to support production plus a tentative production schedule which ultimately becomes the master production schedule for manufacturers).

By using Enterprise 21’s fully-integrated planning process, wholesale distributors can generate forecasts which are an essential input to the time-phased planning process which becomes a key enabler to reducing and optimizing the distributor’s overall inventory position.  Please click here to see a high-level overview demo of Enterprise 21’s forecasting and planning processes from within TGI’s Resources Library.

Does the following scenario sound familiar?  You and your sales team are having a monthly sales meeting.  It’s the middle of the month, and you’re reviewing the sales results for the prior month.

You look at the results and there’s one of your biggest customers – The ABC Company, who typically does $250,000 sales per month – showing last month’s revenue at $30,000.  You wonder what has happened to The ABC Company’s business.  It could be that The ABC Company’s business is slow; however, with this dramatic reduction in order activity, it is quite possible that one of your biggest customers may have gotten sufficiently annoyed with you that they quietly took their business and went elsewhere.

So, is there a way for wholesale distribution software to programmatically help prevent this from happening?  With TGI’s Enterprise 21 ERP software, the answer is absolutely!

Using Enterprise 21’s fully-integrated customer relationship management functionality, a customer order frequency value can be established for each customer.  Let’s say in this example, the order frequency for The ABC Company is set to 10 days.  Should we not receive an order from The ABC Company by the evening of the 10th day from their previous order, the Enterprise 21 system will automatically generate an alert notification to the parties you’ve specified in the system – the sales rep, the CSR, the inside sales rep, etc. – alerting them that this customer has not ordered within normal order frequency and that a follow up call needs to be made to them.

By proactively contacting this customer, you should hear one of three things from The ABC Company:

1. We have been consuming your product at a slower than usual pace.  We’ll be placing an additional order with you in the next couple of days.
2. We got busy and forgot to place our order.  You really saved us from getting too low on the stock of your products.  Let’s place an order right now.  We really appreciate you looking out for us.
3. We were really displeased with how your company handled (fill in the blank) and we have been considering taking our business elsewhere.

In all of these cases, you have the opportunity to positively impact this customer’s satisfaction with your business.  Assuming you have effective problem resolution in place (a topic we’ll address another day – for now, see Service Management), numerous studies have shown that you can achieve higher customer satisfaction levels by resolving customer issues than with those customers who have never experienced any issues with you.

Order frequencies can also be set at a customer-product level, where, for example, some products or classes of products are ordered by a given customer every 10 days while other products or product classes are ordered every 30 days.

So, let’s rewind and go back to the monthly sales meeting.  In this case, The ABC Company has monthly revenue of $240,000 for the month.  When asked why their revenue had fallen off for the previous month, the sales rep can describe the issue that had occurred, how it was resolved, and the customer’s satisfaction with that resolution.  This is a far better scenario than the meeting where The ABC Company’s revenue was $30,000 for the prior month, may be $0 for the following month, and the assigned sales rep is looking for a new job by the next monthly sales meeting.

Nobody likes negative surprises.  And, wholesale distributors running Enterprise 21 will be able to discover and correct customer issues and keep sales revenue high and improve customer satisfaction through the use of Enterprise 21’s CRM software functionality with built-in order frequency features.

Since there most likely is a substantial time delay between the picking and manual data entry processes, coupled with the fact that the picker’s chicken-scratched notes may be highly illegible, there will likely be errors introduced into the inventory data.  In cases in which the administrator can’t understand what the picker was attempting to convey, the administrator may have a discussion with that picker about their notes.  Again, depending on the time delay between the picking and writing on the pick ticket through this conversation with the administrator attempting to enter the data, inventory accuracy issues can get introduced due to time delays and the possibility that the picker may not even remember what their notes meant.

Even if the manual pick, writing on paper, and manual data entry processes were 100% accurate, they would nonetheless be untimely and inefficient, as there would always be some delay between the time picking was completed and the time data was entered into the system.

Alternatively, for companies using strong wholesale distribution software systems that come with fully-integrated warehouse management functionality like Enterprise 21, when barcodes and scanning are introduced into the process, the system would know the disposition of the picking process immediately at the time a picker was performing those operations.  Furthermore, since the scanning process can also confirm that the item that was intended to be picked was in fact picked correctly, inventory accuracy and customer shipment accuracy will increase.  This should lead to a reduction in the number of customer returns due to mis-shipment of items on an order and an increase in customer satisfaction.

Without accurate and timely inventory data, the ability to leverage that information to have the correct product mix while reducing the wholesale distributor’s overall inventory position are an impossibility.  Companies using Enterprise 21 can achieve these benefits through the introduction of barcodes and scanning throughout the warehouse including the picking process without having to acquire any additional application software.

First, by establishing accurate inventory and sourcing data including vendor lead times, minimum order quantities and increments by vendor-product, and inventory management methodologies by product-facility, Enterprise 21’s time-phased inventory planning process (distribution requirements planning) can generate a series of requisitions for purchasing to review and include on purchase orders.  As purchasing reviews requisitions for one or more vendors associated with the container being built, Enterprise 21 enables purchasing to review how full a given container is becoming as additional products are added to the container.  Once a full container is built by purchasing, the associated purchase orders are generated to the various suppliers involved.

