store, call center, etc.) and deliver those orders through multiple third parties. In other words, wholesalers and distr
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ERP in Wholesale and Distribution: A Logical Solution to Logistical Challenges
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holesalers and distributors need to keep track of a large amount of frequently updating data as well accurate planning that will keep the organization running on-schedule without increased costs. This is becoming exponentially difficult in today’s environment as organizations take orders from an increasing amount of channels (online, in store, call center, etc.) and deliver those orders through multiple third parties. In other words, wholesalers and distributors must accurately predict demand and provide products to customers when they need them at a low price, no matter how the order is taken or delivered. As a result, the majority of wholesalers and distributors rely on Enterprise Resource Planning (ERP) as a hub for customer
Methodology The Aberdeen maturity class is comprised of three groups of survey respondents. Classified by their self-reported performance across several key metrics, each respondent falls into one of three categories: •
Best-in-Class: Top 20% of respondents based on performance
•
Industry Average: Middle 50% of respondents based on performance
•
Laggard: Bottom 30% of respondents based on performance
Sometimes we refer to a fourth category, All Others, which is Industry Average and Laggard combined.
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information and inventory management. But ERP is much more than that. ERP is the operational and transactional system of record upon which a business is based. It provides visibility to decision-makers and can help to promote process standards throughout the organization, in support of continuous improvement. This report, based on a survey of 95 wholesalers and distributors, examines their needs for ERP, as well as the benefits that top-performing organizations receive as a result of their ERP solution.
Sage ERP X3 drives growth with visibility and velocity Sage ERP X3, a flexible business management solution by Sage, helps distributors around the world improve productivity and free up capital for investments to modernize operations or enter new markets while ensuring the best quality of products and service to customers. Sage ERP X3 delivers an intelligent, integrated system so distributors have complete visibility and flexibility in managing operations, including purchasing, warehousing, customer relationship management (CRM), accounting, sales, and more. With built-in business intelligence and inventory management capabilities, distributors are able to identify where the biggest improvements can be made, reduce inventory and working capital, and make strategic price adjustments—pricing key products aggressively to bring buyers in the door, while marking up products competitors do not offer.
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Why ERP?
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ata from Aberdeen’s 2013 ERP Benchmark survey illustrates the top business drivers impacting ERP strategies in wholesale and distribution (Figure 1).
Figure 1: Top ERP Drivers in Wholesale and Distribution Need to manage growth expectations
41%
Delays in decision-making from lack of timely information Must reduce costs
35% 32%
Interoperability issues across multiple operating locations
27%
Interoperability issues with customers / suppliers (Need to be easier to do business with)
27%
Percentage of Respondents, n = 95 Source: Aberdeen Group, July 2013
With Sage ERP X3, the challenges of getting bigger are smaller. Wholesale distributors indicate they are turning to ERP solutions for three key reasons: to manage growth expectations, to improve decision making, and to reduce costs. Sage ERP X3 provides midsized and larger distributors with a compelling solution for addressing all three challenges. For example, many growing distributors find critical information and indicators scattered about in spreadsheets, systems, and databases. Sage ERP X3 solves this challenge by centralizing data and compiling it in real time to drive effective decisions. Another fundamental challenge distributors indicate they are facing is that as their organizations get bigger, they often find communication and workflow across functions become increasingly disjointed. Sage ERP X3 handles this issue with end-to-end integration that automates and standardizes processes. For example, by linking together sales, order entry, inventory management, and shipping, Sage ERP X3 will enable a distributor to improve the customer experience by accurately quoting an order and providing delivery dates and pricing in an instant. 6
Forty-one percent (41%) of wholesalers and distributors indicate that they need to manage growth expectations. At the same time, 32% need to reduce costs. As wholesalers and distributors grow, they interact with a greater amount of data and shipments, cover a larger geographic network, and incur additional costs. The goal is to minimize these new costs while using available resources effectively to continue to grow the business without becoming overwhelmed. Therefore, these organizations must find ways to reduce the time it takes to complete processes. Another 35% cite delays in decision-making due to a lack of timely information. This throws a wrench into their ability to make agile adjustments to forecasts and shipments, which further increases costs. Combined, these pressures call for real-time visibility into information and more efficient processes.
