Matching the food distribution business challenge to the right software
The food distribution industry is unique. It’s not like distributing any old widget. Yes, you have the same challenges of maintaining the stock your clients want, lowering supply and transportation costs, and running an efficient business. But, food distribution is also a highly regulated industry. Especially for distributors of perishable goods, USDA regulations add a significant layer of complexity to contend with. Ultimately, though, whether you are a beverage, produce, meats, or non-perishables wholesaler, the unique needs of food distribution effectively raise the ante on the data management challenge.
In order to stay competitive in a crowded market, food distributors generally require a comprehensive ERP program to help lessen the costs associated with food distribution’s operational and accounting challenges. Alternatively, some companies will leverage a capable accounting package, augmented with industry-specific modules. Whichever route you select, a well-integrated system supplying accurate real-time info is key. Whether you are making sure you have the stock on-hand which you are promising to a customer or adding a new product line from a supplier, access to accurate up-to-date information is a must.
There are a handful of key components included in a software system for food distributors:
- Core financials (AP, AR, GL),
- Inventory control,
- Order entry,
- Supply chain management, and
Additionally, more advanced systems will include functionality for:
- EDI communication,
- Delivery routing,
- Fleet management,
- Warehouse management,
- And more.
Managing the supply chain
Getting your product from the supplier, processed and then to the customer can be complex. To help simplify this complexity, distributors are utilizing supply chain management (SCM) software.
Supply chain management has a number of very important benefits:
- Eliminate delays that lead to decreased customer satisfaction
- Identify the vendors providing the most attractive rates
- Maintain just-in-time inventory and save on warehousing costs
- Avoid Shortages and back-orders that lead to lost business
- Optimize warehousing requiring less space or fewer facilities
- Provide real-time updates to customers on order provisioning status
- Utilize historical data to feed future projections and forecasting
- Decrease turnaround time
Most food distributors have a quick turnaround time from the time an order is received to the time it is shipped to the customer. Anticipating demand is especially important when mistakes in demand prediction can nullify the value you can recoup from perishable products. A solid SCM program will help you identify what came in first, how long it has been on the shelf and when it needs to be sold by.
Supply chain software systems feature a number of modules including purchasing, vendor management, demand planning, sales forecasting, receiving, warehouse management and shipping & delivery optimization to help provide a comprehensive management system for the challenge of getting your goods from the supplier to the customer at the lowest cost.
Financial management in the food distribution enterprise
In the food distribution arena, product changes hands quickly. You may order product on Monday, receive it on Tuesday, and ship to your customer Tuesday afternoon.
An integrated solution between your supply chain modules and your accounting modules will help you easily coordinate these transactions. Efficiently and accurately tracking revenues and expenses, assets and liabilities allows for a clear, real-time financial picture.
Modules incorporated into a distribution-oriented financial management system include general ledger, accounts payable, accounts receivable, reporting and budgeting.
Maintain and strengthen relationships with customers and manage new account opportunities
Rarely is strong customer relationship management (CRM) software more important than in the distribution industry. In any kind of distribution environment the majority of your sales are composed by a core customer group. CRM functionality provides you with a tool to position yourself as the company to meet your customers’ needs.
CRM software also can help you acquire new customers. Features which allow you to database and market to prospects based on company size, years in business, key contacts at the company, and product-focus allow you to more effectively target your value proposition to your prospects’ needs.
Turning a new customer into a loyal customer is a much easier process with the right software. Tracking order histories and flowing the information to the sales department can help promote major gains in customer retention.
Managing inventory for regulatory compliance
When buying and selling product, your company reputation is on the line. The stakes are higher when spoilage and recalls loom as potential threats. In fact, very often your inventory traceability requirements will be informed not only by the dictates of running a profitable business, but also by regulatory mandates.
Segmenting your product inventory lots with lot number tracking is a basic, but very important safeguard. The ability to isolate down to batches or lots is a great start for ensuring you can identify effected product, if necessary, but it is just the start. For instance, depending on your product set, you may have a much larger inventory management challenge. Any distributor needs to associate quantity, supplier, product descriptions, and cost with a given inventory item. You may need additional flexibility to add custom inventory fields. Perhaps, you need to not only track the farm at which a food product originated, but also the chemicals used in the grow, when it was harvested, and where it was shipped. Depending on your particular food line, you may have very different custom inventory tracking requirements.
A requirement for traceability is not the only challenge requiring strong inventory control in the food distribution arena. Volume discounts, customer specific pricing levels, and promotional pricing campaigns are very common needs. Carefully inspecting capabilities for supporting multiple price-lists and flexible price calculation is therefore an important part of the inventory control/order entry evaluation. Determining the level of automation required in achieving your inventory counts is another important decision. An RFID system will require the least manual labor, as items are scanned automatically within proximity of a reader. A bar-coding system is less expensive than RFID upfront, but requires an investment ongoing in labor costs to continually scan items into stock. If you are wholesaling a smaller amount of high value items, rather than dealing with large quantities, tracking manually with part numbers may even be an option.
Finding the right program is an important step, but it must also be deployed properly to ensure you receive the value in which you’ve invested. There are several ways food distribution software can be deployed. First, it is important to understand your needs. Do you need just specific modules or are you looking for an all inclusive ERP system? If you just need specific modules, such as inventory tracking, does that module need to integrate directly with your other systems or remain completely stand alone? You may have a sufficient financial management system and just need to add on inventory and CRM functionality.
Also consider your customization needs. If you are looking to integrate with your current systems, there may be a fair amount of custom integration that needs to be done to create the link between your current systems and the new modules.
Finally, is it better to buy the software outright or rent it with a software as a service (SaaS) approach? If you are buying it outright, consider whether you want it installed on your own servers at your location or if you prefer to have it hosted off site and have a third party vendor manage the server systems. These decisions can make a difference in the speed of transactions and accessibility by your users.
Connecting with qualified providers of relevant software is a key step in your software review process. It will help you work more confidently through the many different aspects of making the right financial decision for your business with regards to your software purchase. If you’re ready to uncover your top food distribution software options, we’re ready to help with our free software search service.