Gone are the good ‘ole days of grabbing a part and shipping it. Today’s Distributor knows that the world has gotten much more complex. Take the term “kitting” which is an older term for customization. This trend has grown far beyond the original notion to include bill of material (BOM), scheduling, and direct labor systems to name just a few.
Value-added services are now the norm rather than the exception. As distribution needs have grown more sophisticated, so has enterprise software. The key is to choose the right system for your environment, including anticipating future needs.
The distribution model has evolved into something that looks more like light manufacturing. Assemblies and kitting can mean bundling just about anything from items, to services, and even warranties. Many of the pure distribution software systems out there do not include this capability and I meet many distributors who did not make it part of their evaluation. We’d like to help you avoid that mistake.
ERP for Distributors: What to look for in your next system
You’ll want to find a suite of modern applications that work great on their own and even better together, such as Microsoft Dynamics 365 (which is designed to be an all-in-one business management solution and works well for distributors). Every company can benefit from being able to connect your finances, sales, service, supply chain and operations in one piece of software instead of juggling multiple programs.
Additionally, and something that is often overlooked by distributors, is choosing ERP software with light manufacturing capabilities if you need to support kitting and assembly processes. The software should allow kitting through a selection process or as a manufacturing process where associated labor costs are also collected for accurate costing models. Typically, this is done through the establishment of a defined bill of materials. Make sure your software supports assembly processes outside of your organization when outsourcing to a third party. Other factors to consider include multi-level bill of materials, support for substitutions within a kit, multi-step routings, and tracking associated costs.
Here are some important features to look for:
- Flexible BOMs: that can be changed to meet customer needs
- Inventory Management: tracking of kits as part of your inventory or build the kits at order time with full support for item setup and tracking
- Item Visibility: configuration and printing options to choose when kit components should be shown on sales orders, pick tickets, packing slips, and invoices
- Accurate pricing and reporting: ensure latest prices are included in the kit with automatic roll up of all components
Final Thoughts
Distribution is a fundamental part of the supply chain process. Because distributors hold inventory for varying lengths of time and finance costs impact profits, it is important to understand the different nuances of the business. My best advice is to work with a consultant and an experienced implementation partner to help you explore the questions, challenges and best practices you might not have thought about. Have questions? Feel free to contact Western Computer.
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