Why Distributors Need Software for Supply Chain Management
As a result of the global Coronavirus pandemic, the global supply chain has broken down, particularly with respect to goods imported from Asia. This article explores several ways in which the right software for supply chain management can help distributors address some of these challenges.
Supply Chain Disruption
Even before the recent pandemic, supply chains were under stress as more and more manufacturing moved to China and this was exacerbated by continuing trade disputes. However, now with the Coronavirus pandemic still affecting countries around the world, and many economies still in various states of lockdown, supply chains have been severely disrupted. Tighter screening and import controls are stretching out wait times, and long-haul trucking and rail and local delivery shortages are creating chaos. All predictions are that this pandemic will not be just a short-term crisis but will have real and long-lasting implications. As businesses adapt to the new normal and economies reopen, distributors will have to rethink, reshape, and improve their supply chains. To accomplish this, they will have to rely on technology and implement software for supply chain management.
Role of Distributors in the Supply Chain
Distributors have always played a crucial role in the supply chain providing benefits to both end customers and suppliers. Distributors have close relationships with customers and provide the quick turnaround that customers typically cannot get from manufacturers. Distributors allow customers to place smaller more frequent orders and implement just-in-time purchasing strategies. For manufacturers, distributors’ knowledge of their local markets and relationships with customers is extremely valuable, particularly as manufacturing has globalized. The current pandemic-induced supply chain melt-down has served only to emphasize the need for distributors to intermediate between suppliers and customers. To successfully perform this role, distributors need software for supply chain management that provides a comprehensive view of the end-to-end flow of goods through the supply chain.
Challenges Distributors Face
Distributors have been affected by the ongoing consolidation of customers and manufacturers. Manufacturing consolidation, driven by the need to access economies of scale to remain competitive, is a continuing trend. This trend has been further exacerbated as much of the world’s manufacturing has been outsourced to China. As manufacturing has moved to China, distributors have had to learn to deal with the logistics challenges of global trade, tracking containers and shipping vessels, dealing with port clearances and tariffs, dealing with long-haul trucking and rail, and then local delivery. This has lengthened their supply chain and lead times and introduced elements of risk and uncertainty. The recent Coronavirus pandemic has created severe backlogs and delays with no quick end in sight. As a result, distributors are now also seeing unprecedented price fluctuations reflecting huge increases in fuel, shipping costs, raw materials, labor, and on and on.
What Can Distributors Do Given Today’s Challenges?
Distributors waiting for goods that have been stuck for 6 months on a container vessel waiting to dock and unload, cannot do much to unlock those goods. However, distributors can and should take steps to ensure that going forward they have redundancy and resiliency in their supply chains. What we have seen with the Coronavirus pandemic is unlikely to be an isolated, one-time-only, event. Instead, most experts are saying that distributors will have to expect and plan for ongoing supply chain challenges similar, if not as drastic, to those we are currently experiencing.
Distributors that have the capabilities to control and manage in the face of supply chain shocks will have a meaningful competitive advantage relative to others that will go out of business. Software for supply chain management can help with real-time order management, end-to-end inventory visibility in and out, optimizing fulfillment to deliver on time at the best shipping cost, and tracking purchasing by PO, by container by vessel. Distributors need to ensure that their software for supply chain management gives them the ability to:
- Plan Demand Better. Full visibility into sales to all customers and business intelligence analytics can help distributors really understand their demand. With supply chain bottlenecks, knowing what you really need and when is a prerequisite for survival.
- Improve Customer Service. A distributor’s ability to provide outstanding customer service has always been a critical determinant of success. The stakes on this have been raised significantly for customers that have been put under intense pressure by the pandemic and lockdowns. Software that provides full visibility into orders and fulfillment is essential to providing great customer service.
- Build Customer Partnerships. Distributors that successfully support their customers through this severe supply chain disruption have an opportunity to build deep trust. Having the software and data to really understand their customers’ needs allows distributors to prioritize those customer relationships for which continuity and trust of supply through an unprecedented crisis, will create long-term, lasting, customer partnerships.
- Better Order Management. The pandemic lockdowns and social distancing requirements have altered the ways customers place orders. Distributors need to give customers the ability to place orders with salespersons, over the phone, through a self-service portal, on an online store, or through EDI. Regardless of how these orders are entered, distributors need to be able to see and manage all of these orders easily in one place.
- Full Warehouse Management. For customers facing financial challenges from lockdowns, distributors need to take costs out of warehouse operations. Implementing a full wireless WMS can cut down on warehouse personnel, cut costs and reduce errors.
- Prioritize Goods with Solid Demand. In times of extreme price fluctuations and shortages, prioritize those products that won’t see substitution and/or demand declines as supplies tighten and prices increase.
- Develop Multiple Supplier Options. As manufacturing globalizes, identifying new sources for products is critical. Distributors need to multisource and seek multiple quotes for all purchases. Software for supply chain management that manages multiple suppliers for products, allows seeking multiple RFQs, and maintains all these prices and terms is really important. This capability will create options for distributors in periods of supply chain stress.
- Full Landed Costs Capabilities. Purchasing globally requires distributors to be able to track all POs by container by vessel, manage and update lead times and be able to correctly manage and capture all the Landed Costs involved. The prices of shipping containers and freight costs have skyrocketed, and distributors need to be able to capture actual current costs, not estimates based on history.
Distributors are experiencing real challenges with today’s Coronavirus-induced supply chain meltdown. There are steps distributors can take to put in place the right software for supply chain management to protect against future supply chain shocks. Contact us to see what Accolent ERP Cloud-based software can do for your distribution business.