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by Forrest Burnson,
Market Research Associate
Last Updated: September 27, 2016


Industrial distributors deal with a diverse set of industrial products, ranging from valve fittings and piping to pumps and motors. This diversity creates order management, inventory tracking and transportation management challenges that must be tightly controlled to remain competitive. The right industrial distribution system will include strong inventory management and warehouse management capabilities to keep a distributor up to date on how much of each product is in stock and where the item is located in the warehouse. The system will also include e-commerce, order management and invoicing features that allow distributors to handle sales orders, and procurement/vendor management features for purchase orders.

Here's what we'll cover:

What Is Industrial Distribution Software?
Common Features of Industrial Distribution Software
Evaluating Industrial Distribution Software

What Is Industrial Distribution Software?

Perhaps the most important thing to note about industrial distribution software is that this is not the name of a single software category, but rather a diverse group of software types used in different operational contexts by industrial distributors. These software types fall into the broad territory of supply chain management/ERP, including:

(Click on links for overviews and example products)

Inventory management

Order management

Warehouse management

Transportation management

Procurement

Accounting/financial management

Customer relationship management

Together, these applications can handle nearly all of the back-office needs of an industrial distributor. That said, not all distributors will need every one of these applications. Those that do have two options:

  1. Buy applications on a standalone basis, and integrate as needed
  2. Buy a distribution ERP suite in which applications are already integrated out-of-the-box.

Distributors have specialized needs, and occasionally even a distribution ERP won’t offer all the features you need. If this is the case, consider investing in an ERP system along with one or two standalone systems (say, for warehouse management) and then integrating your standalone solutions with your ERP.

The following vendors offer distribution ERP systems:

NetSuite

Blue Link

SYSPRO

Epicor

Not all ERP systems are right for distributors. Many are intended for manufacturers and/or retailers, and these systems will be overkill (not to mention too expensive) for many distribution contexts. Distribution ERPs are more lightweight and offer flexible capabilities in the areas distributors need, which we’ll look at now.

Common Features of Industrial Distribution Software

We’ve seen that industrial distribution software is a rather loosely defined category, including most of the applications generally grouped under the heading of supply chain management software.

With that being said, there are three areas of supply chain management where “one-size-fits-all” solutions tend to fall short for distributors:

  1. Order management
  2. Inventory tracking
  3. Warehouse management

Distributors need to place purchase orders and receive sales orders, so the solution needs strong order management functionality.

Additionally, the order management system should integrate with the warehouse management system in order to bill for value-added services performed in the warehouse/distribution center, such as kitting, repackaging and light assembly. The warehouse management system itself also needs to be able to track these activities.

Indeed, distributors and logistics companies tend to describe the WMS module as the “weak link” in their ERP solutions. Finding a standalone WMS that fits with your portfolio of services as well as your inventory tracking requirements is the best workaround for this problem, as standalone WMS systems still outstrip modules in ERP systems in the range of functionality they offer.

Moreover, the top industrial distribution systems include the following industry-specific capabilities:

Nested lot codes/serial numbers Since many industrial distributors get involved in value-added services, such as light manufacturing, assembly, rentals and kitting, industrial distribution software allows for the tracking of nested lot numbers and serial numbers when component parts are combined in a kit or package.
Industrial product item codes Since industrial products can vary tremendously, the software supports pricing and tracking of a broad range of products. Examples include building materials, adhesives, heavy equipment, electrical supplies, plumbing/HVAC, janitorial/sanitation and medical. Generally, multiple product codes can be associated with a single product.
Bill of materials A bill of materials (BOM) is a list of the materials used in a product, including parts used in its sub-assemblies, sub-components etc. BOMs can have multiple levels, so they present specific costing and inventory tracking challenges for distributors.
Point-of-sale system Many industrial wholesalers take walk-up orders from contractors filling an order on their way to a job site. In this instance, your industrial distribution solution will need retail capabilities such as an integrated point of sale system as well as wholesale capabilities.
Vendor managed inventory/consignment inventory If you’re monitoring your customers’ inventory levels as a service, or if you’re selling stock on consignment, you’ll need special inventory tracking and order management features.

Additionally, as part of a complete enterprise resource planning (ERP) system most programs will include accounting and business intelligence tools. Some also include customer relationship management features and HR functionality such as payroll.

Evaluating Industrial Distribution Software

The specific type of industrial products sold, sources of revenue and additional services will all play a major part in the evaluation of an industrial distribution software product. A company specializing in medical devices will want a system that supports that industry, while a company that serves multiple industries with service offerings and walk-in orders will need something much more all-encompassing and robust.

When selecting industrial distribution software, buyers should consider the following:

  • Do you require client/server deployment, also known as on-premise deployment, or are you looking for a Web-based, or cloud, solution?
  •  
  • How many warehouses do you operate? Will you need to implement the software in more than one location?
  •  
  • Do you need fron-counter capabilities to serve walk-in contractors filling orders on their way to the job site?
  •  
  • Do you offer value-added services such as light manufacturing or kitting? If so, can the software support a bill of materials?
  •  
  • Do you use QuickBooks, and if so, do you plan on keeping it? There are a number of inventory management solutions that integrate out-of-the-box with QuickBooks, so make sure to evaluate vendors like Fishbowl that have made a name for themselves with easy integrations.
  •  
  • Is part of your business e-commerce? If so, your order management system will need to integrate with your online shopping baskets.

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Ten Steps Guide to Selecting Distribution ERP Software

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