Second, some wholesale distribution organizations elect not to take advantage of a system’s time-phased inventory planning capabilities.  In this case, purchasing personnel can access all pertinent information needed to evaluate and create containers in Enterprise 21 via one or more workbenches established specifically for this task.  The system can provide easy visibility to all product sourcing-related data from a given vendor or vendors in consideration for a given container including average daily or weekly usage of those products, the number of days or weeks of supply on hand, anticipated purchase receipts, and the number of customer orders and associated item quantities acquired over the past 12+ months.  Based on this information and the purchasing person’s intuition, purchasing can build containers of products and then generate the associated purchase orders in a manner similar to that described above.

As containers are established and information is provided to the purchasing department, Enterprise 21 stores and tracks key information such as estimated shipment, on-board, required, and actual received dates, slip sheet cost, container ID, and vessel ID on a purchase order-by-purchase order basis.  Containers and vessels can be tracked from port of departure, on the water by day to destination port, and vessel arrival at the port of entry.

In addition, Enterprise 21 enables complete landed cost management.  Purchasing can establish of a series of landed cost elements such as import duties, drayage, tariffs, and bonding charges.  The landed costs and their anticipated values are associated with specific products either as a percentage of product value or a specified currency value.  At the time of purchase order generation, these anticipated landed cost charges are associated with the purchase order. As the actual landed cost charges become known, they are entered into Enterprise 21.

Landed costs can be spread to individual line items received in a container based on a preferred methodology selected by the given wholesale distribution organization – either by each line item’s relative volume, relative weight, relative quantity, equally relative to the total number of line items, or fully across all items on the receipt.

Strong wholesale distribution systems like Enterprise 21 enable distributors to manage the procurement of items via import management efficiently to have the right products available for customer requirements while concurrently managing landed costs to show an accurate picture of the associated product costs.

Some of the biggest operational efficiencies these distributors can gain from wholesale distribution software solutions like TGI’s Enterprise 21 come from combining and performing picking for multiple orders concurrently.  Within Enterprise 21, this functionality is called cart picking.

Enterprise 21 collects a series of picks for various sales orders based on the business rules a given organization defines within the system.  Once a pick is generated, Enterprise 21 leads the given warehouse operations person through the facility in an optimized path to minimize transit time between picks.  This can be done with either paper-based or paperless picking.

When cart picking is combined with barcode scanning, the Enterprise 21 system prompts the picker to pick a given quantity of an item from a specified bin location and to place that item in a specific tote or location on their picking cart.  When the first item is being picked, the picker scans the item and an associated tote location on the picking cart.  At this point, the system knows that a given order’s picks are associated with that specific cart location.  When the picker is prompted to pick the next item, if it is associated with this same order, they are prompted to place it in this same tote location.  Should they be picking an item for a second order, however, they would be prompted to scan a second cart location to be associated with the second order.

The system will continue to prompt the picker to place items into an associated tote location or to select a new location for the next order being picked.  Should the picker attempt to scan and place an item associated with one order into a cart location associated with a different order, the system will alert them that this is not the correct location for this order and once again prompt them with the correct cart location.  Once all the associated picks for the given picker-cart combination are finished, the picker would take the cart to the packing location.

Next, Enterprise 21 would prompt the packer as to which specific standard carton sizes should be selected for use for a given sales order shipment and which items should be placed in each given box.  The system would generate a carton label for each box.  As the packer scans the items into the given cartons, the system would confirm that the items were in fact associated with the specific order shipment being created.  As part of the packing process, Enterprise 21 also generates the desired shipping paperwork including packing slips and pro forma invoices.

Once the packing process has been completed and the cartons are sealed, the boxes would then be handed off to the shipping department.  Shipping would then run the boxes through the appropriate shipment manifesting systems (i.e., UPS, FedEx, etc.) and ship the various boxes.  Enterprise 21 is fully-integrated with these shipment manifesting systems, so the order status would be updated immediately upon shipment.  Enterprise 21 also generates all appropriate customer transactions resulting from the shipping process including delivery of an advanced shipping notification (ASN) in the customer’s preferred format and method of delivery (fax, email, or EDI).

The combination of Enterprise 21’s fully-integrated warehouse management system functionality when used in conjunction with RF/barcode-enabled scanning technology, including cart picking and wireless warehouse management capabilities, can lead to substantial improvements in warehouse operational efficiencies while minimizing shipping errors.

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.

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.

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.

There are two key criteria for selecting products to have high service factors. First, items with a high order volume or high order frequency should be set to a high service factor. Items with a high order volume and high order frequency account for a significant portion of the organization’s business and revenue. Having the ability to fulfill orders for these items routinely out of available inventory will not only increase gross revenues, it will also lead to increased levels of customer service and satisfaction.

The second criteria for selecting items to have high service factors is high profit margin. Setting items that have a high profit margin to have a high service factor will result in increased bottom-line profits for the organization. Even if an item has a relatively low order volume or frequency, being able to fulfill orders for items with a high profit margin directly out of available inventory will decrease the likelihood of the customer shopping for the product elsewhere and increase the likelihood of repeat business from that customer.

For items with high order volume and frequency or high profit margin, using a service factor inventory management methodology can provide a powerful tool that can be leveraged to increase bottom line profits, improve customer service and satisfaction, and improve the likelihood of repeat business from a given customer.

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.