Enterprise Resource Planning (ERP) systems are game-changing solutions that allow distributors to optimize processes and make data-driven decisions, allowing them to stay ahead of competitors. Underscoring how distributors worldwide are turning to ERP systems, the global distribution software market is anticipated to reach a staggering $13.8 billion by 2029, growing from $12.3 billion in 2022.1
This 2024 guide to ERP software for distributors eBook will look at:
- What a distribution ERP system is
- Who needs a distribution ERP
system
- Signs your business needs a
distribution ERP system
- Benefits a distribution ERP system
offers your business
- A practical guide for implementing
distribution ERP software
- Overview of 10 Top Distribution
ERP Systems
What is a Distribution ERP System?
A distribution ERP system is software designed for businesses operating within the distribution industry. It serves as a centralized platform that streamlines and integrates various business aspects, such as inventory management, order fulfillment, warehouse management, sales order management and more.
ERP systems provide your distribution firm access to real-time information, enabling data-driven decisions. This equips your organization to work better, save money and at the same time improve customer satisfaction.
"Distribution ERP tools are typically built with (or combined with) business
"
intelligence and Customer Relationship Management (CRM) capabilities that provide valuable insight into customers' buying habits." —Elizabeth Quirk, Technology Writer2
Who Needs a Distribution ERP System?
Distribution ERP systems are designed to be used by any business that is involved with the distribution of goods. The following organizations can benefit from using ERP software:
Distributors
As intermediaries between suppliers and resellers, distributors must grapple with fluctuating customer demand, seasonal peaks and widespread product assortments. Without a distribution ERP solution, augmenting existing legacy systems with spreadsheets and gut-based decisions introduces unnecessary chaos and inefficiency.
A distribution ERP integrates siloed business data to give your organization real-time visibility across the entire supply chain. Inventory optimization analytics allow you to predict demand accurately, avoiding costly stockouts, expirations and write-offs due to excess stock.
By automating everything from purchasing and receiving to picking, packing and invoicing, a distribution ERP system enables process improvements for drastic productivity and accuracy gains. With robust reporting and dashboards, your firm can extract actionable business insights to inform continuous improvement initiatives.
Wholesalers
To remain competitive, wholesalers need to run a tight ship by keeping costs low and reacting swiftly to customer and market fluctuations. However, volatile demand, complex supplier relationships and narrow profit margins make this extremely challenging without an ERP that's specially designed for the distribution industry.
By centralizing product data across the distribution network, your wholesale business gains clear visibility into true stock levels at every location. Replenishment automation ensures you have sufficient inventory to meet demand without tying up too much capital. With inventory optimization and demand forecasting analytics, your organization can plan purchasing intelligently to capitalize on order discounts and avoid unnecessary rush deliveries that squeeze profits. By integrating delivery management capabilities, a distribution ERP system introduces efficiencies through route optimization and load consolidation as well.
Manufacturers with Distribution Networks
When manufacturers sell to consumers through vast distribution networks comprised of warehouses, retail outlets and eCommerce channels, lack of visibility across these fragmented operations poses massive problems. Excess inventory in one location could lead to stockouts in another, killing sales and disappointing customers who will take their business elsewhere. Without inventory optimization tools, determining optimal stock levels at each site is virtually impossible.
A distribution ERP system solves visibility issues for manufacturers by compiling inventory data across the entire network into a single version of truth. Real-time updates from connected IoT devices help your organization react swiftly to replenish stock. With real-time analytics, you can accurately predict demand to minimize waste and shortages. By gaining end-to-end visibility across your distribution network, your organization can optimize inventory planning, strategically position stock to balance availability, and reduce safety stock and transportation expenses.
Retailers Managing Multiple Locations
For retailers managing both online operations and physical store locations, delivering a consistent brand experience is incredibly difficult, but vitally important. Out-of-stocks online could lead customers to visit stores hoping to purchase items, only to find them unavailable there as well. Alternatively, promotions offered in-store but not online breed dissatisfaction amongst shoppers. Without inventory that is visible across channels, mismatches are inevitable.
Distribution ERP systems provide your retail business the scalability to grow outlets exponentially while actualizing unified commerce across physical and digital channels. Accurate inventory data across the network helps your organization align marketing campaigns, pricing strategies and fulfillment options system-wide. With a distribution-focused ERP system as command central, you can eliminate fragmented brand messaging to provide cohesive customer experiences.
Signs You Need a Distribution ERP System
For your business to stay competitive, efficient and profitable, understanding and recognizing signs that indicate the need for a distribution ERP system is vital. The following are are five clear signs that reveal whether it's time to implement a distribution ERP solution:
Inventory Management Challenges
One clear indication that your organization desperately needs distribution ERP solution is when your business is struggling with inventory management issues such as stock shortages, overflows or difficulties in tracking and organizing inventory. A distribution ERP system provides you with the tools to overcome these challenges. This software provides you with real-time visibility into inventory, helping you optimize stock levels, prevent stockouts and reduce excess inventory.
