With the right inventory management solution in place, food and beverage distributors can flex and adapt quickly regardless of market conditions, challenges or changing business models.
During the startup phase, food and beverage distributors focus on launching their businesses, building market share and creating sustainable business models. Setting up shop, establishing physical or virtual locations, staffing up, choosing product lines, and finding customers are all top of mind during this stage, and rightfully so.
But once those “early stage” challenges are behind them, food and beverage distributors have to think about scaling up, strategically expanding their markets, increasing sales and building their customer bases to the point of profitability (and beyond).
To support this mission, software solutions must adequately scale with their users. To make sure this happens, companies must invest in the right solutions that not only meet their current needs, but that can also flex and adapt quickly to the needs of an expanding organization.
For any food and beverage distributor that’s operating in today’s fast-paced, ecommerce- oriented selling environment, inventory management is one area where “scale” truly counts. For example, a growing company may make any (or all) of these moves in an attempt to grow revenues and market share:
• Expanding into new geographies (e.g., through acquisitions).
• Overhauling its ecommerce approach to sell more online.
• Taking on new product lines and supplier partners.
• Creating stronger alignments with suppliers and/or customers.
• Developing a “leaner” inventory approach (i.e., one that reduces inventory levels while minimizing stock-outs).
• Finding new ways to drive costs out of the distribution process.
Achieving these and other growth goals can be easier and less costly with technology, but only if that technology is flexible, scalable, adaptable and cloud-based. By helping food and beverage distributors minimize manual work and streamline their operations, for example, a scalable inventory management solution can reduce costs, improve efficiencies and simplify even the most dynamic distribution environments.
In this white paper, we explore how scalable technology helps food and beverage distributors solve their biggest pain points, show how to pick a solution that will scale up as distributors grow and hear how one company successfully transformed its inventory management approach with a scalable, cloud-based solution.
Easing Food and Beverage Distributor Pain Points with a Scalable Inventory Management System
Achieving optimal inventory levels is a delicate balance. Buy too little and you wind up with stock-outs and unhappy customers; procure too much and your carrying costs and obsolete inventory levels go up. Intent on running leaner operations that aren’t saddled down with excess inventory or plagued by wasteful processes, more food and beverage distributors are examining their inventory turnover and coming up with good management strategies that satisfy customer demands while also reducing (or eliminating completely):
• High inventory costs
• Uncertainty due to fluctuations in demand
• Risk of loss
• Inventory turnover rates
• Unnecessary order duplications
• High levels of working capital tied up in inventory
• Excessive storage costs
• Imbalanced shipment lead times
• Lost customers
• Loss of materials due to carelessness or pilferage
Combined, these problems can add up to substantial financial losses—all of which can be avoided or mitigated by using a scalable inventory management platform that enables high levels of inventory visibility on a real-time basis.
Inventory management includes product ordering, storage and control. It’s about having the right products in the right quantities in the right place and at the right time—and all at the right cost. By governing non-capitalized assets and monitoring the movement of products from distributor to end user, inventory management requires detailed recordkeeping for every stocked product.
Good Inventory Management: From Point of Origin to End User
A critical aspect of supply chain management, good inventory management extends from the point of origin (e.g., the manufacturing plant or distribution center) to the end user. Left up to chance, it can either tie up cash and hurt organizational profits, or it can save companies money while also improving their profits and bottom lines.
Consider these two scenarios:
• When you overstock in anticipation of future demand, your company may wind up saddled with “dead stock” in its warehouse, DC or retail store. This dead stock consumes working capital and uses up physical space all while sitting still. The products in question may also be on the brink of obsolescence, rendering them unreturnable and useless in the near future.
• When you don’t hold enough inventory in stock, you risk running out right when customers ask for the goods. Maybe the current tariff situation has you jittery about foreign supply sources, or maybe your firm’s new ecommerce site is creating new, unprecedented demand levels for certain items. Whatever the culprit, you now have a stable of unhappy customers to contend with.
“Utilizing a cloud-based system gives the ability to scale up or down based on seasonal or annual growth, as well as turn features on or off based on the organizational requirements. This offers flexibility to the customer and gives them the ability to configure and customize the system to match their specific needs.”
Frank Recht, Food and Beverage Solution Consultant Manager, Oracle NetSuite
In the past, food and beverage companies tried to avoid these problems by performing physical counts out in the warehouse and then reconciling those counts with paper- or batch-based systems. This task took place on a scheduled basis (e.g., at the end of a set period, such as a month or a quarter), with the result being updated inventory figures.
