Worldwide, distribution and supply chain management are straining as never before to predictably meet customer demand and allow companies to remain viable. In this eBook, we discuss distribution issues that you can address with the right technologies, refined and deployed by industry experts at Sikich.
Distributors’ supply chain management has reached a turning point where it has become so highly exposed and fragile that the world’s attention turns to it when it is threatened by disruptions. Distribution companies are challenged to modernize their supply chain management or fall behind in the competition for customer spending. Several concurring factors drive the urgency of doing so:
Gartner finds* that, while 24 percent of companies surveyed have some elements of a digital supply chain in place, only 1 percent operate with a completely digital ecosystem. However, 23 percent expect to get there as soon as 2025.
*Gartner, Future of Supply Chain.
A study* finds that 93 percent of companies responding experienced supply chain challenges as a result of the pandemic. The three main issues were:
*IndustryWeek and Sikich, “Industry Research: Supply Chain Resiliency.”
Our survey* finds that 77 percent of responding organizations have made changes in their supply chain management, prompted by the pandemic, including the following measures:
*IndustryWeek and Sikich, “Industry Research: Supply Chain Resiliency.”
Allowing a strategic, immediate response to these trends, digital technology has come a long way when it comes to managing supply chains and distribution businesses. For many years, companies primarily looked to technology to help them make their supply chains as efficient as possible and ensure accuracy in inventory management and shipping. Specialized software applications and broad, all-in-one ERP solutions served these goals.
Today, technology can be transformative for distributors and help them achieve the best possible outcomes in managing their business. With software systems and data from many different sources in the cloud, accessible from anywhere, technology can help distributors—
Powered by the right digital solutions, supply chain management can help distributors realize their unique vision instead of playing an important, but secondary, enabling role. This is a similar change to what began happening in corporate finance departments several years ago, when the ability to translate business data into relevant insight allowed CFOs and finance managers to become key business partners instead of supporters.
Sikich consultants have assisted distribution companies succeed and evolve their businesses for three decades. On our industry team you find supply chain experts who had rewarding careers in businesses before they came to our organization. Keeping close watch on supply chain trends and technological opportunities, we help companies weather change to their advantage.
More recently, we often work with businesses, such as manufacturers, that are new to distribution or want to explore new models. Many of them see the volume and reach of companies like Amazon, Walmart, or Wayfair, and want to find the best way to distribute their offerings by partnering with them. Some manufacturing companies are also looking to segment their products and distribute a subset of their portfolio directly by establishing an ecommerce channel of their own.
Engaging with global online retailers and standing up new ecommerce venues both come with risks that Sikich can help you anticipate and address. We will also collaborate with you to elevate your visibility and avoid vulnerabilities resulting from dangerously strained processes.
The Sikich technology arsenal includes several cloud-based solutions that can make a big difference for distributors, including:
In the cloud, these technologies can be universally, securely available wherever people are. Distribution, supply chain, and logistics managers and teams can also access the ERP and analytics capabilities through their preferred mobile devices.
63 percent of the companies we surveyed* are planning on increasing their investments in supply chain management technology.
*IndustryWeek and Sikich, “Industry Research: Supply Chain Resiliency.”
When we deploy Microsoft Dynamics 365 in your business, you get a lot more than the standard solution, competently and efficiently implemented. We put our own intellectual property to work and follow a proven, fast-paced methodology to keep your software project running predictably and shorten the time-to-benefit. We call this approach HEADSTART. It could be described as a standardized, working model of Dynamics 365 that can meet most of the needs of distributors, manufacturers, and other companies without customizations. For some Sikich clients, the opportunity of a smooth, predictable ERP deployment with HEADSTART is a key consideration in their choice of ERP software and deployment partner.
We invest ongoing research and development efforts in HEADSTART, so you can replace legacy software and disparate systems and processes with a unified, streamlined technology and elevate supply chain management to be state-of-the-art. HEADSTART includes a large portfolio of preconfigured business processes based on best industry practices, including several thousand distribution and supply chain management workflows. Because HEADSTART incorporates the experience of distribution and supply chain leaders and the learnings from hundreds of Sikich deployment projects, it also minimizes any risk that your software deployment might go awry and not deliver the outcomes you look for.