Inefficient Order Processing
Manual order processing is an error-prone and time-consuming process which often leads to delayed shipments and dissatisfied customers. A distribution ERP system allows your organization to avoid these obstacles by automating the entire order-to-cash process, accelerating order order processing—from order entry order entry and invoicing to shipping and payment processing. This helps your firm improve efficiency and enhance customer satisfaction.
Lack of Data Integration and Insight
Managing a business with multiple departments such as sales, human resources, finance and inventory—each having its own system—can be chaotic. A distribution ERP system integrates all your company's departments on one platform, allowing you to have easier access to crossdepartmental information. Your business can, therefore, make informed decisions and have a deeper understanding of customer behavior, sales trends and performance metrics.
Difficulty in Compliance and Regulations
Compliance rules and regulations are ever-evolving, and in the distribution industry, compliance is crucial. A distribution ERP system ensures that your company stays updated and in compliance with regulations by automating processes, maintaining accurate records and generating audit trails—reducing the risk of penalties and legal issues.
Difficulty in Supply Chain Management
The more your business expands, the more complex your supply chain becomes. Without a robust system to manage logistics, warehousing and transportation, you may face challenges, such as delayed deliveries and increased working costs. A distribution ERP software allows your organization to streamline supply chain management, which can optimize processes, reducing operational costs.
Benefits of a Distribution ERP System
Distribution ERP systems allow your business to work better, save time and increase efficiency. The following are the other ways that a distribution ERP system is beneficial to your organization:
Streamlined Operations
Implementing an ERP system allows your company to integrate different business processes—such as stock management, order processing, sales and finance—into a single platform, eliminating data silos. This integration allows different departments to collaborate efficiently, resulting in streamlined operations and improved efficiency.
"Investing in a new ERP system was arguably the best decision we've made in the past decade. It has completely transformed our business, giving us real-time visibility into our
"
supply chain, improving customer service and driving significant cost savings. We're now more agile, efficient and able to capitalize on new opportunities." —Chris Reyes, CEO of Reyes Holdings3
Improved Inventory Management
A distribution ERP system provides real-time visibility into your company's inventory levels, enabling you to optimize stock levels, prevent stockouts and reduce excess inventory. You can therefore ensure that products are available when and where they are needed, minimizing both carrying costs and lost sales opportunities.
Enhanced Order Processing
An ERP system ensures that sales orders are processed faster and more accurately through the automation of order processing, leading to quicker order fulfillment, reduced chances of errors and improved customer satisfaction. Furthermore, the automation of tasks, such as order entry, invoicing, shipping and payment processing eliminates manual bottlenecks, resulting in a streamlined order process.
Data-Driven Decision Making
A business cannot make informed business decisions without having access to accurate and comprehensive data, and this is precisely what a distribution ERP solution offers. Your business is provided with advanced reporting and analytics tools that allow you to gain valuable insights into sales trends, customer behavior and performance metrics, enabling you to make decisions based on data and facts.
Customer Relationship Management (CRM) Integration
Distribution ERP systems have a built-in CRM integration module that allows your organization to manage customer interactions, track sales leads and improve overall customer service. This allows your company to enhance customer satisfaction and build long-term customer relationships.
"We're all about customer experience, and that includes our supply chain. Our ERP system
"
helps us get products to our customers faster and more efficiently, which is essential for building loyalty and repeat business."—Richard Hayne, CEO, Zappos4
Best Practices for Implementing a Distribution ERP System
For distribution companies looking to optimize operations and gain a competitive edge, implementing a distribution-focused ERP is a strategic move. However, the road to ERP success is paved with many potential pitfalls. Follow these best practices to ensure your ERP system implementation goes smoothly and delivers maximum value.
Gain Executive Support
Gaining buy-in from top-level management is crucial in driving ERP adoption company-wide. When the executive team actively champions the ERP initiative, communicates its importance and allocates resources, it fosters enthusiasm across all departments. Appoint an executive sponsor to spearhead the project and provide strategic direction. With clear leadership backing the implementation at every stage, your organization can more easily rally around shared ERP goals.
Create a Cross-Functional Team
A strong implementation team is key to a successful ERP rollout. Assign representatives from IT, finance, operations, sales, human resources and other business units. This cross-functional group offers diverse perspectives to ensure all needs are accounted for in the new system.
- Provide training on the ERP methodology and tools to equip the team
- Define roles and responsibilities clearly
- Meet regularly to discuss progress and issues
- Leverage team members to relay updates and gather feedback from their respective
departments
Set Clear Objectives
Be clear on what you want to achieve with the ERP system. Set specific, measurable goals aligned to your overall business strategy, such as increasing order accuracy by X% or reducing lead times by X days. This gives focus to the implementation and later helps gauge its success. Ensure executive sponsorship for these objectives. Communicating goals across your organization will foster buy-in at all levels when people understand the rationale behind the ERP investment.
