Frost & Sullivan Details ERP Limitations that Hold Back Wholesale Distributors

December 10, 2015

Posted by Ranga Bodla(opens in new tab), Industry Lead for Wholesale Distribution at NetSuite

The wholesale distribution industry is undergoing radical changes. Technologies such as ecommerce(opens in new tab), the cloud(opens in new tab), mobile computing and the Internet of Things offer rich opportunities for improving business processes and developing new products and markets.

That’s the good news. Unfortunately, not all distributors can take advantage of these new technologies due to their ERP systems’ inability to support them.

A new report from analyst firm Frost & Sullivan discusses this problem and why most ERP applications are failing to keep pace with the cloud-based, real-time, data-dependent and highly mobile world. Distributors who try to “fix” their ERP problems through customization or integration wind up burdened with additional maintenance costs, further restricting their ability to grow, according to Frost & Sullivan. Despite the marketing claims of ERP vendors, most haven’t lived up to their hype. Many lack true cloud-based architectures, for example, not a true multi-tenant cloud(opens in new tab).

The wholesale distribution industry is highly fragmented, with multiple different market segments, often requiring extensive customizations to ERP systems. While mainstream ERP applications can be customized, those customizations often make it impossible to further update the software, so the customer loses out on future innovations. True, multi-tenant cloud ERP, makes it easy to further customize and adapt the software to the individual needs of each distributor—while those customizations carry forward automatically with every upgrade.

For example, MusclePharm, a distributor of sports nutrition products and a NetSuite customer, has experienced tremendous growth over the past four years, going from $3.2 million in revenues to $177 million last year. Despite the rapid expansion, MusclePharm’s system easily kept up with demands. Had the company been on another vendor’s application, it would likely have needed to do costly customizations and upgrading, or even a complete overhaul. Rapidly growing companies risk missing out on new opportunities when they’re forced to devote time and money into maintaining the IT infrastructure.

There is one major exception to this grim assessment, however. In its report Cloud Enterprise Resource Planning (ERP) for the Wholesale Distribution Industry North America(opens in new tab), Frost & Sullivan singled out NetSuite’s ERP for wholesale distribution for praise, citing NetSuite’s cloud architecture, easy customization and full range of functionality, as important features for growing distributors. The internationally recognized analyst company also named NetSuite its Customer Value Leader in cloud ERP for the wholesale distribution industry.

Frost & Sullivan graded NetSuite on 10 criteria, including price/performance value, customer ownership experience, operational efficiency and growth potential. They also credited NetSuite for having comprehensive functionality which includes virtually every aspect of the enterprise, from CRM and ecommerce to order management(opens in new tab) and supply chain(opens in new tab). This cross-company functionality enables its customers to run their entire business on a single platform.

For more about the Frost & Sullivan research and NetSuite for wholesale distributors? Download the Frost & Sullivan report on ERP for Wholesale Distributors(opens in new tab) and visit the NetSuite for Wholesale Distribution(opens in new tab) portal to get product information, customer case studies, and white papers.



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