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Top 5 Key Performance Indicators for Distributors

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    Every industry has specific KPIs, or key performance indicators, that should be constantly monitored to make sure the business is tracking to plan. For distributors, and any company that operates using a distribution business model, we’ve outlined five KPIs that should be on your radar.  The most accurate way to track these KPIs is by using both an ERP and CRM solution that integrate with your systems and provide visibility into all areas of your operations.

    1. Inventory value and carrying cost
    Inventory management is always top priority for distribution companies.  Keeping your inventory investment low is important, even when demand increases.  The ability to accurately forecast and predict customer demand is essential to managing inventory and anticipating production needs.  An ERP system that includes powerful forecasting tools will allow you to see the whole picture.  An ERP solution like Microsoft Dynamics NAV with flexible forecasting that adjusts to reflect real procurement requirements can help with inventory carrying costs, demand planning and product lifecycle management.

    2. Sales order fill rates
    Do you currently track how long it takes for an order to be completed?  When you tell a customer that a certain item will be delivered by a certain date, are you able to keep your promise?  Microsoft Dynamics NAV can help shorten the time between order and delivery - from building quotes to entering orders, you can be sure the items are in stock and ready to ship as promised. With the real-time Capable to Promise (CTP) and Available to Promise (ATP) functions in Dynamics NAV, your customer service representatives can accurately determine shipping and logistics time.  By using CRM together with an ERP solution, distributors can differentiate themselves from competitors who may not have complete supply chain visibility.

    3. Vendor performance
    It’s essential for distribution companies to accurately score and report on a vendor’s performance.  Are your vendors meeting your expectations? Do they meet the level of quality that your customers have come to expect? It’s important to evaluate and make sure vendors are meeting your needs and working efficiently.  Even for distributors who feel their vendors are producing top quality product and shipping goods on time, it’s important to track this data and provide regular feedback to vendors, both positive and negative.

    4. Lost Sales
    After sending a potential customer a quote, do you keep track of why they decided not to purchase from you?  Several factors need to be considered, including price, availability and responsiveness.  With an integrated CRM solution, distribution companies can record sales, opportunities, and quotes and see which ones converted to orders, and just as importantly, which ones did not. Having visibility into real-time data like this enables you to make course corrections as needed to prevent future problems.

    5. Returns due to improper shipments and defective items
    Do you have metrics around items that have been returned because of shipping mistakes or defects? Even if you have a Warehouse Management System (WMS) to track them, a powerful ERP or CRM solution will provide more insight into what’s working and what isn’t.  By integrating disparate systems, these solutions can provide real-time dashboards with drill-down capabilities, allowing you to pinpoint the problem areas and fix them.

    If you are a distributor or a company that operates on a distribution business model, it’s crucial to measure these KPIs to make sure you are tracking to business goals.  With many businesses struggling to keep costs low and do more with less, distributors are often asked to provide customers with even more services than before.  Having an ERP and CRM solution that is aligned with business goals will help you work more efficiently and ‘do more with less’ - resulting in increased business agility and greater revenues.

    By OmniVue, Georgia Microsoft Dynamics Partner

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    One Response to “Top 5 Key Performance Indicators for Distributors”

    1. Thanks, Jeff. Using my wordsmith vocabulary, I’d say this is a terse, concise and pithy summary of back to basic KPIs for distributors.

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