Choose the Right ERP
Not all ERP systems are created equal. Work with stakeholders to outline must-have capabilities and functionalities. Assess top ERP solutions that fit your distribution needs, including supply chain management, warehouse management, inventory optimization and sales order processing. Compare capabilities, technology benefits, scope for customization, deployment options and costs. Leverage demos and trials to evaluate user experience. Work with an independent industry software expert to gain a better perspective.
Plan and Schedule Implementation
A detailed project plan is vital for navigating the complexity of an ERP system implementation.
- Outline the phases, mapped to realistic timeframes
- Factor in design, testing, training, data migration and go-live
- Assign resources and account for related costs
- Plan to accommodate normal business operations throughout the transition
- Post go-live, have a support plan for continued user adoption
A pragmatic roadmap and clear communication will keep all stakeholders aligned and engaged and reduce potential snags.
Abcam, a UK-based producer, distributor and seller of protein research tools, went over budget by over $130MM during their ERP implementation after the company lost focus on governance, execution and cost control.5
Overview of 10 Top ERPs for Distribution
Acumatica offers a cloud solution designed for distribution. Acumatica focuses on companies with revenues that range between $20 million and $200 million, with some existing customers that have significantly higher revenues. The number of employees at companies that are good fits for Acumatica is around 200.
Aptean Distribution ERP customers typically are mid-market consumer goods importers and distributors with revenues ranging from $10 million to $300 million and/or 10 to 250 concurrent users. While available both as on-premises and SaaS single-tenant solutions, over the last three to four years the SaaS has been the primary option.
With Prophet 21, Epicor provides wholesale distribution customers with an option that gives all durable goods distributors support for sub-verticals within distribution. Epicor Prophet 21 is a cloud solution, with what's called a "dedicated tenant." Customers share the network infrastructure and the application, but each client has a dedicated database.
CloudSuite Distribution is a cloud-based, multi-tenant ERP solution purpose-built for wholesale distributors. This solution is backed up by 30-plus years of distribution industry experience. And this experience is manifested in its implementation accelerators that help businesses get up and running quickly with pre-configured distribution business processes and data models, user-defined home pages and distribution-specific training.
Business Central is an ERP solution that is well suited for small and medium-sized companies. The software is designed to allow customers who have outgrown an entry-level ERP or home-grown solution from both a process and software perspective. Oracle Cloud is a single-tenant solution so that all the modules can operate independently, integrate seamlessly or plug-and-play with best-in-class solutions. Its functionality is appropriate for pure distributors, 3PL operations, retailers and manufacturers with heavy distribution requirements.
NetSuite is built as a single database solution that has evolved through enrichment of the core functionality, not through acquisition of complementary software. Its cloud structure and ease of configuration make it a good solution for the distribution company that does not have a deep IT bench for either implementation or ongoing support.
Sage X3 is built for manufacturing and distribution, particularly companies with the complexity of being a multi-national, multi-language, multi-currency operation, or has multiple entities.
SAP Business One is a small- to mid-market solution. The ideal distributor size for SAP Business One is between $20 million and $250 million in revenue (with flexibility to go higher or lower), with 50 to 100 office workers and 15 to 75 warehouse workers.
SAP S4 Hana has broad functionality that covers most industries, but it is typically geared for companies that are in the upper-mid-market or larger. Within the distribution marketplace, SAP's largest market share is in healthcare/pharmaceuticals, where it supports large distribution companies. They also have a strong presence in food service distribution, industrial product distribution and technology distribution.
Conclusion
Implementing a distribution ERP system is a strategic move for any distributor looking to optimize operations, increase efficiency and achieve sustainable growth. By streamlining business processes, improving inventory management, automating order processing, enabling data-driven decisionmaking and integrating customer relationship management, a distribution ERP system empowers your business to stay ahead of the competition and provide exceptional service to your customers.
At Ultra Consultants, our experienced team can guide you through the ERP selection and implementation process, leveraging our deep expertise in the distribution industry. We take a hands-on, collaborative approach to understand your unique business challenges and requirements, and then we help match you with the optimal ERP solution. Partnering with Ultra Consultants sets you up for ERP success, positions your company for growth and allows you to realize the full benefits of streamlined operations and data-driven insights. For more information and additional resources on how to bring our expertise right to your doorstep, visit us at ultraconsultants.com.
References
- https://www.globenewswire.com/news-release/2023/10/18/2762172/0/en/Distribution-Software-Market-Size-and-Huge-
Growth-Rate-Analysis-2023-Latest-Business-Strategies-and-Demand-Forecast-to-2029.html
- https://solutionsreview.com/enterprise-resource-planning/what-is-distribution-erp-software-and-why-do-you-need-it/
- McKesson Corporation - Financials - Annual Reports. (n.d.). https://investor.mckesson.com/financials/annual-reports/
default.aspx
- Esposito, A. (2012, May 10). Zappos Unveils Keys To Mobile Success. Retail TouchPoints. https://www.retailtouchpoints.
com/topics/omnichannel-alignment/zappos-unveils-keys-to-mobile-success
- https://techmonitor.ai/leadership/digital-transformation/abcam-erp-overspend-egm