5 Key Order Management System Requirements for Companies Who Sell Through Distributors

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Companies who sell to - or through – distributors or extended value chains have unique order management needs. Their business model impacts the specific types of information that they need to collect, the business processes required to support their sales execution, and the leveraging of all this information for forecasting and demand analysis.

Tensoft has been supporting the supply chain needs for electronic component and semiconductor manufacturers for almost 20 years. Over that time, we’ve heard a great deal about the need for a better sales order management and demand management solution from our customers, since many of them sell through distributors or extended value chains.

When we started actually building on and leveraging this feedback to create a solution, we found that it organized into these five specific themes:

1. Multiple Customers:

One of the first requirements is the need to track more than one customer in the ordering process. The end customer and the sell to customer may be different – along with the ship to company and location. This type of information impacts the business process, the required order and pricing management, and the forecasting and demand analysis. This is really kind of critical and unique to the industry that we're working with, or at least people that sell through distributors or through extended value chains.

2. Complex Shipping Terms:

We found another requirement related to shipping functionality.  In the technology industry, it's common to use your customers' shipping accounts and the customer shipping terms, instead of your own.  In other words, companies who sell through distributors often do are not use their own company’s shipping accounts.  Shipping terms may include specific customer requirements based on the ship-from or ship-to locations, the weight of the shipment, and/or the need for re-shippers.  Shipping requirements need to be communicated through from the order and the customer profile all the way to the shipping dock  The shipping dock which might be an outsourced fulfillment center in an inventory hub, or a 3PL, or even a key supplier providing logistics services.  So the challenge is how to collect and capture the shipping terms for these often complex extended value chains.

3. Flexible Pricing Models:

A third area relates to pricing, which I talked about a little bit already related to that extended value chain.  We can have a single customer, distributor, OEM who has multiple price points for the same product where either they might get a discount based on specific negotiated terms for an end customer, or a rebate based on sales later on.  This pushes a requirement for different pricing models and terms for the same ship-to customer for the same product based on who the end customer is.  Or based on what the value chain dictates, or what later integration with resale data that tells us about the nature of the final sale.

4. Booking/Billing/Backlog Metrics:

A fourth important area is the need for certain metrics and management processes.  These include booking billing backlog, capturing key change variables, looking at things like on-time delivery history and measuring performance of delivery to a schedule and commit date to a customer.  This is really relevant in the technology industry, where extended supply chains are common.  In this industry, the means of production are often outside of the direct control of the internal operations team.  However, the team must manage the outside suppliers.  So, they need to set commit dates that they can meet based on their plans.  Then, they need to keep track of how well they do against those commit dates as part of a customer delivery performance metric.  They may spend several days a week just managing these metrics manually.  Being able to automate this is a big help.

5. Post-sale Inventory Tracking:

A fifth significant requirement is the need to track inventory post-sale.  Inventory may go to a hub, a VMI storage facility, or a distribution channel, for example.  However, you still need to integrate point of sale (POS) information to show the inventory draw-down or record the pulls from inventory when there is a JIT system consuming the inventory.  There also may be stock rotation, right of return, price guarantee or rebate privileges involved.  Whatever the driver, the need to track inventory post-sale as a demand indicator, pricing validator, and feedback mechanism for how much inventory's building up at the channel can be critical information.  In addition, you may need to validate the final end customer consuming the inventory as part of both your pricing and demand analysis process.  Finally, you may need to understand your potential liability for returns or rebates.

Tensoft DemandOps Handles the Unique Needs of Companies Who Sell Through Distributors

These five themes form the initial core product vision for Tensoft DemandOps.  In addition to these themes, we see potential to add even more value in future versions. For example, forecasting is probably part of your Customer Relationship Management (CRM) system already. But, if you are forecasting by end customer, there is a lot of data to filter through to compare the reality of your sales orders to your forecast plan. There is also the need to judge the forecast and come up with the forecast for the supply chain team to use for their build plan. Tensoft DemandOps easily identifies and reports the specific data needed to streamline this process. In addition, Tensoft DemandOps provides the data you need to support the new revenue accounting standards (ASC 606 or IFRS 15), which significantly impacts how revenue is determined in this business model.

For More Information:

For more information about Tensoft DemandOps, please visit our website at www.tensoft.com. If you have any questions, please feel free to contact us directly as well.

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