In HEADSTART, we have fully preconfigured the Supply Chain Management and Project Management modules within Dynamics 365. For example, for wholesale distributors, we provide capabilities for high-volume distribution, warehousing, and transportation. Another set of capabilities addresses the needs of equipment manufacturers that handle some of their distribution themselves and also work with trading partners.
Sikich refines and adds to the process library in HEADSTART as the industry changes and new de-facto standards emerge. We also update HEADSTART whenever new capabilities become part of Microsoft Dynamics 365.
Some businesses require deep functionality in certain aspects of supply chain management. To meet these needs in the most effective and streamlined manner, HEADSTART includes solutions from independent software vendors (ISV) that are tested to work reliably with Dynamics 365. They are integral components of the deployment methodology. You can thus maintain a coherent ERP environment without making everyday management or upgrades more complicated. For example, ISV technology in HEADSTART makes it possible to use electronic document interchange (EDI) communications or move and automate paper-based processes in the digital realm with optical character recognition (OCR) functionality.
In distribution and supply chain management, business processes differ from company to company more than they do, for instance, in finance. That particularity drives much of Sikich research and development in this discipline. In deployments, we usually prioritize important processes that are not yet part of HEADSTART to enable them within your schedule and with minimal solution changes. Typically, they also become part of our development backlog.
In a recent project with a distribution client, we replaced a balky, management-intense legacy ERP system and several specialty software applications with Dynamics 365. We used Microsoft Power BI and other Azure analytics tools, together with dashboards we developed, to enable business insight for key roles in the company. We set the organization up for engaging with a large online retailer and provided EDI and process automation to simplify vendor transactions.
THE OUTCOMES? The company
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 see where goods in transit are—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.
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.
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 make you stand out.
Customer relationship management (CRM) 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 integrate 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 OCR processes, as well as the specialized EDI and OCR software tools, are preconfigured within HEADSTART. We therefore can implement EDI and OCR for you in a standardized, predictable manner without slowing or complicating your deployment.
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 in 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.
How do you assess your company’s customer experience today? What are your protocols for improving it? By the time you work with one of the large online retailers, you should have a strong track record of keeping customers happy from their first contact through to delivery of your products at their facility or home.
When you partner with Amazon and similar retail leaders, you outsource customer experience to a degree. Customers transact business, are billed, and direct initial inquiries in case of any issues to them, not you. When you work with a retail organization that describes itself as fanatic or obsessed with customers’ experiences, you have to align with their high standards, or the collaboration won’t work out. You need to uphold your end of the business by honoring your customer promises and delivering quality goods on a tight schedule, with accuracy and speed in all of your processes. When customers need to return items or ask for assistance, you have to be responsive and easy to deal with, or they might stay away and give you an unfavorable review.
On the other hand, if you treat customers well and garner praise, your search visibility on retail sites may improve and you have a better opportunity to win repeat and referral business.
How do you assess your company’s customer experience today? What are your protocols for improving it? By the time you work with one of the large online retailers, you should have a strong track record of keeping customers happy from their first contact through to delivery of your products at their facility or home. You can use the CRM capabilities in Microsoft Dynamics 365 to manage your customers and commitments, and have a complete, real-time view of your performance to KPIs for customer experience and service levels. Sikich can also help you apply and achieve common industry benchmarks.
For most distributors, satisfying the needs of customers who repeatedly order the same products in similar quantities is not a challenge, but they find it difficult to adjust when demand shifts. Analytics and insight tools like Microsoft Power BI can complement your Dynamics 365 environment to give you early visibility of market volatility, so you can be ready to adjust quickly. The same resources can help you identify issues and drive improvements in the last segment of the supply chain, when goods are on their way from the last distribution facility to customers’ homes or business locations. When customer expectations and the flagging performance of shipping services need you to jump into action, you can do so before the quality of the customer experience slides.
Some distributors offer products through online retail partners and decide to market others through their own channels. You will have your own criteria—profit margins, market share, brand building, customer segmentation—for doing so, and reporting through Microsoft Dynamics 365 can help you target the right product for the right market and channel.
If you want to stand up your own ecommerce venue, Sikich can deploy and configure the Microsoft Dynamics 365 Commerce module. We can also help you launch the new channel to customers and manage it efficiently. You can use dashboards developed by Sikich in conjunction with the analytics tools on the Microsoft Azure cloud to gain a real-time view of events in your ecommerce channel and make rapid course corrections.
