You manage operations for a distributor company, and you want to help operate more efficiently. But you’re not sure just how bad the situation is. Maybe it’s better than you think? You’re also not sure of the data you need to evaluate the situation.
That’s where scorecards generated from a business intelligence platform come in handy. Velosio recommends distributors set up scorecard dashboards to evaluate the performance of six key areas across their business:
- A procurement scorecard primarily includes KPIs such as the % on-time deliveries, the % of over- and under-delivered shipments, the non-conformance/return rate of vendors, and the average delivery time.
- The vendor scorecard focuses on the profitability of the products you receive from each vendor. KPIs include margin percentage, invoicing accuracy, total revenue, and the revenue percentage of each vendor compared to all your vendors.
- Warehouse scorecards help determine how accurate and efficient you are at receiving, putting away, picking, and shipping products. How quickly does your warehouse team complete each phase? Do they track products accurately as they make their way through your warehouse process?
- The inventory scorecard publishes KPIs such as item aging, carrying costs, back-order rates, available quantity to promise, shrinkage, and profitability by item.
- Fulfillment is essentially the inverse of your vendor scorecard—you are now the vendor to your customers and looking at the KPIs from the opposite perspective—How good are you at delivering products to your customers? Key metrics include the % on-time deliveries, lead time by item, and freight estimates vs actual costs.
- On the customer scorecard, you look at the profitability of each customer overall and by each item they purchase, including the margin percentage. You can also look at the total revenue per customer and the percentage of your overall revenue that each customer generates.
Whether or not data is readily available to you to generate these scorecards will depend on the maturity of your business intelligence capabilities. The scorecards don’t come “out of the box” within ERP systems—you need to integrate with a centralized analytics solution that can generate real-time KPIs.
Reduce Carrying Costs Without Compromising Fulfillment
Trying to produce scorecards by pulling information from multiple sources into spreadsheets and running macros usually takes too long; it’s too late to act on the information. Often, this approach is undertaken by one person who has the “secret sauce” to make their spreadsheets work somewhat effectively. But others can’t easily access the information, and if that person leaves the company, all those valuable insights go with them.
But with a centralized business intelligence solution—that automatically pulls information from your various databases—you can create easy access for everyone and greatly improve the efficiency of your internal operations. For example, by drilling down into the details behind the warehouse and inventory scorecards, you can see which individuals are more efficient at picking, packing, and cycle counting. You can also identify underperforming resources, which may lead to training or a reassignment of duties.
Analytics also help you optimize your picking routes and procedures as well as your packaging processes so you can get as close as possible to just-in-time fulfillment and avoid holding inventory for long periods of time. Ultimately, you increase efficiency and reduce carrying costs without compromising your ability to fulfill on time.
Build Stronger Vendor and Customer Relationships
In addition to helping you run your operations more efficiently, the six KPI scorecards will help you build stronger relationships with your vendors and your customers. You can identify the 20% in each group that typically accounts for 80% of your business.
From there, you can analyze the profitability of each vendor and customer in the 20% groups and take measures to mitigate any relationships that are not delivering sufficient profitability. This is particularly helpful if you have one or two vendors or customers that you must keep doing business with because they represent a large portion of your business. If these relationships are not profitable, being aware of what’s going on and keeping an eye on your margins facilitates looking for opportunities to improve the situation.
Key Analytics Solution Attributes
As you search for a business intelligence solution to help you generate the six KPI dashboards and other insights your distribution business requires, be sure to utilize a cloud platform. Compared to an on-premises enterprise data warehouse, the cloud reduces IT costs and makes it easier to deploy and update services. The cloud is also more accessible to your staff, whether they are working from another location or at home.
The leading cloud platforms provide analytics services that bring together data integration, enterprise data warehouses and data lakes, big data analytics, and artificial intelligence. They also give you the freedom to query data using either serverless or dedicated compute resources. Your solution should also be flexible to ingest data from multiple systems. These include your ERP, CRM, warehouse, e-commerce, human resources, and any other databases you draw data from.
For creating the dashboards and reports that produce the KPIs, you may be able to do this on your own. But a partner like Velosio can also show you how to build these assets so you can eventually become self-sufficient.
And by using a tool like Microsoft Power BI to extract, transform and load data from multiple sources into cubes that are consumable as KPIs, you can connect with any enterprise database from Microsoft and third-party applications. Even better, you don’t need to be a developer to build reports and dashboards— Power BI is an evolution of Power Pivot in Excel. So if you have non-technical folks good at Power Pivot, you can typically get them trained on Power BI, which is more advanced and easier to use.
For more information on Power BI or to get help in building scorecards that provide the business intelligence your distribution business needs, contact Velosio today.