Why Leading Distributors Are Moving to Modern, Cloud ERP Systems
By Kelly Squizzero, Director of Industry & Solution Strategy, Infor
The competitive landscape in the distribution industry is fiercer than ever before. Rapidly changing customer demands, global supply chain disruption, and a shifting labor market are adding to the pressure on distributors, while accelerated digitalization is forcing them to reevaluate their business in order to compete. According to Deloitte, “distributors now have the opportunity to generate incremental value via effectively leveraging digital assets and applying information, analytics, and insights to critical business decisions and stakeholder interactions.” To get ahead, leading distributors are investing in digital technologies to empower productivity across their operations, workforce, and customer experience.
While a modern, cloud-based system will offer a continuous flow of new technologies and industry-specific capabilities, many distributors are still limited by legacy enterprise resource planning (ERP) systems — often decades old — that lack the agility to support new requirements and technology, and only serve to hold them back. Many find themselves grappling with significant ERP modifications, making them feel locked into their old system. Others are overwhelmed by the thought of disrupting their daily operations by adopting a new system and simply choose not to act at all. In both cases, the gap between these distributors and their more tech-forward competitors is widening every day.
To truly compete in today’s market, distribution companies need to upgrade to a modern ERP system tailored to meet their specific industry needs and designed to give them the flexibility to adapt to changing business requirements. Using an agile implementation approach, distributors can manage the disruption they fear by breaking the software implementation into manageable sprints and reducing complexity with pre-defined industry capabilities. Here are four key reasons why a modern, cloud-based ERP system can make distributors more agile, efficient, and better able to serve changing customer needs.
Highlight Customer-Centricity
Perhaps the biggest success factor for distributors today is developing innovative services that go beyond the typical distributor-customer relationship. Whether it’s offering expert job management services to keep construction projects running smoothly, managing customers’ indirect material and machine supplies to streamline operations, expanding into maintenance and repair services, providing customers the option to rent vs buy, or offering configuration services to create personalized products, value-added services are key to creating strong customer relationships. These types of services address real business problems and provide distributors the opportunity to increase customer loyalty and differentiate themselves in the market.
Distributors should look for a modern ERP system that not only supports these types of services, but also incorporates the use of technologies such as the internet of things (IoT), artificial intelligence (AI), machine learning (ML), and mobile devices to enhance their offering. For example, a distributor can leverage IoT to monitor equipment and collect data to determine the optimal time to perform maintenance, safeguarding against customer equipment failure. Another example might be putting mobile devices in the hands of their field service team to provide them immediate access to the information they need to complete the repair.
In addition to providing customers innovative value-added services, distributors can leverage a modern cloud-based ERP system to improve their customer’s buying experience. A modern ERP system can use AI and ML to deliver highly personalized product recommendations, even factoring in external sources, such as weather, to recommend the type of drill needed in freezing conditions.
The rise of customer desires for self-service can’t be ignored. When it comes to e-commerce, customers desire powerful online research tools, the ability to design their own products, and mobile access from any device. A functional website that lets customers operate on their own terms can inspire loyalty and give the distributor a competitive advantage.
Enhance Productivity
Customer demand for speed and accuracy requires streamlined and efficient operations across the supply chain, impacting every aspect of the distributor’s business – from sales, to service, to inventory and warehouse management. Modern ERP systems leverage new technologies to better anticipate fluctuations in demand to make better buying decisions. These systems also offer warehouse automation, replacing slow and error prone manual processes, and asset management capabilities to better manage a fleet of trucks to ensure they are always operating and able to deliver the right product to the right place, at the right time.
Modern ERP systems offer workflow tools to automate business processes and eliminate manual steps to achieve optimal efficiency. Leveraging this technology enables the distributor to ensure best practices are followed and prevents problems that might have otherwise occurred. Workflow tools act as a manager and ensure work is passed from one person to the next in the appropriate sequence until the process is complete.
Another benefit of a workflow tool is the ability to proactively identify potential issues. Without tools like this, distributors often are playing catch-up and resolving customer problems in hindsight. To offer the best service, distributors must operate in an environment where they stay one step ahead. A modern ERP system can identify potential problems before they occur. For example, if a purchase order is going to arrive later than expected, the system will alert employees of customer orders that will be impacted by the delay. As such, employees can address the issue before it becomes a problem.
The productivity gained from a modern ERP system will make a tremendous impact on distributors’ overall organizational health and will allow them to compete as the industry continuously evolves.
Improve Employee Adoption
When it comes to seeing a return on investment with any new technology, a business will only be successful if employees readily adopt and integrate the system into their ways of working. Perhaps not surprisingly, the lack of learning tools in legacy ERP systems represents a great barrier to entry in the enterprise software industry. Making emerging technologies accessible to any person in any area of the business is what makes modern enterprise technology so powerful.
Modern ERP systems emphasize seamless user experience and design, making it easy for employees to engage with the software and seek out data to inform their decision making. Twenty years ago, distribution employees had to tolerate lengthy training sessions just to understand their workflows. But by choosing an ERP solution with modern training tools and pre-built content, employees can skip those extended classes and continuously learn within the system itself. These modern training tools and intuitive systems are also particularly useful for distributors that hire temporary workers during busy seasons, like the holidays. Not everyone will be familiar with every piece of technology that a workplace utilizes, so having help buttons to guide them through processes, as they go, increases employee productivity and lets managers focus on higher-level tasks.
Attract and Retain Talent
A twofold challenge for the distribution industry today is the wave of older, experienced workers who are retiring, at a time when a new generation is entering the workforce. This new generation of digital natives demands user-friendly technology that gives them immediate access to data, supports team collaboration, and mirrors the look and feel of apps they use in their everyday lives. For many distributors, modern ERP systems, which improve overall employee experience, have been a key differentiator when targeting this generation of workers.
Define Your Future in the Digital Age
Distributors still using legacy ERP systems face an opportunity cost every day. While tech-forward competitors race ahead with modern cloud ERP systems that let them better serve customers and their changing needs, improve their overall productivity, and support and retain employees in a tight labor market, distributors without modern systems will only continue to fall behind the pack. The companies that succeed will be those that progress beyond legacy systems and step into the continuously evolving world of modern ERP. Your future in the digital age is yours to define. Which path will you choose?
INDUSTRIAL SUPPLY MAGAZINE
The November/December issue of Industrial Supply magazine features an in-depth cover story about Kimball Midwest. Plus, we're featuring articles by contributing writers Dirk Beveridge, Frank Hurtte, and Mike Marks, as well as interviews with numerous product and distribution industry experts.