Some Sikich clients market a small percentage of their products through their own ecommerce venue, while online retail leaders handle the lion’s share of their distribution. Some manufacturers generate considerable revenue by selling parts or supplies online. For other companies, ecommerce is an effective way to remain connected with certain customers and capture their interest when they are ready to offer new services or product upgrades. In any case, the Dynamics 365 environment Sikich implements for you has the scalability, flexibility, and intelligence to manage any number of transactions and profitably serve customers.
Gartner found* that 69 percent of the supply chain leaders they surveyed expect that consumers will be less willing to visit physical stores and that 46 percent see product-to-service offerings as a critical new business model.
*Gartner, Future of Supply Chain
For many distributors, recalling the history of their business may bring back memories of siloed data sources and disjointed processes. Sustainable practices, too, often used to be isolated in certain domains. Maybe the company had a great sustainability message for its customers and was environmentally responsible in its office environment, but extending this effort to production and logistics may have been more difficult and costly. Some businesses found that their customers and employees were enthusiastic about sustainability, but it was challenging to have vendors join the green momentum.
Today, many business customers and personal consumers prefer to do business with a distributor that matches their environmental values and can demonstrate pervasive sustainability practices. When you distribute through online retail leaders, these enterprises may expect you to align with their often well-publicized, companywide sustainability initiatives and values.
Microsoft Dynamics 365 can help you advance sustainability throughout your supply chain. For example, you can make environmentally sound production, packaging, and shipping part of your vendor evaluations. Reports based on these findings can be invaluable for planning procurement weighted toward the vendors which meet your standards and provide transparent disclosure of their accomplishments in sustainability. Similarly, you can plan engagements with shipping and logistics providers based on their track record of minimizing their carbon footprint and using energy from renewable sources.
Conversely, when trading partners or customers ask you about your company’s sustainability programs and progress, you can rely on data and insights based on data in the ERP system to show them how you achieve the benchmarks and KPIs that drive your environmental performance.
Customers and suppliers may be ready for you to assist them in becoming more environmentally responsible. Some distributors offer recycling of products at the end of their lifecycle or of bulky packaging and containers that they cannot reuse or store. In Microsoft Dynamics, you can manage this as a valuable, profitable service that, currently, can still create a powerful competitive distinction for your company.
Complying with the business conditions of your retail trading partners may be demanding enough. When you also have to follow regulatory mandates for financial management, sustainable sourcing and distribution, end-to-end tracing of components and materials, or product safety, compliance can become a risky, costly undertaking. If you extend your distribution to other countries, compliance conditions can become yet more complex. For example, many countries have requirements for managing sensitive customer data that are more strict or differ from U.S. practices.
Your Sikich team can work with you to review the strength and resilience of your compliance processes and make adjustments before we implement Microsoft Dynamics 365. Hundreds of clients in compliance-intense industries have collaborated with us to mitigate compliance risks and efforts. While compliance typically requires an additional layer of reporting and control, we know how to create this in such a way that the business as a whole benefits from it. Improved efficiencies, faster workflows, and better visibility can serve compliance as well as the company’s overall goals.
When we deploy Dynamics 365 for your distribution business, we maintain the integrity of compliant processes in the ERP environment. Compliance and quality management dashboards and analytics tools can help you gain assurance that the company’s activities meet the required standards, or else allow you take corrective action.
Customers and suppliers may be ready for you to assist them in becoming more environmentally responsible. Some distributors offer recycling of products at the end of their lifecycle or of bulky packaging and containers that they cannot reuse or store. In Microsoft Dynamics, you can manage this as a valuable, profitable service that, currently, can still create a powerful competitive distinction for your company.
As we hear sometimes from clients, the Sikich ERP and supply chain management practice offers a unique combination of assets:
We start with the current state of your business, but we don’t stop there. We learn your company’s unique vision, value proposition, and direction. When we deploy your Dynamics 365 platform, we ensure that it is extensible and flexible to support change and growth. Some technologies may not be called for right now, but they may make a difference in the future. Using the internet of things (IoT) for anytime, anywhere tracking of products, materials, containers, and vehicles may be a next step for you. Or, machine learning and artificial intelligence to anticipate demand, optimize logistics, or determine best-fit suppliers. On your ERP foundation, you can manage today’s business and foster innovation to outperform the competition.