How Do You Compare? Wholesale and distribution respondents to the 2013 ERP Benchmark survey were ranked on the following criteria: •
Days to close a month: Best-in-Class – 2.3, Industry Average – 5.5, Laggard – 8
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Complete and on-time delivery: Best-in-Class – 97%, Industry Average – 93%, Laggard – 82%
•
Internal schedule compliance: Best-in-Class – 98%, Industry Average – 93%, Laggard – 82%
•
Inventory accuracy: Best-in-Class – 98%, Industry Average – 95%, Laggard – 86%
Interoperability is the other key driver impacting ERP strategies in wholesale and distribution. On the one hand, interoperability across multiple locations can be difficult as the organization adds more distribution centers and other locations. But interoperability with the extended enterprise is extremely important in wholesale and distribution. Wholesalers and distributors deal with more countries, currencies, and companies than ever before. Twenty-seven percent (27%) indicate that they need to be easier to do business with. Wholesalers and distributors need to interact effectively with suppliers and resellers in order to accurately forecast demand and ship orders. They also must have access to customer information in order to ensure a seamless customer experience and allow customers to receive orders when they expect them. As a result, wholesalers and distributors look to ERP as a hub for this information.
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Strategies for Enabling Strategic Decisions
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he above business drivers prompt top performing wholesalers and distributors to embark on a series of strategies (Figure 2).
Figure 2: Top Strategies of the Best-in-Class Standardize business processes
44%
Streamline and accelerate processes to improve efficiency and productivity
33%
Optimize the use of current capacity
33%
Link global operations to improve interoperability and collaboration
28%
Provide visibility to business processes across functions and departments
17%
Provide timely information on critical decision making data to front-line employees
17%
Best-in-Class
Percentage of Respondents, n = 95 Source: Aberdeen Group, July 2013
Automate to accelerate. Automated processes—both within an organization and with external partners—are the key drivers of business velocity. Sage ERP X3 provides the required end-toend integration to make it happen. For example, Sage ERP X3 can standardize work practices, information exchanges, and procedures for handling exceptions between a manufacturing facility in Taiwan, dozens distribution facilities across the world, and countless suppliers. At any time, business leaders and other team members at the company’s headquarters can access coherent, real-time data to make adjustments and capitalize on opportunities.
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Most importantly, the Best-in-Class streamline their processes and then standardize them across the organization. ERP acts as a hub for process improvement. It is a delivery method to communicate best practices across the organization and ensure that all employees act as they should. All essential processes are supported and the advanced visibility into the status of processes will help enable organizations to optimize the use of their resources. Through ERP, wholesalers and distributors also attempt to provide their employees with greater insight into data. With visibility across departments and divisions, employees can better predict demand, ship orders, interact with customers, and invest in the business with confidence. ERP provides a “one stop shop” for all of the information needed to run the business effectively. Providing this data links the whole organization to enable interoperability and enhanced collaboration. For example, this allows organizations to ship orders from other locations when stock at a certain distribution center is low in order to maintain schedules. In summary, ERP is the source for manufacturers when it comes to visibility, collaboration, and efficiency. So how are these strategies put into practice through ERP? When it comes to visibility, the Best-in-Class are more likely than All Others to
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have access to the data they need, and to be able to work that data into decisions (Figure 3). Figure 3: Visibility for Decision-Making Best-in-Class
Industry Average
63%
Laggard 59%
56% 33%
29%
49% 27%
26% 13%
Real time visibility into status Ability to automatically notify Ability to do demand of all processes from quote decision-makers when planning and forecasting to cash scheduled activities fail to occur on time or when certain conditions occur Percentage of Respondents, n = 95 Source: Aberdeen Group, July 2013
ERP 2012 Best-in-Class Respondents in Aberdeen’s ERP in Wholesale and Distribution: Extending the Enterprise to Extend Profits were ranked on the following criteria: •
Increase in profit margins over the past two years: Best-in-Class – 19%, Industry Average – 7%, Laggard – 2% (decrease)
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Decrease in time to decision over the past year: Best-in-Class – 40%, Industry Average – 12%, Laggard – 11%
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Complete and on-time delivery: Best-in-Class – 98%, Industry Average – 94%, Laggard – 87%
•
Inventory accuracy: Best-in-Class – 97%, Industry Average – 95%, Laggard – 86%
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You can’t act on what you can’t see. One real-world example of real-time visibility supported by an alert system comes from Sage ERP X3 customer Allied Metals. The company operates numerous warehouses and manufacturing facilities across in the U.S., Europe, and Asia. Sage ERP X3 provides up-to-the-minute detail into production and inventory details, which enables better purchasing decisions and precise responses to customer inquiries. An alert system, instantly notifies the right employee when there’s an exception that needs to be resolved or an opportunity that’s available. The Best-in-Class are 97% more likely than All Others to have real-time visibility into the status of all processes from quote to cash. This allows them to monitor activity and alter their actions to stay on schedule while keeping costs low. It also creates a system of record for traceability later on. One key capability of Best-in-Class organizations is automated alerts, which enable immediate, agile decision-making. The Best-inClass are over twice as likely as All Others to have this capability. Wholesalers and distributors could, for example, take advantage of beneficial prices, or buy extra stock when it is determined that demand is going to be high.
