Wholesale distribution has emerged as one of the top performing industries in terms of cloud technology take up. This early adoption, when compared to other industries such as professional services or manufacturing has seen Australian wholesale distribution business bounce back from a period of shrinking margins and red-ocean competition.
Most distributors over the past 5 years have either evaluated or implemented some form of cloud technology in their business. One of the main drivers for these software packages is to be able to collect more customer, inventory, operational and supplier data to increase efficiency and effectiveness of their resources.
Now that they have the data, the key question is… What should they do with it?
10 Years ago, Wholesalers relied on some basic reports and metrics to identify whether their business was healthy and growing or struggling. KPI’s such as inventory turnover, accounts receivable aging reports and dead stock reporting were common. In 2019, Wholesalers are becoming more sophisticated in the metrics they are using to measure themselves and the results are sometimes surprising.
The following KPI’s are some of the key metrics our customers are using to measure their performance and continual operational improvement.
Financial KPI’s – A New Take on Financial Performance Management
In Wholesale, as in any business, keeping a keen eye on the past, current and future financial performance of the business is key to continued growth and ongoing success. However, owners are looking beyond traditional reports and KPI’s such as gross margin on items or inventory turnover velocity when it comes to making critical business decisions.
Modern Finance Managers are looking to use the data that is collected during marketing, sales, order processing and customer service and support to gain better insights into key business drivers and performance metrics. An example of this could be:
Average Days to Pay by Industry
A metric to highlight which industry segments that a wholesaler deals with is the best when it comes to paying their account on time.
This information can help define marketing and sales strategies as well as highlight which industries might need different payment terms to help level out cash flow.
Filter
Customer Industry Segment.
Calculation
Total Days to Pay / Number of Invoices in the Period.
Sales and Marketing KPI’s – Looking Beyond Top Line Sales Performance
Traditionally, most sales departments are defined by one thing. Actual Sales against quota. However, because modern Wholesale Distribution software provides integrated Sales and CRM functionality, along with procurement/inventory management and accounting and financials, we can now do more with the information we have available.
Sales and Marketing Campaign ROI
Because Sales CRM and Accounting and Finance live in the same place, it is now easy to see exactly how marketing campaigns and the cost associated translate into closed sales orders.
By tracking lead source, when a new customer or contact is entered into the system, we can pull the total sales value of all invoices, and segment this by campaign, or campaign type, thus giving us accurate ROI for every marketing dollar spent. This leads to better decision making and more efficient use of marketing budgets.
Filter
Marketing Campaign/Type.
Calculation
Total Value of Sales Filtered to Individual Marketing Campaigns.
HR and Payroll KPI’s – Measuring People and Performance
Because modern ERP’s like NetSuite, provide fully integrated time sheet entry, employee expense management and payroll processing, HR and Payroll Managers are able to use data across both employee records, payroll data and other key business areas to better understand key HR metrics such as “average sick leave days by manager”.
In businesses with a higher number of managers, it can be very insightful to understand employee behaviour when compared by manager. These sorts of KPI’s might provide some insights into team motivation or highlight potential HR problems before they are reported and escalation, or worse, not reported.
Average Sick Days by Manager
A metric to highlight the number of sick days taken by a group of employees under individual managers.
Any spikes in this metric could indicate potential conflict within a manager to team relationship. Research has shown that when an employee has issues with their manager, they are 3 x more likely to take sick leave.
Filter
Manger.
Calculation
Total Sick Days Taken / Team Head Count.
Customer Service KPI’s – Keen Eyes on Customer Success
In an increasingly competitive market, customer service is imperative. Google has made it easier than ever to quickly research and compare different providers of the same or similar products, and sometimes you might not be able to compete on price alone. Many wholesalers are beginning to understand that customer service has just as much impact of purchasing decisions as price.
To be able to better understand your customer, and to use this information effectively, wholesalers should be looking to get a 360-degree view of their behaviour both when it comes to purchasing and support and complaints.
An example might be:
Average Product Complaint / Support Requests by Vendor
A metric to help identify if any particular supplier’s products have a higher rate of return or complain.
This KPI’s can help identify overall quality of goods being provided by a vendor and gives data to the wholesaler to be able to support discussions around improving product quality.
Filter
Product Vendor.
Calculation
Total Support Tickets Lodged / Total Invoices Containing Vendors Products.
Because Cloud ERP’s like NetSuite hold CRM, Inventory, Procurement, Support and Financial data all in the same system, it becomes easy to start designing and reporting on KPI’s that really matter to the overall performance of your wholesale distribution business.
Also, the flexibility of the report and search tools in NetSuite make it simple for users to make inquiries on any data set, because all information is in the one database from day one.
Can your system support these KPI’s? If not, is it time to consider a new direction?
Many of our customers are making great use of these NetSuite features and have taken monitoring their business performance beyond to standard metrics that are available in legacy systems, and the results are amazing.
Wholesale distributors today confront significant challenges to meet B2B customer expectations, increasingly distributed supply chains and higher pressure on margins. Additionally, new opportunities in mobile computing, the Internet of Things and globalised customer databases, present their challenges. NetSuite provides innovative distributors with a complete and connected business suite with scalable, intelligent, easy-to-use features that link together financials, eCommerce, inventory and customer data—enabling them to transform their business and track every operation in a single management console.
If you would like to see how NetSuite Wholesale Distribution Edition could help give you better, and real-time insights into your business performance, contact one of our business consultants for an obligation free discussion.
