How to Get the Most from Your Supply Chain: SCM Reaches the Mid-market

Today’s midsized distributors can benefit from their software systems in ways that were impossible a few years ago. By layering advanced, affordable supply chain management (SCM) and electronic data interchange (EDI) functionality on top of their existing enterprise resource planning (ERP) system, they can profit from improved productivity and lower labor costs. Find out how.

Supply Chain Challenges for the Mid-market

Forklifts are for moving inventory, not for taking out existing systems. In the past, midsize distributors had various advantages that helped them compete against larger competitors. They were able to adjust business practices on the fly, personalize service for customers, and tailor their product offerings—all because they had fewer locations, flat organization charts, and manageable order sizes. 

However, meeting the mandates of an increasingly complex and global supply chain is a baseline of doing business no matter what the organization's size. Small and medium companies (those with annual revenues of $250 million [USD] and below) must now look to other differentiators and process improvements to stay ahead of encroaching competitors and to retain their customers. Mid-market companies face the same issues as large companies, but they do not have the same resources to implement costly, high-end, integrated suites to answer the advance of large distributors on their territory. To survive, mid-market organizations should look for solutions that leverage their existing investments in enterprise resource planning (ERP) infrastructures, and augment those capabilities with enterprise-class functionality that integrates the back office to the warehouse. 

ERP has matured for mid-market companies. Size, cost, complexity, and necessary manpower were once prohibitive, and midsized companies carved out their markets without the help of mammoth ERP applications. As with most technologies, time, adoption curve, and critical mass have dramatically cut the cost and increased the value of ERP solutions. These solutions are now better, cheaper, less complex, and more feature-rich than ever before. Big companies were the unwitting trailblazers in proving the technologies and improving capabilities while helping drive down the cost. Now, mid-market companies can take advantage of the investments and lessons learned of their larger competitors—by leveraging integrated electronic data interchange (EDI) and advanced supply chain execution capabilities alongside an existing ERP system, organizations can realize the benefits of an enterprise-class supply chain platform to meet the needs of both complex and simple supply chains. 

A Warehouse Management System (WMS) Delivers the Dream of Fast, Accurate Fulfillment and Inventory Tracking 

Fulfillment is the cornerstone of customer retention and growth. Having the stock in the right quantity, at the right time has a significant impact on the bottom line. Inventory, once a mid-market company's biggest question, is no longer an unknown. Typically, it has been difficult for a midsized organization to have a precise view of inventory targets across all their products. Not having automated processes and real-time inventory updates meant not knowing inventory levels. In order to grow, mid-market companies must be able to handle more fulfillment volume, address customer-specific needs, and leverage solutions that provide intermodal visibility and control. 

While small and midsized firms do not have the volume issues that larger distributors face, mid-market companies trying to expand should still seek more advanced fulfillment capabilities to help take them to the next level of growth, whether locally or globally. Global expansion adds new dimensions and complexity to a midsized business. As an increasing amount of inventory is imported globally, whether raw materials or finished goods, keeping track of that inventory becomes even more onerous and cumbersome. In addition, growth requires overcoming additional challenges, such as balancing a modest level of human resources without having to incur significant investments in additional capital assets. 

But by leveraging the right supply chain execution system paired with EDI capabilities on the customer side, midsized companies can expect to see substantial improvements in workflow optimization. Best-of-breed supply chain execution solutions provide tangible benefits, such as increasing workforce productivity, elevating inventory accuracy, and impacting the velocity of goods in and out of the warehouse. Mid-market organizations can offer a broad base of products without investing in excess inventory, but at the same time, have enough inventory on hand to fulfill orders and deliver on promises. Thus, rather than letting inventory be a cost center, best-of-breed WMSs transform inventory into a revenue center by having it work for the distributor, with better turnover and faster return. The result is reduced inventory holdings leading to greater revenue growth impact through reduced order cycle times, a more efficient workforce, and highly satisfied customers.

Trading Partner Compliance within Reach 

Compliance continues to present challenges for midsized companies. Chargebacks are costing distributors both time and money. Big-box retailers continue to set stringent requirements for order processing, shipping, receiving, and labeling—which can substantially impact your vendor rating should you fail to comply. Midsize companies need to improve their workflows and their transportation, shipping, and labeling capabilities, not just to meet customer mandates, but to control costs. This is putting intense pressure on midsized companies to ensure every item delivered to the end point complies with those guidelines, or else suffer often severe penalties levied by their customers. 

Mid-market organizations should look to existing best-of-breed logistics solutions that can provide the workflows required to manage retail compliance, and not merely pay lip service to adhering to retailers' standards. In other words, a logistics solution that offers customer-specific, compliant labeling, reporting, and other data translates into reduced chargebacks to the distributor. A reduction in chargebacks can lead directly to increased efficiency and revenue, and more specifically, directly to the distributor's bottom line in cost savings. Meeting customers' standards means exceeding customer expectations—enabling companies to outmaneuver competition and solidify customer satisfaction. 

Augmenting an existing ERP environment with a best-of-breed logistics solution can greatly improve trading partner compliance and provide a remarkable competitive differentiator, enabling the distributor to maintain a strong supplier relationship with its customer. Oftentimes, the overlooked component, or glue, to the success of this solution is the use of EDI technologies to extend the ERP into the application. 

Just as ERP is no longer merely for giant companies, the cost of entry to a fully integrated or embedded EDI solution is not as high as it used to be. Similarly, the cost of EDI transactions is no longer as cost-prohibitive as it once was. There are EDI solutions in the market that are ideal for global expansion and that not only scale from a small, single warehouse environment, but to more complex multi-warehouse environments with advanced requirements around warehouse optimization and trading partner collaboration. Through EDI integration, mid-market companies can experience extensive trading partner and supplier optimization. So, with a concerted drive toward enabling technologies, distributors would be able to fulfill quickly and accurately, and benefit from lower costs of order fulfillment operations.


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