Inventory and Vendor Management as Competitive Advantages for Distributors

Worldwide, distribution and supply chain management are straining as never before to predictably meet customer demand and allow companies to remain viable. In this series of six blog posts, we discuss distribution issues that you can address with the right technologies, refined and deployed by industry experts at Sikich.

Earlier, we discussed supply chain challenges, how Sikich helps address them, and how our HEADSTART methodology makes a difference. In the following posts, we consider key areas of distribution and supply chain management that are often top priorities for Sikich distributor clients, starting with inventory and vendor management.

Ensuring the right inventory levels

Keeping enough inventory on hand to meet the demand that you can expect, based on the history of your business, and avoiding tying up funds in overstock, is still a common-sense practice—but it’s no longer enough.

For one thing, demand changes can happen surprisingly quickly. When unforeseen circumstances prompt consumers or businesses to stock up on certain products or find alternatives to them, your offerings may suddenly be attractive to more customers, in larger quantities than you might have expected.

Also, when you distribute through Amazon and similar retailers, you may need to have certain inventory levels always on hand. You may face penalties if you cannot maintain that minimum inventory, run out of stock, and won’t be able to deliver within the turnaround time you committed to. You may have to maintain minimum inventories in the retail partner’s warehouses as well as your own, which can make management more challenging. Your customer ratings can take a quick downturn even if your delivery is late just once, eating into new sales and repeat business. And if you cannot consistently meet the retailer’s inventory-level conditions, you may be unable to continue doing business on that platform.

In Microsoft Dynamics 365, as deployed by Sikich, you always have full visibility and meaningful analytics to tell you what inventory levels currently are and how they are trending. The master planning module in Dynamics 365 is the critical engine for helping you manage inventory. All inventory information resides in a single repository, so you don’t have to navigate data silos.

You can track goods in transit —including containers on ships— and whether their lead times conform to your projections or not. You can take shipping times from and to your own and your trading partners’ warehouses into account as you plan inventory. As soon as historical reporting or current events alert you to possible shortages or shipping delays, you can activate alternative procurement and logistics options in time to avoid issues and ballooning expenses.

HEADSTART augments Dynamics 365 with an inventory analytics dashboard to make it easier for distributors to understand and plan inventory movements and financials.

Making it easy for vendors to do business with you

What if dealing with your company is what people in supplier and trading partner businesses were to think of as the favorite part of their day?

You can go far on the strengths of your products. But you can extend your market reach and brand value even more if it’s also easy to do business with your company. And, when you interact with organizations that are much larger than your own, or which buy from or deliver to multiple businesses similar to yours, this can generate the kind of attention that makes you stand out.

Supplier Management tools in Microsoft Dynamics 365 help you document and manage commitments, conversations, and experiences with vendors and trading partners. Team members working with vendors can always be fully informed regarding the details of contracts, delivery schedules, discounts, requests, or other business conditions without digging into the company’s files or asking colleagues for help. Neither your associates nor your trading partners have to depend on someone who has information others don’t.

In Sikich-led deployments of Microsoft Dynamics 365, we often deploy a secure vendor portal with your ERP system. The portal’s functionality can meet your requirements for what matters most in vendor relationships. Anytime and without requiring other assistance, vendors can, for example, submit invoices, provide shipping updates, look up orders, or provide proposals.

Some vendors and trading partners set their own business conditions, such as making EDI communications obligatory when you deal with them. Sikich often incorporates EDI into the Dynamics 365 environment so they can meet that requirement. We use a third-party software product called SPS Commerce for EDI, fully vetted for smooth interoperability in the Dynamics 365 environment.

Smaller vendors may not have made a full transition to doing business electronically, so they may provide invoices or other documents on paper. You may not want to revert to inefficient, paper-based processes. We use an optical character recognition (OCR) software add-on called ExFlow from SignUp Software to transform paper documents into electronic files that you can use with Dynamics 365.

Both EDI and AP automation processes, are documented within HEADSTART. Allowing us to implement EDI and AP automation for you in a standardized, predictable manner without slowing or complicating your deployment.

Managing and tracking vendor quality

Some distribution companies take quality risks when they engage with the industry’s leading online retailers. They may be motivated to source less expensive products in an attempt to secure sustainable margins, and quality may be compromised. Other distributors realize that they may have inadvertently risked damaging their business when they learn from customers that a vendor-provided product or component does not meet expectations.

Regaining customer goodwill after a bad experience can take much more effort and expense than winning it the first time. Recovery gets even more difficult when unfavorable online reviews remain discoverable by search engines and on retailer sites, throwing a long shadow across your best sales and marketing efforts.

Your vendor contracts may already stipulate certain base levels of acceptable product quality, but that does not guarantee that quality will be consistent or flawless. You may want to test sample shipments at random when you’re dealing with high volumes. If vendor products or components are essential for your manufacturing and distribution of high-ticket, partly customized items, you’re probably already testing them.

In addition to product quality, pricing, on-time delivery, and professional communications also play into a vendor’s overall performance. The scoring tools in Microsoft Dynamics 365 allow you to record and track such metrics over time. You can review the performance of individual vendors or group them into categories. You see how they trend and can hone in on data points to understand them better. Sikich can provide dashboards and reports for this purpose to augment Dynamics 365.

If you need to switch to another source when a supplier has gone beyond the pale in terms of poor quality, the vendor relationship functionalities in Dynamics 365 can help you make that transition quickly.

The next step

If you are ready to take your supply chain management to the next level, let’s talk. If you are still in a research phase, be sure to check out this eBook: What’s Next for Distribution Management: 7 Key Areas for Modernizing Distribution.