The Right Choice Makes All the Difference

Distribution Software Selection Tips

The following are some of the key differentiators and functionality that distribution companies should look for in a distribution software solution.

  • Customer and Vendor Portals. Distribution software utilizes Internet technology to communicate with both customers and suppliers. Customer, vendor, and employee portals have become widely accepted as a means to enable interaction with the distribution system. A portal is a special Web page that is the main entry point or that allows a customer or vendor to access specific types of information that is secured by password protection.
  • Accounts Receivable. Accounts Receivable for distribution companies are complex due to the many discounts, shipping charges, goods returned, warranty replacements, backorders, short orders, trade promotions, and advertising allowances that impact the net amount that should be collected on an invoice. National Accounts functionality enables distributors to ship products to multiple branches and locations of a customer while presenting a single consolidated bill to the parent company.
  • Inventory. Because movement of inventory is critical to the profitability of distribution companies, the ability to manage the cost of inventory is a very important function of distribution software. Distribution software calculates landed cost to track the complete cost of inventory including shipping charges, tariffs, rent, utilities, insurance, taxes, employee costs and the cost of capital.
  • Units of Measure. The distribution industry has sophisticated requirements for units of measure and unit conversion abilities because goods are often bought in units such as ton, pallet, or case, and are then sold in smaller units such as pounds, pints, or eaches. Managing weight, dimensions or volume of outbound products for shipping purposes is another distribution requirement. Distribution software often has the ability to calculate the number of containers or pallets of a particular dimension for loading purposes.
  • Lot and Serial Number Traceability. Distribution software has the ability to trace a lot number forward to every customer who bought from a particular lot. It also tracks the serial number from the manufacturer to the customer, through a warranty return or replacement. Distribution modules that maintain lot and serial number tracking include receiving, quality inspection, warehouse management, and order entry.
  • Electronic Data Interchange. While electronic data interchange (EDI) standards have been around for a long time, they show no sign of disappearing in the near future, particularly if you are selling to the Big Box retailers. The biggest drawback with EDI is that it requires a formal arrangement and custom links to transmit data between companies. Once set up, data exchanged between EDI partners goes straight into the distribution application, a powerful advantage over competitors who must re-key data.
  • E-commerce. E-commerce enables transactions using the Internet. For distributors, a standard protocol allows XML-enabled distribution systems to exchange information such as orders, order confirmations, and advance shipping notices over the Internet without having to set up EDI transmission protocols.
  • Catalog Management. There are two phases to catalog management. The first is creation and management of the catalog itself. Distribution software links the warehouse management system that maintains SKUs and product descriptions to the application that creates the catalog. The second phase is the order entry system. A customer will reference the catalog they are buying from, and the software pulls the prices and promotions from that particular catalog and presents it to the order entry personnel.
  • Mail Order Management. Mail order management separates standard customers from mail order customers, and provides the customer segmentation information needed to do targeted campaigns. Most companies send catalogs to existing customers and a purchased list at the same time. A strategy to manage and maintain combined and separate lists is crucial.
  • Pricing. Distribution software supports multiple pricing models because every company is unique in the way it prices its products. Five common price models are used and each requires unique software functionality – Quoted Price, Printed Catalog/Web Store; Price Book/Discount; Configured Price; Contract Price. The key to pricing management is flexibility in the way formulas are calculated and managed.
  • Configurators. Configuration is the ability to adjust a product or an order to a customer’s specifications. Software configurators are usually very difficult to implement because it takes a lot of time and effort to translate all the rules of a product into a formula that the configurator can understand. However, once the configurator is set up, it gives sales and production personnel a powerful tool. Distribution software that includes a sales order configurator allows less knowledgeable order entry personnel to take orders that only senior sales people were able to do before. These employees are also enabled to do more upselling because options are presented on the order taker’s screen.
  • Sales Analysis. Distribution software provides visibility to all the data collected or associated with a customer in the course of its history with a company. Standard reports in sales analysis tools present data such as customer information by salesperson, territory, region, frequency, volume, product line, and transaction size.
