Wholesale distributors’ holy grail: the perfect delivery

By Derek Gittoes, V.P. Supply Chain Management Product Strategy, Oracle and Erin Sun, Director, Supply Chain Management Product Marketing, Oracle

Customer expectations have never been higher than they are today. Customers want a full order, the right products, in perfect condition and delivered on time. In other words, they want what we call perfect delivery.

But no matter what industry you’re in, any conversation about perfect delivery begins with order management. That function has moved to the top of the list of what businesses care about these days, as market volatility has surged, and distribution channels and physical inventory locations have proliferated.

So, it’s no surprise that we’re seeing more businesses looking for a centralized, automated solution to help them orchestrate orders across different systems and provide real-time visibility across their supply chains. When companies don’t know how much inventory they have and where it’s located, it’s difficult to make delivery promises or route orders to the best distribution center. And that can have a devastating effect on the customer experience and on the bottom line.

A Case in point: Wholesale distributors

A perfect case in point is the $7 trillion wholesale distribution industry, where many companies are struggling to cope with thin margins on high sales volumes and relentless price pressure. Making matters tougher, distributors are now facing the “Amazon effect” where customers not only demand flawless delivery, but also the best possible price, availability and customer service.

To thrive in these daunting market conditions, wholesale distribution companies are seeking to minimize operating costs while optimizing process efficiencies with the aim of fulfilling every order “perfectly.”

The burden of legacy

However, the reality is that legacy order management systems weren’t designed to meet the demands of the modern wholesale distribution environment, with its complex mix of channels, products, pricing and rebate agreements, fulfillment methods, stocking locations and customer returns. These earlier-generation systems – often comprised of a collection of multi-vendor, on-premise applications – not only have difficulty addressing these challenges but offer limited ability to scale in response to expanding business requirements.

These systems can act as an impediment to growth for a variety of reasons:

• They typically operate in silos suitable only for a single distribution channel and inventory location
• They are challenged to deliver a unified customer experience across the order lifecycle, potentially leading to customer churn
• They struggle to support new digital processes, potentially stunting innovation and revenue growth
• They can often consume 70% or more of the IT budget just for maintenance and upgrades (see to IDC surveys and Computerworld survey)

The road to the perfect order

In the face of these challenges, wholesale distributors aren’t standing still. They’re moving swiftly to adopt new business models and pursuing M&A strategies designed to respond faster and more flexibly to rapidly evolving markets. Most importantly, distributors are embracing modern digital order management systems and process innovations to help drive these transformations and propel their businesses forward.

By harnessing modern digital technologies, distributors can streamline business processes, gain operational flexibility, and collaborate more effectively across their value chains. Here are a couple ways we’re seeing distributors use integrated order management solutions to help achieve perfect delivery.

Optimizing fulfillment to increase on-time shipments and maximize profit margins

When demand exceeds supply – or when new supply becomes available – you need to fill your most important orders first. But that’s hard to do with conventional order promising systems that schedule orders on a first-come, first-served basis.

Next-generation, cloud-based supply chain solutions offer modern backlog management capabilities that allow you to prioritize all of your open orders based on flexible rules configured to meet your business objectives. For example, with Global Order Promising capability in Oracle Fusion Cloud Order Management, and backlog management capability in Fusion Cloud Supply Chain Planning,  you can choose to fill the highest-revenue orders, or those for the most critical customers or channels, ahead of less strategic orders. You can also simulate different fulfillment options, make adjustments, and compare the impact of each scenario before you finalize fulfillment schedules.

Achieving perfect inventory levels

Every day, wholesale distributors need to restock hundreds if not thousands of inventory locations, and the sheer number of products and warehouses makes it difficult to maintain the right level of supply, especially when demand suddenly shifts.

The latest replenishment-planning solutions – a capability in Oracle Fusion Cloud Supply Chain Planning – can help distributors predict consumption and more accurately plan restocking using forecasted or historical demand to decide when and how much to replenish. This is a powerful tool to help you improve fill rates and minimize stockouts.

While the tool’s automation features are great for steady-state environments, you’re still in control with tools to help you manage exceptions, and change replenishment policies for individual items and locations. A graphical workbench makes it easy to identify root causes of issues and simulate the best way to minimize stockouts and overstocks with the least disruption.

Real customer results

Modern inventory and fulfillment systems are giving companies a leg up on the competition. For example, a leading European distributor of plumbing, heating and cooling products was facing operational difficulties due to the lack of visibility into its global inventory across hundreds of distribution sites. This had two consequences:

• Not knowing where demand would come from, the company had to hedge its bets by keeping higher levels of inventory than necessary – keeping costs high.
• Since it didn’t have the right inventory in the right places, it had trouble filling customer demand, leading to chronically poor fulfillment performance.

So the company took action, deploying Oracle cloud solutions engineered to centralize supply planning and purchasing, automate replenishment planning and execution, and enable a global order promising program. The integrated platform consisting of Oracle Supply Chain Planning, Order Management, Procurement, and Logistics, helped the distributor improve stock availability, boost on-time in-full (OTIF) performance by several percentage points, reduce inventory costs, and increase revenue and margin.

That’s just one example of how modern digital order management systems can equip your company to deliver the perfect order and build a sustainable competitive advantage.

To learn more about how you can optimize fulfillment for maximum business impact – and access a wealth of informative assets – visit our Perfect Delivery page.