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Demand planning and forecasting is one of the most important activities wholesalers and distributors can engage in. Fifty-nine percent (59%) of the Best-in-Class have this capability. Inability to forecast demand exposes organizations to situations where they are not able to meet orders or have too much inventory on the shelves. As the hub for all essential information, ERP can be used to get a better picture of demand levels.
The Logistics of Enhanced Visibility
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here is the data that organizations gain visibility into located? With ERP, along with integrated extensions, wholesalers and distributors can create a “one stop shop” for data (Figure 4). Figure 4: Creating a “One Stop Shop” for Data Best-in-Class 81%
Industry Average 62%
59%
Laggard
56% 38%
37%
Integrated business applications serve as a complete and auditable system of record
46% 47% 33%
Master Data Management Business analytics / integrated into ERP intelligence integrated into ERP
Percentage of Respondents, n = 95 Source: Aberdeen Group, July 2013
Aggregate and create multidimensional views of data. The built-in Data Collection capabilities for Sage ERP X3 enables analysis across the business—from order management and general ledger to purchasing and supply-chain management. Users can match supply and demand in real time, increase inventory turns with faster order execution, and meet government reporting requirements with ease. Online self-service capabilities give customers a secure view into order status, pricing, and product availability at any time, enhancing the customer experience. 13
Eighty-one percent (81%) of the Best-in-Class have integrated business systems that create a complete and auditable system of record. All processes are monitored and recorded. Each function can then use the data as needed, whether front- or backoffice. Of course, data is useless if it is inaccurate. Therefore, 62% of the Best-in-Class have Master Data Management (MDM) integrated into ERP. This ensures that the data is clean, accurate, up-to-date, and useful. Further, 46% of the Best-in-Class integrate ERP data with business analytics, which allows users to derive insight from available data through differing views and formulas. This can help impact decisions through things such as demand forecasts. Further, by linking ERP with other sources of data, wholesalers and distributors can provide complete visibility and enable greater flexibility when managing operations from order taking through delivery (Figure 5). The Best-in-Class are almost four times as likely as All Others to have the ability to share and integrate data with the extended enterprise. This gives organizations visibility into the inventory of their business partners and can help in planning for and forecasting demand. Additionally, it allows wholesalers and distributors to share data with customers. For example, customers can find out when items that are out of stock can expect to be replenished.
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Figure 5: Integrated Systems Enable Visibility and Flexibility Best-in-Class 54%
31% 18%
All Others 54%
25%
28%
31% 18%
Ability to share and Customer Ecommerce Customer selfintegrate data with Relationship integrated into ERP / service portals the extended Management order management integrated with ERP enterprise integrated into ERP Percentage of Respondents, n = 95 Source: Aberdeen Group, July 2013
ERP can also be linked with other sources of data. For example, Best-in-Class wholesalers and distributors are more likely to integrate ERP with technologies that make it easier for them to work with customers. They are over twice as likely as All Others to have integrated Customer Relationship Management (CRM) to provide greater insight into customer data. The Best-in-Class are also 93% more likely than All Others to integrate Ecommerce with ERP and almost four times as likely as All
Sage covers every corner of your business. No two wholesale distributors are exactly alike. So it’s important to select an ERP solution that provides the flexibility you need to adapt the system in a way that makes sense for your organization. Sage ERP X3 provides that flexibility, handling the majority of business needs in the core solution and addressing more specific tasks and processes through add-ons. Equally important, Sage provides one of the most respected support and service organizations in the industry. The company and its network of regional partners have a track record of working with distributors to confidently solve any functionality requirement.