  • Purchasing Vendor Metrics. Vendor metrics track statistics about the vendor such as orders, cost, on-time delivery, damaged goods, correct quantities, and performance. Distribution software maintains these statistics on an ongoing basis, but, more importantly, it gives the purchasing agent visibility of the pertinent vendor metrics at the time of placing the order, which is a very powerful supplier management tool.
  • Electronic Approvals and Routing. Leading distribution software packages have excelled in the area of workflow and electronic approvals. This allows selected items to be approved by different managers before they are ordered. Workflow functionality routes a purchase requisition electronically to the inbox of the approver who attaches an electronic signature to the proposed order before it is converted to a purchase order.
  • Replenishment. Replenishment involves the ability to manage inventory and supplies in an organization, assuring that goods are available when needed. Distribution software supports all of the standard methods of calculating inventory replenishment including min/max, reorder points, economic order quantity calculations, and others. The software will also automatically suggest purchase orders based on the replenishment parameters established in the system.
  • Inbound Logistics. Inbound Logistics is often referred to as “on-the-water” tracking and is gaining more importance now that companies have established global supply chains. Distribution software offers the ability to track information such as the date the goods left port, when they are expected to arrive, the container number, and shipment number so that any reported deviations from the plan can be managed. Much of this information can be automatically transmitted to the distribution electronically, providing real-time tracking of the inventory. This enables Available to Promise (ATP) and Capable to Promise (CTP) functionality.
  • Barcode/Radio Frequency. Barcode functionality is fairly standardized through the use of standard barcode interfaces. Radio frequency (RF) has become standardized for distribution warehouses. RF offers the ability for wireless handheld devices to track inventory location, and provide pick, pack, and ship instructions to workers in the warehouse, allowing management of inventory on a real-time basis.
  • Multi-Location Warehouses. Distribution software is very strong in the ability to handle multi-location inventory tracking. This functionality includes consolidated views of products across warehouses. It provides the ability to sell items from any warehouse, ship to and from any warehouse, and handle transfers between warehouses. Distribution software offers the ability to separate overflow storage stock, pull stock, yard stock, production stock, and any other stock locations needed, so you can see a consolidated view of all items.
  • Picking. Key considerations of picking capability include the number of picks in a day, the number of items in a pick, and the urgency of product delivery. Distribution software offers picking functionality, which makes warehouse personnel much more efficient. Some of this capability includes pick routing (the route the picker should take in the warehouse), parallel picks (picking multiple orders at the same time), alternative bins (alternative bins to pick from if the pick bin is out of stock), kit picking (additional items that should be included in a kit), and printing options (combinations of pick tickets, packing slips and bills of lading that are printed together).
  • Packing and Shipping. Some distribution software offers a shipping module, but a common approach is to have a relationship with a third-party shipping package for which they have written a standard interface. The benefit of packing and shipping software is that you have visibility of the whole distribution process. This means that an employee handling an order will be able to see when the shipment went out, what shipper was used, the tracking number, and the shipping cost. The value of cost per shipment information is especially useful to those companies that charge shipping costs or want to accumulate actual shipping costs by customer. Distribution software can also manage the loading process used by companies who load trailers or containers.
  • Returned Materials Authorization (RMA). RMAs are generated to track returned goods that were sold to customers through the return, repair, or warranty replacement process. It is issued and attached to a line item on the original order of a customer. Establishing a link between the return, order, and customer enables return analysis to be done at the customer level. RMA modules also handle advance replacements and provide tools to track the returned item, so the customer is properly credited or charged if the item is not received.
  • Manufacturing for Distributors. Most distribution companies need to manage value-added operations. For this reason it is common to find some level of manufacturing functionality in a distribution package. This may include Kitting, Bills of Materials, light MRP and Capacity Planning.

For answers to specific questions regarding your software evaluation project, feel free to email or call us at (425) 216-4030.

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