Major Challenges in the Distribution Industry
February 11, 2021 | News
Challenges in the Distribution Industry
The distribution industry is facing disruption on a massive scale in large part due to advancements in technologies such as machine learning and predictive analytics.
Companies in the distribution industry must adopt these technologies in order to remain competitive.
Customers demand access to real-time information about their orders. They demand that their orders are always shipped and received on time and that costs are always the bare minimum.
In order for companies in the distribution industry to meet the growing demands of their customers, they must use Enterprise Resource Planning (ERP) software.
5 Major Challenges in the Distribution Industry
Stock & Inventory Management
One of the largest challenges faced by companies in the distribution industry is stock management or inventory management.
Traditionally, distribution companies would conduct periodic checks of inventory in order to determine the cost, quantity, and quality of inventory. The results of these checks would be recorded in spreadsheets or on paper.
Both of these recording methods are prone to error and do not provide data in real-time.
As a result, inventory will oftentimes be overstocked, resulting in higher costs of warehousing. Or, inventory will be understocked, resulting in customer backorders and delays.
In the modernized business world, companies in the distribution industry often struggle to meet customer demand.
Customers, such as wholesalers and retailers engaged in e-commerce, must cut down their costs in order to remain viable in their respective industries. In turn, distribution companies must reduce their own costs in order to be competitive in their own industry.
Distributors can reduce their costs by improving the efficiency of their operations. One of the ways distributors can improve efficiency is by enabling the entire company, as well as partners in the supply chain, to have access to accurate, real-time information about the business.
Industry-specific ERP software solutions make this possible.
The accurate, real-time information provided by ERP software solutions allows business decisions to be made more rapidly and intelligently than they could be made without the aid of ERP software.
Companies that want to remain competitive in the distribution industry should invest in an ERP software solution.
Among other advantages, distribution companies that use ERP software solutions are able to collect and track more valuable business data than companies that do not use ERP software. With this data, companies using ERP are better equipped to understand where shortfalls are occurring in their operations and how those shortfalls can be remedied or improved upon.
Complex Supply Chain Networks
As the purchasing behavior of businesses and consumers change, so does the complexity of distribution supply chain networks.
No longer is it satisfactory to give purchasers estimated delivery date windows. They want to know exact delivery dates, and often even exact delivery times, in order to accommodate their own logistical setups and requirements.
ERP software makes it possible for distributors to give purchasers the exact information they need.
Since ERP gives distribution companies the ability to share information more easily across the entire organization, customer purchases quickly go from sale to shipment. And by analyzing historical data, distribution companies are better able to predict when customer purchases will be delivered and share that information with purchasers.
The rise in e-commerce compounds the difficulties created by the increasing complexity of the distribution supply chain.
Manufacturers that engage in e-commerce are, more and more, avoiding the use of wholesalers. Consequently, distributors now have to be prepared to fulfill purchases not just from a handful of wholesalers, but direct purchases from consumers as well.
How to Overcome Challenges and Scale Your Distribution Business
To overcome the multitude of new challenges placed on distribution companies, it is important that they be early adopters of modern technologies such as ERP software solutions.
By investing in, and adopting, technologies such as ERP, distribution companies are able to:
Improve the identification, understanding, and development of sustainable solutions for issues resulting in lost productivity
Reduce the time it takes to market new products being offered by manufacturers
Expand the assortment of product stock
Enhance customer satisfaction and, at the same time, reduce costs
At Pinnacle, we specialize in cloud ERP software helping distribution overcome the challenges in this competitive industry. For more information about how your company can overcome these challenges and scale your business, speak with a professional today.