Today’s challenging business environment forces Manufacturers, Distributors and Retailers to face the fact that what worked in the past might not work in the future. Realizing this, they try to come up with new methods that will help them lower their operating cost, increase profitability and gain market share. Doing so they often assume new roles.
The New Roles Companies Assume
- Manufacturers trying to be more competitive outsource their products so the assembly is done by overseas companies where the labor cost is lower. Then they sell the finished products directly to the Retail Stores, by-passing the Distributors.
- Distributors change their business models by not using the Manufacturer, importing their products directly from overseas and assembling them at their warehouses.
- Online Retailers often buy directly from overseas Manufacturers, bring the finished products to their distribution centers, where they are re-packaged and shipped to consumers.
- Large Retailers who have stores in the shopping malls face decreased sales and many are forced to consolidate stores while others end up going out of business.
Obstacles Found in This “Brave New World”
- Companies who don’t have modern Integrated Warehouse Software face issues of misplaced inventory and incorrect shipments to their customers.
- Returned merchandise often becomes excess inventory and receives ‘charge back’ from their customers for the incorrect or late shipments.
- Not having Integrated ERP Software results in the purchasing department buying on “gut feeling” often resulting in shortages or excess inventory in the warehouse.
- When the Physical Inventory is taken in the Warehouse, misplaced inventory is found and often becomes excess inventory that might not be saleable.
- Many banks are reluctant to renew or increase lines of credit when their customers have excess inventory, forcing them to go to the secondary financial market whose loans carry substantially higher interest rates.
Finding the Proper ERP Software
- Before the demo takes place, the company’s Business Requirements should be outlined and addressed in the demo.
- Close attention should be paid as to whether the end users are able to learn the new software.
- Very often, companies who buy software without paying attention to their users’ ability to readily learn it, end up going back to the “old reliable” Computer System resulting in another sad story.
- When speaking with the software vendor’s references, the following questions should be asked: Is the Software “User Friendly” and how big was the Learning Curve?
- A High Learning Curve will result in Additional Costs and Business Disruption.
- How Responsive is the Hotline support? A poorly Responsive Hotline will result in severe business disruptions and financial losses.
- Is the software vendor willing to modify its software to meet the company’s business requirements or do they expect the client to change its business model to meet the software requirements?
Case Study of a Large Fish and Seafood Distributor
A few years ago I received a call from the CFO of a large Fish and Seafood Distributor who told me that his company imports its products from all over the world and on weekends people come to the warehouse to buy fish and seafood, paying cash for it. When I asked the CFO how he keeps track of the cash he responded, “This is my issue. I have no way of keeping accurate track of it.” I explained to him that the company I represent has Manufacturing, Distribution and Retail ERP Software that will enable his company to become a manufacturer and keep track of the cash received.
Before the demo took place, a detailed study was conducted of the Distributor’s Business Requirements. A test environment with the new software was created so the users were trained with data to which they were accustomed.
After going live with the integrated ERP Software I represent, the Distributor opened a 25,000-square-foot Retail Supermarket next to his Warehouse, selling fish, seafood and a wide variety of food products ranging from pasta to imported cheese and olive oil to the public.
Looking to the Future
In today’s new business environment business owners must realize that ‘what has always worked in the past’ might not work in today’s changing environment. Very often, companies find themselves assuming different roles than they did in the past by acquiring their competitors to gain market share and increase their bottom line profitability.
About SMC & Dani Kaplan:
Since 1980, Dani Kaplan has worked with manufacturers, distributors food distributors and food processors as the trusted advisor helping them lower their operating costs, stream line their operation and control the inventory.
Dani can be reached via SMC – http://www.smcdata.com/contact