What is a Scalable Software Platform?
In the business world, the word “scale” means to grow or expand in a proportional and usually profitable way. It’s also used as a noun that translates into proportional growth especially of production or profit and/ or a large market position.”1 Specifically in the software realm, a scalable system is one that doesn’t have to be redesigned in order to maintain high levels of performance when workloads increase.
Those increases could be driven by more users on the system, the need for higher storage capacity, an increase in transaction levels or pretty much any other event that forces the solution past its original capabilities. Not always seen as a requirement during the software selection phase, scalability allows your inventory management solution to grow, change and morph along with your company.
Scalable software platforms provide myriad benefits. A food and beverage distributor that’s just starting out, moving into a new market or taking on a new product line, for example, should select a scalable inventory management solution that provides only what the company needs at the time. That translates into lower upfront investment and less user training—both of which are attractive “wins” for companies in the startup phase. As the distributorship starts to grow, however, its inventory management solution has to mature right along with it. A food and beverage distributor that starts out with 200 SKUs and 10 customers, for example, but then expands to 2,000 SKUs and 100 customers within two years, needs a solution that can scale up without any major redesigns or interruptions.
By preparing for future expansion while keeping complexities to a minimum, scalable platforms leave the door open for changing requirements while helping distributors adapt to their own changing business environments (and all without a high upfront investment in technology). Because the software was literally designed to grow along with the company, distributors can continue to leverage the same software for a longer period of time. Combined, these benefits help companies protect their investments and get the most out of them.
Is Your Software Really Configured for Scalability?
At some point, every distributorship experiences the kind of growth that outstrips its technology. Maybe that software was developed decades ago, or maybe it’s just maxed out and unable to scale up any further. It could have been developed on older architectures and because of this, it can’t integrate with other systems and solutions. Or maybe a distributor wants all of the bells and whistles (e.g., dashboards, application programming interfaces (APIs), mobile capabilities, etc.) that modern, cloud-based software platforms have to offer.
The problem is that in today’s competitive business environment, food and beverage distributors can’t afford to spend time and money on manual inventory management processes—nor can they afford to work with solutions that don’t adjust to their current (and future) technology needs. No longer relegated to using proprietary, on-premise systems that offer low levels of flexibility, today’s leading food and beverage companies are leveraging cloud-based platforms with capabilities that can be expanded (and, if necessary, contracted) to meet the enterprises’ needs.
If a distributorship is using Excel spreadsheets to manage inventory; continually finding itself in either overstocked or understocked positions; and dealing with inventory counts that don’t align with what’s really on the storeroom shelves, then it’s probably already losing money and customers. Other telltale signs that an inventory management system isn’t working anymore include:
• Complicated, time-consuming inventory reconciliation processes.
• Overstocking to ensure that the right amount of product is on-hand when needed.
• Constantly having to manually change physical counts to reflect actual in-stock positions.
• Mismanaged inventory levels.
• High levels of human error (i.e., due to manual data entry processes).
• Inability to handle an increased number of stock keeping units (SKUs) as your distributorship grows.
• No metrics to leverage to confidently optimize inventory.
• Too much obsolete inventory in the warehouse or distribution center (DC).
• Poor demand forecasting.
• The list goes on…
“Food and beverage distributors and manufacturers are working with commodity products with quick turns and low margins. Customers require robust reporting capabilities and time is of the essence to answer the question, problem or issue at hand.”
Frank Recht, Food and Beverage Solution Consultant Manager, Oracle NetSuite
For a company in growth mode, the right technology can help gain better economies of scale and improve throughput with less human labor. By investing wisely in technology, a distributorship can achieve all of these benefits and more.
Scalable Inventory Management in Action
Historically reliant on manual inventory processes, Navitas Organics recently digitized its inventory management approach with the scalable, cloud-based Oracle NetSuite application. Based in Novato, Calif., the producer of organic “superfoods” can now track the location of its packaged products and more quickly pick, pack and ship orders. In the warehouse, workers use handheld mobile devices to record when they transfer products to different bins or pick them to fill orders. “Formerly, we had to do a full physical count to reconcile our inventory,” Navitas’ Greg Hingsbergen told Forbes. “Now it’s done in real-time.”
