Every distributor should be consolidating their supply chain data flows into a select few KPIs (Key Performance Indicators) that are easier for tracking and deliver the most insight on ROI. While the digital transformation of wholesale distribution grants unprecedented access to information, you could spend lifetimes trying to comb through every individual metric without capturing something to act on. To ensure the best value return on your inventory, you must streamline your analytics with modern distribution management software hosted in the cloud.
A state-of-the-art SaaS (Software-as-a-Service) ERP – like Acumatica – will allow you to automate both metric capture and your decision-making by providing all of your relevant KPIs in a single, customized dashboard. This data is populated on-demand and in real-time based on your chosen fields, letting you build your reporting around your unique processes and not the other way around. Armed with a modern enterprise system and your top, most impactful performance indicators, you will be able to adapt your distribution operations with the latest demands in the market while still capturing the best ROI.
Here are the top KPIs for distributors and how to best capture them with cloud ERP:
Distributor Financial KPIs
Financial and accounting data will be your first go-to point for KPIs as a distributor, since so much of what you do hinges on budget and profitability. However, it is also the easiest area for your employees and managers to become overwhelmed by the data since it ties into everything else, especially if you have outgrown your accounting software. This can obfuscate deeper-level operations performance indicators when metrics are mixed up, so you need to identify and segment the key points accordingly so that the information flows upstream clearly.
Core Distribution Accounting
This might seem like a basic step that needs no mention, but tracking your core accounting and budgeting processes accurately is the critical foundation for all other distribution KPIs. Without a solid system for keeping your finances in check, you could lose vital data points and capture an incomplete picture of your margins. It goes without saying that this will affect every other decision you make, so an informative – yet simplified – view of these items is paramount.
Return on Investment for Inventory
Once you have your accounting analytics firmly established, you can better work towards capturing a truly accurate vision of your profitability. Comparing the cost of inventory against sales revenue for each item through an automated software solution lets you quickly categorize product by net value and map the factors that shaped this figure. Armed with this data on demand, you will be able to narrow down your stock to what actually generates ROI and improve your margins.
High Impact KPI you should be tracking:
- Profitability by Item
Ecommerce VS Brick and Mortar Sales
Ecommerce accounted for a growing percentage of the distribution and retail markets before the pandemic, but COVID-19 social distancing made it a priority. Every distributor should be measuring the impact digital commerce had on their business before coronavirus, but at the very least, you must be able to determine its impact since. Even as the country opens up (and if it does remain so), online portals are going to remain a preference for many consumers, potentially changing the way you, your customers and your suppliers do business.
What You Need for Tracking Financial and ROI KPIs
To accurately track your financial KPIs, you need a robust accounting solution built for backend distribution processes, preferably an ERP. A smaller desktop bookkeeping software system will lack the scalability you need to effectively handle the volume of data you will need to compute for the level of visibility required. Additionally, an enterprise system will provide a better range of customization and module options to extend your solution’s features to include areas such as accounts payable (AP) and procurement management.
Distributor Operational KPIs
The other side of financial visibility is operational insight, and your supply chain processes should be inextricably linked to your budgeting. Yet to truly capture the big picture for your inventory and distribution management, you need to be able to quantify the effectiveness of your process controls and procedures. These performance indicators should give you an accurate view of your downstream capabilities and grant you the knowledge required to keep your customer channels profitable.
Inventory Management
Proper inventory and warehouse management is still a key ROI factor, but this is only fully obtainable through deep supply chain visibility. This is where distributors must ensure the best data capture, and with digital transformation and the service economy, it also must match the speed of fast-moving value chains. You need to be able to look at historical trends in addition to what is developing in real-time to better forecast for the developments of tomorrow and next week.
High Impact KPI you should be tracking:
- Inventory Turnover Ratio
Order and Shipping Management
Moving further down the supply chain, your next tracked KPI should focus on the actual distribution of your customer orders. Returning to the swift nature of the modern market, it is imperative to be able to have an eye on outgoing and in-transit product up-to-the-minute. Besides helping you keep control of your value chain in the event of disruption, this will contribute to your final reporting and adding the final components of your ROI calculations.
High Impact KPI you should be tracking:
- On Time Shipping Ratio
What You Need for Tracking Your Supply Chain KPIs
Deploying modern inventory management technology enables you to better trace your product throughout the supply chain. With a modern ERP for distribution hosted in the cloud, you gain a real-time view into your warehouse and transportation processes, with data captured in the field delivered directly to your computer or mobile device. This grants you access to consistently updated analytics on your inventory items, whether they are incoming, outgoing or stored in-place.
Consolidate Your Data to a Few Key Performance Indicators
Spending all day pouring over spreadsheets and dashboards will only hold you back from executing on the decision-making that will improve your business value. The distribution KPIs that have the highest impact on your bottom line are those that are tied the most to the “reality on the ground,” those that reflect the key drivers of your business day to day. Limiting your tracking to these metrics will allow you to capture real visibility into the value of your business, as long as you leverage a modern distribution management solution.
Discover How to Track High-Impact KPIs with Acumatica
Acumatica Cloud ERP is a modern SaaS system with modules built for industries like wholesale distribution, with real-time data capture and mobile functionality to enable businesses like yours gain end-to-end supply chain visibility. Let SWK Technologies – the consecutive Acumatica Partner of the Year for the past two years – show you how to get a simplified, single version of truth with this distribution management solution.
To learn more about the high-impact KPIs your distribution business should be tracking, download the whitepaper.