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How Distributors Can Gain Control Over Inventory to Cut Costs and Improve Customer Satisfaction

You might be surprised to learn that Wham-O, the company that gave America the Hula Hoop in 1958-selling over 100,000,000 of this smash hit toy in two years-nearly went broke when the craze died down. Their problem? Inventory… Anticipating more huge sales numbers, the company bought millions of feet of plastic tubing, just in time for the fad to fade to nothing. This wad before the invention of Enterprise Resource Management (ERP) software. Such tools might have helped them avoid the error that almost put them out of business.

Inventory Management is Cash Management

Distributors need to manage inventory well or risk going under. This is because inventory management is essentially the same as cash management. If you’re in the distribution business, you should know this well: The longer you hold onto inventory, the more cash you are tying up. Ideally, you can sell merchandise before you have to pay for it. This is a positive cash cycle. Alternatively, if you’re borrowing money to pay for inventory that’s sitting in warehouses, you’re getting into risky territory. In any event, even if you are doing well with the inventory cash cycle, you could always do better.

Inventory Management is Customer Management

When it comes to inventory, the distribution business presents an endless series of “rock and hard place” moments. You don’t want to run out of items that customers want. If you get into “stock outs” on too many products, your customers will start looking for new distributors. Account relations are potentially at risk if you can’t predict how much stock to hold in inventory.

How Software Helps Distributions Companies Gain Control Over Inventory

Software can be a powerful tool for distributors who want to get better at inventory management. This is partly a matter of the software’s features. But it’s also about how you put the software to work. Modern ERP solutions like Acumatica, which come with the option to add distribution and inventory management modules, provide specialized features such as:

Data analytics and reporting work across all of these features. At every juncture in inventory management, it essential to know what’s what-and what might be about to happen. This might involve the use of Key Performance Indicator (KPIs). A KPI is a data point that signals something good or bad happening. For example, if you have a history of running out of an item under specific conditions (e.g. selling out of snow shovels when it’s snowing), a predictive KPI can help you avoid this negative scenario by comparing earlier year’s sales trends with today’s.

We have worked extensively with distribution businesses on the implementation and tuning of ERP solutions with inventory management capabilities. To learn more or see a demo of Acumatica Distribution ERP software, contact us today!

Originally published at on November 27, 2019.