Inventory was crammed onto warehouse shelves (which weren’t designed to accommodate pallets), jumbled, and difficult to manage in terms of first-in/first-out or last-in/ first-out (in relation to expiration dates). “Every day was a scramble to get our orders out,” Hingsbergen said.
Using Oracle NetSuite’s inventory reporting module, Navitas Organics can see if items are approaching their “best before” date, prompting the company to either offer a promotion or push the products out through one of its distributors.
Up next, Navitas plans to enable shipping companies to input information, such as the date and time of pickup, lot numbers, quantities, and ship-to locations, directly into the NetSuite application.
The Best Approach: Walk, Crawl, Run
During the software selection process, the vendor’s job is to help the customer “walk, crawl and then run” in a way that ensures good scale for a growing business. Using a step-by-step approach, distributors will not only be building your inventory management approach on a strong foundation, but also setting that system (and company) up for future success.
In return, distributors gain full visibility into their inventory and the ability to make fast, accurate decisions regarding the allocation of orders and products. To get started, Davidson tells food and beverage distributors to assess where they are right now and where they want to go.
“When researching systems around inventory management, it’s imperative you find one that not only resolves today’s challenges but can also scale and grow with what you foresee as potential needs in the next 5 – 10 years. The right software vendor will be able to provide a long term plan adding what is needed to meet your growth requirements within your timeframe, not the vendor’s.”
SFrank Recht, Food and Beverage Solution Consultant Manager, Oracle NetSuite
Assessing Your Current and Future Requirements
As Navitas Organics and many other companies have learned, finding the right inventory management system requires assessing the distributorship’s current needs and its plans for future growth. And while predicting the future is never an easy thing, assessing a distributorship’s current status, identifying any technology gaps and reviewing its future plans can all help set distributors on the right path.
Key questions to ask include:
1. What are we using right now and how is it working for us?
Take an honest snapshot (or, bring in an outside consultant or software vendor to provide a third-party opinion) of the current inventory management solution and its capabilities. If it’s not working, tell us why—what’s missing?
2. What are our current solutions’ limitations?
What should be on the “wish list” right now if someone asked what the inventory management solution should handle? With today’s cloud-based software systems, virtually anything is possible.
3. What will you need one to five years from now?
Brainstorm with sales and marketing team, talk to your warehouse manager and do some customer focus groups to figure out where the new opportunities are. Taking advantage of them will mean scaling up the inventory management approach to meet the needs of your growing distributorship.
“The inventory management system is the nucleus of your ERP, therefore it is imperative you take your time during the selection process. This decision will impact everyone within your organization and influence how your people are able to spend their time throughout the day. Knowing this, it’s important to pick the right system so your resources are spending their time managing and growing your business versus carrying out tedious non-value tasks.”
SFrank Recht, Food and Beverage Solution Consultant Manager, Oracle NetSuite
Working through this exercise, distributors will have a clear picture of the company’s current inventory management needs and what it will need in 2019 (and beyond).
Getting the Right Products to the Right Place at the Right Time
Whether a company is just starting out in distribution or ready to gain more market share in the field, it will miss the mark if it doesn’t have an efficient, automated inventory management system to build upon. Not only will the company not be able to scale up, but it will always be held back by the number of people it needs to manage all of the manual inventory management processes.
Armed with accurate inventory data that’s recorded, tracked and optimized with a robust software suite, distributors can effectively reduce costs, minimize waste, meet customers’ expectations and more accurately predict future demand. By incorporating automation— namely, barcode scanners that enable real-time updates—inventory management software also removes the potential for human error and gives organizations an accurate picture of their inventory status at any given moment.
Combined, these benefits help firms maximize their profits while minimizing their inventory investments. When supported by a scalable, cloud-based inventory management solution, this approach also helps distributors protect themselves from fluctuations in demand, reduce the risk of loss, minimize administrative workloads and avoid ordering duplications. Most importantly, a scalable inventory management platform ensures that customers get their shipments in a timely fashion in today’s on-demand business world—a must- have for any growing distributorship.
About Oracle Netsuite
For more than 20 years, Oracle NetSuite has helped organizations grow, scale and adapt to change. NetSuite provides a suite of cloud-based applications, which includes financials/Enterprise Resource Planning (ERP), HR, professional services automation and omnichannel commerce, used by more than 16,000 customers and subsidiaries in 203 countries and dependent territories.