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Others to integrate customer self-service portals. This enables a seamless customer experience and keeps customers happy. But what are the core technologies that are included in a top performing wholesaler’s or distributor’s integrated business backbone? According to Aberdeen’s ERP in Wholesale and Distribution: Extending the Enterprise to Extend Profits, the Bestin-Class are more likely to use technologies such as Warehouse Management, Distribution Requirements Planning, and Supplier Collaboration. And, to ensure that they can share data with the extended enterprise, the Best-in-Class are 40% more likely than All Others to have an Electronic Data Interchange Translator. Combined, these technologies help to ensure that wholesalers and distributors have full visibility into their business, while also running efficiently.
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Table 1: Wholesale and Distribution ERP Modules and Extensions
Best-in-Class
All Others
Forecasting / Demand Planning
59%
47%
Electronic Data Interchange Translator
56%
40%
Warehouse Management
47%
31%
Distribution Requirements Planning
27%
17%
Supplier Collaboration / Scheduling
18%
11%
Source: Aberdeen Group, June 2012
Since wholesalers and distributors are, by nature, distributed organizations, they require access to the data contained within ERP and its extensions beyond a stationary workstation. According to data from Aberdeen’s 2013 ERP Benchmark survey, the Best-in-Class are over twice as likely as All Others to enable mobile access to ERP (Figure 6). Not only are 56% of the Best-in-Class aided with triggers and alerts in order to help them make immediate decisions, but 76% of the Best-in-Class have data entry at the point of activity. Delivery drivers have instant access to customer information, ensuring that they deliver orders correctly. Additionally, warehouse workers can record inventory or pick orders without having to go back to a workstation. These technologies allow employees to make agile decisions and also complete their jobs more quickly, helping to reduce costs.
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Figure 6: Mobility Drives Efficiency Best -in-Class
Industry Average
Laggard 76% 62%
56% 46%
46%
44% 26%
22% 20%
Users have access to ERP from mobile devices
Event Management (Triggers and Alerts)
Data entry at the point of activity
Percentage of Respondents, n = 95 Source: Aberdeen Group, July 2013
With Sage ERP X3, decisions aren’t confined to a desktop. Sage ERP X3 is a web-native solution. Its portals and dashboards can be accessed in a browser anytime, anywhere, from any connected device. This connectivity simplifies the way employees, customers, and suppliers collaborate and improve their overall experience. For example, Sage ERP X3 enables a wholesale distributor to configure customer and supplier portals that serve up relevant information anytime, anywhere. Sage also offers a series of mobile applications—Sage Mobile Sales, Sage Mobile Service, and Sage Mobile Payments. Through a real-time cloud connection, these mobile solutions enable business representatives to close more sales, provide better service, and get paid faster.
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Measurement: The Key to Improvement
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he above capabilities can have a significant impact on a wholesaler’s or distributor’s ability to perform, but one of the key benefits of ERP is the ability to monitor and measure performance (Figure 7). This data is essential for understanding where the organization can improve. It all starts with enabling employees to view the data that is most essential to them. The Best-in-Class are 57% more likely than All Others to have the ability for users to tailor their user interface. These employees can then have instant access to their KPIs. Of course, there is data that is outside of their world that may still be useful to these employees. Therefore, Best-in-Class wholesalers and distributors are over twice as likely to have a centralized repository for metrics and KPIs. For an example of how this works in practice, note the fact that 56% of the Best-in-Class have the ability to measure the accuracy of demand planning and forecasting. They can then use the insight they gained from studying past variances in future demand planning.
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Figure 7: Measuring for Continuous Improvement
Best-in-Class 50%
47% 30%
56%
All Others
54%
36% 27%
23%
Ability for users to tailor Central repository of their user interface metrics and KPIs available on-demand
Measurement of accuracy of demand planning and forecasting
Quantifiable business benefits resulting from overall implementation of ERP are measured
Percentage of Respondents, n = 95
Source: Aberdeen Group, July 2013
Of course, continuous improvement should extend to ERP systems themselves. But this is impossible without understanding which functionality is most effective or which is going underutilized. Therefore, the Best-in-Class are 100% more likely than All Others to measure the quantifiable business benefits that are gained from ERP.
Measurement of a business is key to driving improvement. With its extensive intelligence engine and data warehouse, Sage ERP X3 equips businesses with ample tools for analyzing, fine-tuning, and improving business processes. User-defined dashboards and a plethora of reports enable business leaders to measure practically every aspect of their business. For example, executives and other software users can monitor key performance indicators for customer satisfaction, sales, cost of delivery, quality, and supply chain costs. The Sage ERP X3 alerts system even notifies key stakeholders when exceptions occur or opportunities are available.
