For Distributors, Better Inventory Visibility Leads to Better Profitability

In today’s complex supply chain and logistics world, distributor inventory visibility means much more than just tracking and tracing shipments. Your visibility efforts must start at planning and include all end-to-end execution steps.

One of the key ideas from this report by the Aberdeen group is implementing orchestration of your supply chain to address increasing complexity and decrease costs with your partners, channels and carriers. You can reduce your total inventory on hand (and carrying costs) with better information about your inventory events. Another key area, which impacts your bottom line, is the ‘Cost to Serve’ for each of your customers or channels.

How can you gain the insight you need into these areas to begin improving profit margins?

Look at your business processes and determine how to drive down excess inventory and order processing costs. This analysis must look at both warehouse and in transit inventory. Also, review how you proactively respond to both inbound and outbound supply chain events.

Here are four performance metrics to develop which will be key in starting your inventory visibility process improvement initiative:

Perfect Inbound Orders – what percent of the time are the orders you receive from your manufacturers and suppliers complete and on time? Do you measure or track this today? Take a look at how you can increase this percentage and you will be saving your distribution business the cost of delays, rework and extra communications. Leaders in supply chain visibility have a higher percentage of perfect orders.

Perfect Outbound Orders – This is the other side of the order equation. What is your percentage of perfect orders delivered to customers filled completely and delivered on time? Improve this percentage and you’ll be adding to your bottom line.

Decrease in Total Landed Cost – per unit shipped, reviewed by items, customers and channels. Of course, finding ways to decrease your costs will increase your profits. In areas where you’ve decreased your total landed costs, increase your marketing of these items to add further to increased revenues.

Out of Stock Frequency – this is measured as a percent of out of stock inventory to the average on hand inventory versus the same period in the previous year. Are their ways to change your stocking policies or levels to decrease your out of stocks?

Your Enterprise Resource Planning (ERP) system contains the key data needed to develop and analyze these metrics. Does your ERP and it’s reporting tools support your requirements to improve your inventory visibility and profit margins? If not, or if you would like help with your analysis project – please contact Socius and their Distribution 20/20 team at 800-589-6614.

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