Inventory is the lifeblood of the wholesale distribution business. Paradoxically, less is more. Inventory reduction is now considered a leading core competence for distributors, and a powerful wholesale distribution ERP suite has emerged as the key to achieving a lean inventory profile. All this seems a little counter intuitive to the human brain. It only seems natural that distributors would gravitate towards a robust inventory, not wanting to be caught short. Fortunately, advanced software systems head in the opposite direction; distributors need to learn to trust the system.

ERP System

Inventory Reduction as a Wholesale Distribution Core Competence

Distributors must think strategically about reducing their inventory for greater overall business efficiency. The best way to optimize inventory is through a fully integrated wholesale distribution ERP system that empowers distributors to micromanage their inventory for a leaner, meaner, more profitable warehouse.

When business is brisk, a distributor’s instinct is to stockpile inventory to protect against future shortages. Ah, the risks of optimism! It’s much less intuitive to instead envision downward fluctuations in demand, resulting in idle inventory, locked up capital and inefficient warehouse management. Yet it happens. Products reach the end of their lifecycle and customers stop ordering. Competitors innovate and demand shifts from one line to another. Excess inventory, on the books at one cost becomes a huge headache when it needs to be liquidated at cents on the dollar. ERP systems provide the forecasting brainpower to synchronize supply with demand and let inventory transform itself from a push model (stock to sell) to a pull model (procure to ship.)

Utopia in distribution can be described as knowing precisely the products and quantities to have in stock at any point in time. With this insight, distributors could make 100% accurate forecasts and stocking decisions, freeing up cash, warehouse real estate and improving operational efficiency. Of course, that’s exactly what an effective ERP system delivers. ERP functionality auto analyzes historic and current data such as customer orders, current inventory, demand at the product level and seasonal trends to create an intelligent forecast based on actual demand. The system will automatically trigger order placement when items drop to predetermined inventory levels, but not before.  Supplier collaboration enables your partners to anticipate order requirements and be prepared to replenish on a Just in Time basis.

In times like these—and no one expects the good old days, if they ever existed, to return anytime soon, it is more natural than ever to seek ways to reduce inventory. The key is knowing where and how to reduce. And there’s no better way than with the right wholesale distribution ERP system.

Written by :

Don Cooper