Analyst Insight

The face of manufacturing has changed dramatically in the last decade. Constantly seeking to reduce production costs, manufacturers have outsourced many jobs to low-wage, developing countries. The industry as a whole has shifted from a production-based model to a service-oriented model, with a growing emphasis on distribution versus simple production.
-David Bourque, research associate, Technology Evaluation Centers

The three imperatives to help organizations adjust to this changing environment are:

1) Leverage Existing Software Technology. Many distribution companies have made significant investments in ERP or back-office systems, such as human resources, finance and accounting. However, to leverage investments and achieve the necessary functionality, distribution companies should look to purchase systems that integrate with or extend their existing systems. Key components include: warehouse management systems, supplier relationship management systems, transportation management systems and international trade logistics. Ultimately, successful distribution companies will develop and implement ERP-distribution systems.

2) Improve Fulfillment and the Bottom Line. To properly manage the flow of components and goods, distributors require an accurate picture of the distribution pipeline. ERP-distribution software provides this picture by allowing the organization to track inventory throughout the entire supply chain and ensure timely, accurate fulfillment.

3) Better Adhere to Standards and Compliance issues. Not meeting these stringent requirements may lead to unnecessary charge-backs from retailers and financial penalties from governments. Worse still, failure to meet standards related to quality, environmental friendliness or social responsibility may damage the brand image among potential purchasers. ERP-distribution software can help meet these compliance regulations by being able to configure standards into the supplier relationship management module. Distributors can enter exactly which regulations need to be adhered to thus giving control to the distributor if an issue or conflict were to occur.

The Outlook

Overall, we expect current trends to at least hold steady, with the greatest likelihood that they will in fact accelerate. Manufacturing will continue its rapid maturation into a service-based distribution industry, with a corresponding increase in the adoption of ERP-distribution software. As well, we look for more web-based technology to integrate into ERP-distribution software, helping to facilitate increased levels of international trade.