Conditions that Have Distributors Embracing a New ERP System
I got a chance to read Mark Jordan’s post that shared his point-of-view around the “Top 5 Reasons to Buy an ERP”. I thought I would add a few additional practical insights on the topic…..
Some may call it a “new ERP system”, others may refer to it as a “digital transformation”. Whatever you call it, it is clear distributors are actively in search of enterprise technology to help extend the future of the businesses.
Over the last month, several distributors have simply asked me, “What are the typical conditions that drive companies like us to invest in an intelligent enterprise?”. By intelligent enterprise, I mean a new system that may include both intelligent ERP and integrated B2B and SCM solutions.
My responses have been both strategic and tactical in nature. Distributors have shared the following challenges with me…..
- “Our systems, although they served us well for many years, are now just too old to take us where we want to go”.
Many wholesale distribution systems are home grown and now difficult to maintain. Some were purchased decades ago and are no longer supported or have been heavily modified and beyond upgrading.
- “Our future business models cannot be enabled by our current systems”.
Distributors have evolved from transitional wholesaling to hybrid business models that include, specialty manufacturing, value added services, B2C channel expansion, etc., they create lists of new functional system requirements that IT resources must deliver on.
- “We don’t want to support or update our own data center anymore”.
Many distributors want to get out of the business of maintaining their own mainframe or AS/400 data centers. They want to reduce IT TCO by moving their system into a private cloud environment. A private cloud allows both a reduction in IT cost, and the ability to always keep their ERP system updated.
- “We have a number of ERP’s we have accumulated from a series of acquisitions. We would like to get on a single platform”
The number of distributors with revenue over $1B has doubled in the last decade because of industry consolidation through acquisitions. M&A activity has doubled over the last 5 years, leaving distributors with multiple ERP systems to support. They are striving for a single system allowing for centralized real-time information.
- “Our systems cannot support our global expansion strategy”
ERP systems need to support multi-language and multi-currency requirements as distributors expand globally. Often an international growth strategy is a catalyst for replacing an existing aging ERP.
As Mark concluded in his post, “Whatever the reason, it is becoming a fundamental imperative for wholesale distributors to digitalize their business to gain the competitive edge required to compete in the coming years.”