Posted by Ranga Bodla, Wholesale Distribution Industry Lead at NetSuite
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.
New 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 span 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. Leading wholesale distributors like iAutomation, Red Star Traders, RISO Latin America, Advantage Sign Supply and S-One reported significant improvements across a range of performance-related categories. For example, iAutomation, a leading supplier of machine automation products and services headquartered in North Attleboro, replaced its Epicor and Sage applications with NetSuite’s financials, manufacturing, inventory management, sales and CRM platform. The company credits its move to NetSuite’s integrated cloud platform with helping it achieve double-digit revenue gains to more than $70 million in 2013 through improvements that include access to real-time data from all 11 of its East Coast offices, the streamlining of its inventory and supply chain management, and the automation of its quote, sales order and purchase order processes.
According to SL Associates’ research, distributors running NetSuite reported KPI improvements in five main categories:
Business visibility. 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. For example, RISO Latin America reported higher efficiency among non-technical finance and operations staff. It was able to maximize business efficiency after leveraging NetSuite’s real-time dashboard metrics with the ability to drill down into details.
Financial management. This is a big category that 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.
Inventory management. 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 such as Advantage Sign Supply, in Grand Rapids, Mich. It’s saving $56,000 per year simply by moving to electronic invoicing.
Customer management. Shipping and fulfillment that the greatest 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. NetSuite customer Red Star Traders (RST) Brands is now able to more efficiently process EDI transactions in real time, allowing fulfillment in a 24-hour window. 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.
IT management. IT costs were the biggest savings, no surprise with a service with as much overhead as ERP. 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.
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. As one top executive at RISO Latin America observed, “NetSuite has enabled the company to operate very efficiently and be on top of inventory and receivables, all with great accuracy and a staff that has no knowledge of IT.”