By Daniel Dowling of EazyStock, an Inventory Optimization Solution for Wholesalers and Distributors
Customers are the heartbeat of any wholesale distribution business. From distributors in the B2C retail and e-commerce arena all the way to B2B distributors that service commercial needs, one thing remains constant – the customer is king. With the onset of the “I want it now” buyer culture, companies like Amazon Prime, PeaPod and Uber, have changed the way customers expect to be serviced.
Today’s buyers demand to have access to the products they want, when they want them, which poses challenges for businesses that do not have a good handle on their inventory control or inventory management. Truly measuring the customer experience from end-to-end as they interact with every aspect of your business is extremely difficult to manage.
A great modern day example is online customer forums such as Yelp or TripAdvisor where customers can go online to rate the service and products of a business based on their experience. All the good, bad and the ugly is out there for the whole world to see. Unfortunately, dissatisfied customers tend to speak louder than happy customers.
Requirements for customer satisfaction are not only unique but difficult to quantify. One key performance indicator that distributors can leverage to deliver world class service is to measure inventory availability and service levels within their inventory control.
There are 3 primary inventory control techniques that, if managed properly, will without fail result in increasing customer loyalty, satisfaction and sales revenue for wholesalers and distributors.
3 Inventory Control Techniques That Boost Customer Satisfaction
Specifically, inventory control is the act of monitoring inventory to ensure sufficient stocking levels are maintained to meet customer demand. It also involves monitoring inventory to avoid excess working capital becoming tied up in stock. The perfect balance is to have just enough inventory to meet order fulfillment while keeping inventory levels lean to offset unnecessary carrying costs. Easier said than done.
Traditionally, businesses have relied on Enterprise Resource Planning (ERP) systems, such as SAP, Sage, NetSuite, Epicor, Microsoft Dynamics to name a few, to monitor stock as part of the wider resources of the company. This business practice worked well in the 90’s when customer loyalty wasn’t so fickle, but today these systems struggle to keep up with the pace of business, the market and customer demands. There are three primary capabilities that distributors need in their inventory control to keep customer satisfaction and service levels maximized:
1) Increased Purchasing & Procurement Accuracy:
Inventory management systems today manage the inflow and outflow of products. They also manage supplier networks and can push orders for Minimum (MIN) or Maximum (MAX) order quantities, but that is where their intelligence starts to lag. Inventory buyers are more often than not forced to export the system data into Excel to run the advanced ordering calculations outside of the system, which is a far cry from finding the exact economic order quantity when reordering.
This process increases time and labor costs spent “crunching the numbers” by high cost, highly skilled employees and also increases the variable error rate of the ordering process. The accuracy of purchase orders suffers, and stock levels are left vulnerable to unpredictable increases or decreases in demand. The first area for improvement is to onboard an intelligent purchasing system to manage demand forecasting and purchasing accuracy that can directly integrate into the business’ core management system.
2) Shorten Supplier Lead Times:
Through the process of increasing purchasing accuracy, a business can further drive down inventory levels or items that move slowly while focusing more attention on replenishing stock level of faster moving, high demand items. By focusing on high demand items in the supply chain, distributors can more effectively keep item availability high which will drive up service levels and overall customer satisfaction. Eradicating stock outs and increasing service levels will gain the business a reputation for reliability and trust.
A reliable tracking system that can run advanced ABC classification analysis is important as it will help prevent items from getting lost in the warehouse, so customers avoid having to wait for items to be found or re-ordered. Also, safety stock metrics for every item carried in the warehouse should be monitored closely and frequently to ensure lead-time management is predictable. These capabilities are also available as add on cloud-based modules that can integrate into existing warehouse management systems and enterprise resource planning tools.
3) Increase Visibility Across Stock Locations:
Surprisingly, most distributors with multiple stock locations do not always have their data seamlessly tied together for a holistic view of their inventory. The company may use one inventory system such as SAP or Epicor, but that does not mean the systems talk to each other. These systems can effectively manage the inventory within the walls of a single warehouse, but the system has no access to other locations or even same inventory items that exist in other warehouse locations. Inventory redistribution is a system add-on capability that enables businesses to see items that exist within the entire supply network.
For example, an aftermarket parts distributor of auto parts may have 1,000 spare parts of an item in their stock location in Sacramento, CA, but there is no demand in that region for those parts. Without demand these items will sit in inventory taking up valuable space, adding to the monthly carrying costs to hold the items and may never be sold. Elsewhere in the supply network, the stock location in Chicago, IL has demand for 1,200 units and only 200 items in stock. Without multi-location visibility, the Chicago location will submit a rush order to a supplier for the balance of the 1,000 units inflating the costs of inventory on items the business already owns and has available. With inventory redistribution capabilities, a business can liquidate the excess stock in one location and redistribute those items to supply another’s demand without tying up more capital in inventory.
The process of managing customer satisfaction starts long before a sales transaction takes place. Building smarter processes and practices that increase purchasing accuracy, shorten supplier lead times and increase visibility within the organization will not only save you money but will ensure high satisfaction and loyalty with your customer base.
About the Author and EazyStock:
Daniel Dowling is the Head of EazyStock’s Global Demand Generation. Daniel is responsible for advising company leaders of distribution and wholesale businesses on effective market strategies to optimize their inventory operations.
EazyStock is an inventory optimization solution for mid-sized distributors and wholesalers that look to buy smarter, plan faster and service their customers better. Learn more at www.eazystock.com
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