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Three Keys to Decoding Profitability for Your Distribution Company

Three Keys to Decoding Profitability for Your Distribution Company


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Three Keys to Decoding Profitability for Your Distribution Company

Abr 19, 2022

Ken Weygand
Men in hard hats walking in warehouse

You’ve had a successful distribution company for years. You know you have good products, your retail clients are happy and your service is outstanding. But with prices skyrocketing for everything from fuel to basic goods, it’s even more important that consumer goods distributors keep an eye on their profitability.

Profitability is more than just how much money you’re making. There are many factors that will determine how well your company navigates profit and loss ratios. Profitable businesses need efficient operations; excellent customer service; intelligent, dedicated employees; and most importantly, keen insights into every part of your operation. This means that you can tap into Key Performance Indicators (KPIs) and feel confident that each decision you make about your enterprise is based on hard data.

Your consumer goods business needs to find a way to absorb rising costs while still maintaining the excellent relationships you have with your retailers. You must also keep up with changing trends and stock accurate inventory counts at all times. Tracking your profitability in the face of a dynamic, changeable industry is daunting, but it’s not impossible.

Understanding and growing profitability starts with leveraging analytics and tracking KPIs. Then you need to comprehend that data to see whether you’re actually profitable. If you are losing money, you need to find actionable ways to make improvements.

In the blog below, we’ll give you three keys to help you get the most out of your distribution business, while still staying compliant with strict retail requirements. Profitability doesn’t have to be a mystery—all you need are the right tools. An industry-specific ERP, coupled with warehouse management tools and a Profitability Scorecard, is all you need to stay on top of your enterprise’s financial well-being.

Key #1: Profitability Analysis

An industry-specific distribution ERP like Aptean’s Distribution ERP comes with a built-in Profitability Scorecard. This powerful tool helps you understand your company's true profitability without hours of manual number crunching. Your consumer goods company can access bottom-line profitability in seconds with this automated tool.

As you know, retailers have so many rules and regulations that you must follow, or your company will accrue fines. Walmart in particular is notorious for their strict on-time in-full (OTIF) standards. If you miss shipment dates or mislabel an item, you bear the charges, not the retailer. While those charges may seem minimal, they do add up and they are directly affecting your bottom line.

The profitability scorecard tool offers you a real-time view of profitability accounting for all your costs, including landed costs, retail allowances and chargebacks, commissions, royalties and more. Powerful financial analysis tools help you see detailed views of every customer, supplier and product. Even better, each user can define the fields they need to track the cost drivers that impact your business. Comparative views enable you to analyze results from multiple customers, suppliers or products and see who's helping or hurting your bottom line.

Key #2: Warehouse Management

Your warehouse is the heart of your supply chain. You need to stay competitive in the new fulfillment economy, because customer expectations are higher than ever. If you have warehouse management (WMS) capabilities built into your ERP, you can support even the most complicated, multichannel fulfillment processes, improving efficiency and productivity. This allows you to analyze the best use of floor space based on your specific characteristics.

We know that finding qualified warehouse workers is a very real issue right now, but a WMS helps you make the best use of the team you have. Your team won’t waste time trying to locate products because they’ll always know where everything is and they will know current, accurate inventory levels down to the smallest SKU. Automated processes boost pick, pack and ship accuracy and eliminate mis-picks and you’ll get full visibility of all orders using lot, batch and serial numbers.

You also have the visibility and analytics you need to monitor and measure employees and can easily track productive time by measuring product input and output. However, to keep your employees productive throughout their shift, you need to monitor the labor outside of tracked processes, because those directly impact your profits. With WMS, your warehouse managers have real-time labor analytics to track employee performance. This ensures that employees perform their jobs efficiently and holds them accountable for completing their daily tasks.

Key #3: Industry-Specific ERP

An integrated, distribution-specific enterprise resource planning (ERP) solution is your best weapon against hidden charges, because it enables complete profitability analysis. As you comb through incoming and outgoing financials, you can analyze and track trends, fines, and chargebacks and then you can break those down to see which of those charges and fines are avoidable.

Aptean’s Distribution ERP software has built-in import management capabilities. With automated container updates and receiving-by- container functionality, your consumer goods company gets full visibility. Because you’ll know exactly when your products will arrive, you’re not wasting time tracking orders. Instead, you’re able to focus on ways to grow your current retail relationships and cultivate new ones. You create leaner processes and smarter operations, all of which enhances your profitability.

In addition, integrated EDI guarantees accurate information sharing and compliance and protects your valuable retail relationships. To stay profitable in the consumer goods vertical, it’s as simple as getting your customers the right products at the right time. But that means you must stick to a strict timetable and ensure your product moves through the supply chain seamlessly. Our distribution ERP has shipment, vessel and container tracking and management tools which give you the visibility you need into incoming inventory. It tracks and calculates your landed costs, so you understand your true profitability.

Are You Set up for True Profitability?

Profitability is a complex equation, but with the right tools, you’ll understand which of your client relationships are impacting your bottom line. You’ll get a detailed analysis of your strongest sellers. You’ll get products out of your warehouse faster. Once you have these three keys in place, you can focus your attention on making improvements and growing your business.

Ready for Aptean Distribution ERP to help your consumer goods business understand true profitability? Find out how, now.

The Ultimate Profit Strategy Guide for Consumer Goods Businesses

This whitepaper contains key points to consider when analyzing the profitability of your operational decisions and impacts.

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