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Wholesale Distribution

Getting Started with Wholesale Distribution

Like all industries, the wholesale distribution industry is driven by market forces related to economic, competitive, technological, and government requirements. Also like other industries, wholesale distributors are faced with shrinking margins, the pressure to cut costs, increasing customer demands, complex orders, and ever-shorter lead times.

However, more than most industries, the wholesale distribution industry is undergoing considerable change. In addition to consolidation, throughout the supply chain, the distributor's partners – from retailers and commercial customers to suppliers and manufacturers – are increasingly exploring options for the distributor's services.

In response, wholesale distributors of all types – from food, technical, industrial, and pharmaceutical distributors to purchasing organizations – are rapidly developing and offering customized, value-added services. With these services, distributors create new revenue streams, outperform their competition, and improve customer loyalty. And to reduce costs, distributors have concentrated on their core business while identifying outsourcing opportunities. For example,  some organizations are partnering with logistics service providers that focus exclusively on core fulfillment activities. Other distributors have entirely bypassed the distribution channel, opting instead to reach customers directly via Web-based, business-to-business stores. These wholesale distributors are repositioning themselves as critical information hubs to both customers and suppliers.

As wholesale distributors increasingly seek better ways to compete and make themselves indispensable to their business partners, it is an exciting time for the distribution business process expert (BPX) and the BPX community at SAP. Here, you can discuss, understand, and influence the processes that run the ever-adapting wholesale distribution industry. You can learn how others are increasing process efficiency and agility. And you can discover the processes that drive the strategic growth and profitability, product innovation, and operational excellence of today's modern wholesale distribution companies.

Optimized Wholesale Distribution Business Processes

With optimized business processes, a distributor can achieve a wide span of business benefits ranging from improved service levels and reduced capital investment in stock to lowered cost of goods sold, streamlined operations, and decreased overhead costs. However, before these business benefits can reach fruition, the processes that drive them must be optimized. Because this requires the integration of marketing, logistics, and financial applications to support process innovation leading to new services, it also requires a fully integrated software solution.

The SAP for Wholesale Distribution solution portfolio represents the state-of-the-art in integrated solutions for wholesale distribution and trading organizations of all sizes. The solution portfolio enables these organization to deliver world-class services to their ecosystem and to master the challenges of managing a high-volume, low-margin business.

From purchase order and inventory management to supplier-managed inventory and chargebacks, SAP for Wholesale Distribution solutions support the key processes that run the wholesale distribution business, including the following:

  • Planning processes require long-term supply chain design, marketing planning, and sales and service planning capabilities. To build new relationships, distributors can develop value-added, fee-based services for customers and suppliers to offset low product margins. With integrated planning and multi-channel capabilities, distributors can optimize the entire distribution network based on demand and costs, collaborate with business partners on strategic product planning, and simulate and assess possible changes in supply chain design.
  • Procure-to-pay management processes help distributors to manage strategic and operational relationships with suppliers. This includes strategic sourcing, purchasing, supplier collaboration, supplier agreement monitoring, and cost recovery capabilities. Distributors can group purchases to maximize purchasing power and improve profit margins. They can also manage contractual agreements to optimize quantities ordered and reduce cost of goods sold. And orders can be timed to take advantage of price changes and limited offers from suppliers.
  • Supply chain execution processes require inbound and outbound logistics, warehouse and inventory management, compliance, and foreign trade management capabilities. These enable customs handling and compliance with regulations. Distributors can manage and allocate warehouse tasks to avoid resource bottlenecks. They can also support direct store delivery and the accommodation of various trading practices.
  • Order-to-cash management processes enable wholesale distributors to manage billing and collection activities, as well as to manage and maintain customer relationships and improve customer satisfaction while reducing costs. Order-to-cash management optimizes the processing of back-to-back orders and acts as a broker of products and services. To manage inventory, distributors can collaborate with customers to support direct price agreements with suppliers and customers and the settlement of price differences.
  • Value-added service processes support general business services, logistics services, and financial services that help distributors counteract margin pressure and improve overall customer satisfaction. With value-added services, distributors can pursue new revenue opportunities, improve customer retention, and allow third-party interaction, such as pooled payment or central billing.

Supporting these key processes are enterprise management services to manage the distributor’s general and industry-specific processes in finance, human capital operations support, and corporate services. In addition, a unified technical architecture built on Service-Oriented Architecture (SOA), SAP’s blueprint for an architecture that allows innovation and standardization in a single environment, enables the integration of information, people, and processes. The SAP for Wholesale Distribution solution provides a solid, tightly integrated enterprise resource planning (ERP) software core, while SOA enables the option to adapt very quickly to new business models without affecting the ERP core.

A single solution platform – the SAP NetWeaver platform – creates a flexible IT infrastructure that encompasses both SAP and non-SAP systems. The technology platform allows distributors to leverage their existing IT infrastructure and lower total cost of ownership.

Business Benefits of Optimized Wholesale Distribution Processes

With an integrated wholesale distribution solution to drive business processes, distributors gain these specific business benefits:

  • Optimized logistics processes: Distributors can bundle orders for optimized, cost-effective delivery. Moreover, inventory optimization helps them achieve the best possible use of storage capacity, which can significantly improve efficiency.
  • Improved profitability: An integrated solution enables wholesale distributors to offer value-added marketing and sales services. These may include Internet sales, call center and customer information management, and repackaging to customer specifications. Distributors may also offer innovative services, such as direct sales from trucks, direct store delivery, and supplier-managed inventory.
  • Enhanced cost recovery: Wholesale distributors can manage the chargeback reimbursement process based on special agreements between manufacturers and customers. The software handles data capture, subsequent invoicing, and control of chargeback agreements. In addition, capabilities for managing and tracking bonuses help distributors forge optimal financial agreements with their suppliers.
  • Reduced financial and transactional costs: Distributors can offer financial services, such as centralized invoicing and factoring, to their business partners. The software supports extended bonus settlement and Web-based complaint administration for agency receipts – significantly reducing financial and transactional costs.
  • Improved decision making: By allocating costs based on information in the vendor billing document, the software makes costs more visible and allows a more accurate evaluation of profitability. Furthermore, sophisticated business intelligence tools can provide still deeper insight into business processes to further assure sound business decisions.

SAP Process Support for the Wholesale Distribution Industry

The SAP for Wholesale Distribution solution portfolio supports the most important business processes in any distribution or trading company and, for greater efficiency and effectiveness, provides tools to manage these processes. SAP solution maps give the business process expert a clear overview of the business processes relevant to the wholesale distribution industry. Solution maps are multilevel blueprints of processes defined for a particular industry. They help you visualize, plan, and implement a coherent, integrated, and comprehensive business solution. A complete library of solution maps and business scenario maps for the wholesale distribution industry is available to business process experts at Wholesale Distribution Software.
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