Industrial distributors face challenging issues: materials management, complex purchase and sales orders, multiple pricing models and rising transportation costs. Because they typically deal with semi-finished goods, managing the handling of these products can be difficult and expensive.

ERP software for the distribution industry helps companies deal with these challenges in several ways. Here are a few key features to look for when examining the plethora of available options:

Materials management directly affects your bottom line. When goods move through the supply chain, distributors have three options: selling the products directly to the end user, holding excess inventory (and incurring extra costs) or returning the products to the supplier (also incurring extra costs).

A good ERP product can reduce the financial consequences of each of these options, streamlining the movement of goods through the supply chain.

Specifically, demand management software can determine how much product is needed. A warehouse management system keeps you apprised of where goods are and the quantities available. And a purchasing management module reports what product is coming in and how and when it's going out.

Order fulfillment is crucial to customer satisfaction. Due to the complexity of managing purchase and sales orders, distributors have to deal with a combination of buying bulk and buying a large amount of different line items.

An ERP system's sales order management feature can tackle the number of items being ordered and where they are within the supply chain. It can also calculate delivery times, so distributors are ready to receive the goods (or deal with any problems that crop up during shipping).

Pricing can be a complex process because a distributor may simultaneously face multiple pricing models—not to mention the added complexity of separating lots within a sales order, when bulk pricing no longer applies.

An ERP system helps by using pricing and discounting functionality. For example, a distributor can price different types of products by weight, giving a discount to the end-user if they buy in bulk, or give special consideration to items that have been separated out of lots. The software can also price “typical” pallets where nothing needs to be modified.

Rising transportation costs are putting pressure on distributors' profit margins.

The transportation management module within an ERP system should include two important functions that help distributors deal with freight costs: load optimization and rate shopping functions.

Load optimization calculates how much product can fit into a certain physical space by weight and size. When the correct load is in place, it will adjust the amount of fuel needed to move it and thus cut down on fuel costs.

A rate shopping function searches the Internet for competitive rates and selects the best one.

ERP software can greatly reduce the challenges of materials management, complex purchase and sales orders, pricing methods and rising transportation costs faced by every distributor—helping them streamline their processes and keep costs in line.