Inventory Redistribution Trends for Wholesale Distributors
- Redistribution Challenges Faced by Wholesale Distributors
- Key Performance Indicator Targets for Distributors
- Benefits of Investing in Software and Technology for Redistribution
- Inventory Optimization for Your Business
An ever growing competitive landscape in today’s global markets, rapid introduction of products with short life cycles and heightened customer expectations are all forces that have pushed wholesale distributors to rethink their inventory management and logistics systems. Many distributors are turning to inventory redistribution as a means to lower working capital costs and drive up service levels.
To be highly responsive to swift changing customer demand, distributor networks have grown and often times include multiple distribution centers that supply regionally specific customer bases. Due to its proximity to customers, such a supply chain network quickly responds to changing customer demands, market conditions and regulatory norms, however over the last few decades legacy enterprise resource planning (ERP) and warehouse management system (WMS) technology have not kept up with the times.
As costs in the supply chain continue to increase due to increased inventory, vendor and logistics costs, wholesale distributors have turned to inventory redistribution practices to offset working capital costs, carrying costs and to keep stocking locations lean and efficient.
Redistribution Challenges Faced by Wholesale Distributors
There are hosts of challenges wholesale distributors face in day-to-day business operations, but here are the top 4 trends that influence distributor headaches.
- Multi-location Planning: For companies with multiple stocking locations, accurate visibility into the inventory network is critical. A company must know what is on hand, on order, and what is on back order for every item in each location. Multiple location planning is a difficult job that becomes exponentially more difficult with the growth of a business.
- Antiquated Technology Systems: Many distributors today are working with legacy ERP or MRP systems that are decades old. Other distributors have lost control of their core technology integrations over time and now operated with
- Transportation Costs: The rising cost of fuel is a big worry for many global businesses and can become even more of an issue for companies who are looking to redistribute inventory and therefore need to transport goods to and from various distribution centers.
- International Business: A lot of wholesale distributors have customers in different areas of the world and deal with multiple currencies, languages, and market expectations can pose considerable barriers to the efficiency of business operations and distribution.
Key Performance Indicator Targets for Distributors
The good news for distributors facing the challenges listed above is that there are a few key performance indicators (also known as KPIs) that can be monitored that will ensure measureable productivity gains and operational efficiency improvements when managing inventory redistribution. With many businesses finding it increasingly difficult in the current economic climate to keep costs low, reasonable and consistently monitored KPI targets can lead to cost savings through greater levels of efficiency.
Outlined below are three core KPI’s that are of utmost importance to distributors looking to contain costs:
- Inventory Value & Carrying Cost: For distributors, maintaining low levels of inventory investment is essential, even when demand increases. The ability to forecast customer demand accurately should also not be underestimated and is integral to anticipating customer needs. Most distributors are carrying large stockpiles of excess and obsolete inventory without even knowing.
- Sales Order Fill Rates: When considering redistribution, it is important that a distributor is able to keep on top of and effectively track their orders, providing accurate delivery dates for customers. Consistently failing to provide customers with correct delivery dates as a result of poor supply chain management will lead to the unfavorable result of a poor customer service reputation and customer attrition.
- Vendor Performance: It is crucial that distribution companies accurately and consistently score and report on a vendor’s performance. Even for distributors who feel their vendors are meeting or exceeding quality expectations and shipping goods on time, tracking data on vendor performance will allow the provision of regular and accurate feedback. Whether the feedback is positive or negative, it will encourage a continuous improvement in vendor performance. Having a system in place to track these scores, lead-times and evaluations can help keep your vendors in check.
Benefits of Investing in Software and Technology for Redistribution
Many of the problems outlined above can be simply addressed by investing into more robust inventory management and optimization technologies, many of which work in collaboration with legacy applications. There are many benefits of accurate redistribution processes, including increased productivity and efficiency, the potential to increase sales capacity, and potentially higher levels of customer satisfaction.
Inventory redistribution can often be extremely difficult to stay on track of manually. Using appropriate inventory optimization software can lower stock levels, holding costs and capital tied up in stock; increase service rates, fill rates and sale orders; and also reduce administration time and cost for inventory planning and replenishment.
Inventory Optimization for Your Business
The process of inventory optimization is a method of balancing capital investment constraints and service-level goals over a large assortment of stock-keeping units (SKUs), while taking demand volatility and supply volatility into account.
EazyStock’s comprehensive inventory management software solution can be useful for small to medium-sized businesses that are struggling to keep track of and manage their inventory after starting a phase of redistribution.
To learn more about inventory optimization for your business, download your copy of our free white paper here!