The distribution industry is the second largest percentage of companies looking to install ERP with representation at 18%, according to SelectHub, a market research company. Since the distribution industry is highly competitive, it is vital that these companies find a way to distribute high quality goods in a cost-effective manner. In order to do this, distribution companies rely heavily on KPIs or Key Performance Indicators. Below are some KPIs distribution companies should be looking for after an ERP implementation.
A Key Performance Indicator (KPI) is a way to measure the achievement of a key business objective. A Distribution KPI or metric is a measure that a company in the distribution sector uses to monitor performance and efficiency, defined by InsightSoftware. These measurements help organizations identify areas of operational success and failure by measuring certain measurable aspects of their company. Such metrics can include inventory management, fleet management, shipping, order picking and financials.
Fill rate is a crucial distribution and supply chain KPI you can use to monitor the order fill and line fill rates. Sales order fill rates are displayed as a percentage of packages successfully shipped on the first try. This fill rate can be tracked within an ERP system to make sure your items are being shipped and delivered correctly.
The most important measurement for tracking the effectiveness of distribution and supply chain is on-time delivery. This is one part of the “Perfect Order” KPI and it can help determine customer satisfaction. For example, if you have a low percentage of on-time orders, that means you need to look at your shipping times and make adjustments. Luckily, having an ERP software allows for this tracking to be made easy by seeing the percentages on screen and making changes to your business processes if needed.
VPM is the monitoring and analyzing of the reliability, quality and performance of a company’s vendors. It allows your organization to enhance your efficiency and products, reduce stock levels and inventory costs between vendor and buyer. Although easily termed, VPM is difficult to sustain. With an ERP system, you can observe these metrics and consistently confirm your efficiency, products, stock levels and inventory costs are maintained.
Inventory turnover rate is the number of times a company sells and replaces its stock in a period, usually over one-years’ time. You can use this inventory turnover rate as an indicator if your business has too much inventory compared versus how much is selling. An ERP system can easily track this measurement to keep you updated on your inventory.
Quantifying your products shows to what extent the sum invested produces the desired result. Using an ERP solution can measure this by customer, product, supplier or company. Not having this information, the management cannot tell if the organization is on target and is not able to change margins or properly negotiate favorable agreements.
Distributors are aware of the need for their product to be shipped in perfect shape. The returns rate is an indicator you must pay close attention to so you can easily identify causes like, inadequate cargo, faulty or injured goods during transport. Distribution ERP systems have the ability to see return rate and also reason for return.
The top five highlighted above are just a few KPIs that distribution companies should be tracking. Depending on what your company defines as their specific KPIs, only one or two may apply. One thing is for sure; after an ERP implementation, it is vital to compare your past business processes to current. With clearly defined KPIs for post-implementation, you should be to see if they are achieving the company goals.
Interested in distribution ERP software? We are here to help! Contact us at 856-335-1010 or email at info@4acc.com for more information.
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