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The Results And these benefits can be quite substantial, even for organizations that generally do not perform quite as well as the Best-in-Class. Organizations of all types report direct benefits as a result of their ERP solution (Table 2). These results include increases in the KPIs that are especially important for wholesalers and distributors. For example, the Best-in-Class saw a 17% increase in complete and on-time shipments. They also saw substantial increases in process efficiency, inventory turns, and schedule compliance. Of course, these increases ultimately lead to a significant impact on the bottom line. Best-in-Class wholesalers and distributors saw a 20% decrease in operational costs as a result of their ERP solution.
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Table 2: Measurable Benefits to be Derived from ERP Best-inClass
All Others
Improvement in inventory turns
51%
39%
Reduction in operational costs
20%
9%
Reduction in administrative costs
17%
11%
Improvement in complete and on-time shipments
17%
16%
Improvement in internal schedule compliance
15%
11%
Improvement in cycle time of key processes
19%
16%
Benefit Achieved through ERP
Source: Aberdeen Group, June 2013
Achieve the benefits of ERP, without crippling costs. Sage ERP X3 provides industry-leading functionality that encompasses all business processes. Its compact software design supports industry-specific processes and provides end-to-end visibility across finance, sales, customer service, purchasing, inventory, and manufacturing operations. As a result, Sage ERP X3 is able to deliver the advantages of large-scale ERP tools—including inventory control, on-time delivery, improved operating margins, and enhanced visibility—without the soaring costs and long implementation often associated with ERP.
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Key Takeaways and Recommendations
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op performing wholesalers and distributors take advantage of the visibility and process efficiency enabled through ERP to effectively plan for demand and serve customers efficiently. In today’s environment, wholesalers and distributors now face competition from global companies and across multiple channels. Therefore, they must provide a consistent experience to customers and deliver products on-time. In order to meet these goals, wholesalers and distributors should consider the following recommendations: • Provide visibility. It can be difficult to get a good grasp of what is going on over a wide network in order to make decisions. With greater visibility into operations, decision-makers can guide the organization in an agile manner. As such, the Best-in-Class are 97% more likely than All Others to have real-time visibility into the status of all processes from quote to cash. • Integrate business systems internally and externally. Providing an endto-end system that contains all of the data needed to run a business provides many benefits to wholesalers and distributors. By integrating ERP with business analytics, decision-makers can create more accurate demand forecasts and can be more informed when making choices that will affect the business. Additionally, integrating with systems such as Ecommerce, CRM, and customer self-service portals enables organizations to work more effectively with the extended enterprise. As such, 81% of the Best-in-Class have integrated business systems that create a complete and auditable system of record. • Enable mobile access. Mobile access enables immediate reactions to changes, allowing for agile fulfillment or purchasing. It also enables efficiency as employees can utilize ERP no matter where they are, without finding a workstation. As such, the Best-in-Class are 119% more likely than All Others to enable mobile access to ERP. • Measure performance. Measurement is essential for continuous improvement. Not only do 56% of the Best-in-Class measure the accuracy of demand forecasts, but they are also twice as likely as All Others to measure the quantifiable benefits gained from ERP. These steps will enable wholesalers and distributors to keep customers coming back for more without incurring increased costs.
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Sage ERP X3 delivers insight, mobility, and flawless execution. Wholesale distributors seeking to differentiate their businesses and compete more effectively require a unified ERP platform. Sage ERP X3 enables companies to evolve and grow with a solution that provides the visibility, automation, and mobility needed to achieve measurable gains—including reduced operating expenses and improved customer experiences. One example of a best-in-class company that has achieved strong results since implanting an end-to-end ERP solution is Sage ERP X3 customer Russell Sigler, a distributor of heating and air conditioning products. According to Rich Unterbrink, IT manager for the company, Sage ERP X3 was the driving factor in Russell Sigler’s ability to handle the challenges of a massive expansion. In addition to automating processes including inventory replenishment, claims, and fulfillment, Sage ERP X3 has enabled the company to improve customer satisfaction as revenues doubled.
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For more information on Sage ERP X3, call 866-530-7243 or visit NA.Sage.com/Sage-ERP-X3. Related Research Business Process Management and ERP: Driving Efficiency and Innovation; June 2013
Managing ERP Implementation Projects to Deliver Increased ROI; April 2013
The Outside-in Approach to Order Fulfillment: Providing a Seamless Customer Experience; April 2013
ERP in Wholesale and Distribution: Extending the Enterprise to Extend Profits; October 2012
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