5 common problems distributors face

by | Oct 26, 2023 | Data Management, Distributors, Inventory Management

In today’s evolving supply chain landscape, distributors face mounting pressure from both vendors and customers to deliver exceptional service, error-free order processing and seamless communication. Without streamlined processes, businesses often resort to inefficient or manual methods, leading to many issues. When distributors lack the agility to meet their customer demands head-on, they can encounter these five common challenges:

1: Inefficient order management

When suppliers fail to provide consistent and accurate information regarding order status, distributors can experience costly delays. Confirming whether orders can be shipped on time and in full can be difficult, leading to logistical disruptions and customer dissatisfaction. The need to efficiently manage order expectations and swiftly identify alternative items becomes essential to maintain smooth operations and meet customer demands. In some cases, this may even necessitate hiring additional staff dedicated to manually tracking down this critical information, which can strain a company’s resources and increase operational costs.

2: Inability to manage supplier performance

Struggling to measure and manage supplier performance can often lead to significant disruptions in the supply chain. Poor fill rates and delayed deliveries can have a cascading effect on a distributor’s business, impacting customer relationships and operational efficiency. Additionally, it can lead to unnecessary holding of excess inventory, tying up valuable capital and storage space. Empty shelves and missed delivery dates can result in customer dissatisfaction and potential revenue loss.

3: Inefficient inventory and distribution management

A distributor with a costly inventory and distribution management process often lacks adequate visibility into what shipments are on the way and when they will arrive. This can lead to slower inventory turnover, with products sitting in the warehouse for extended periods, tying up capital that could be invested elsewhere. It can also create bottlenecks in the receiving process, causing order fulfillment delays. Costly strategies are often labor-intensive. For instance, if products need to be manually opened, counted and redistributed, it may require hiring additional staff and increasing labor budgets.

4: Poor customer experience

It is impossible to provide an optimal customer experience without accurate and consistent item data from suppliers. Timely new product introductions allow a distributor to offer the latest products and meet changing customer demand—any delay can leave the business more vulnerable to competitors. Inaccurate item data can lead to poor product placement on the shelf or online, leading to declining sales performance. Staff may find themselves dedicating excessive time to collecting, updating and cleansing item data to compensate for its lack of accuracy. This diverts valuable human resources away from more strategic and customer-centric tasks.

5: Manual invoice reconciliation

A lack of an audit trail for efficiently matching orders to invoices can lead to costly consequences. Distributors can miss out on valuable early payment discounts, which are crucial to optimize cash flow and reduce costs. A poorly documented or unorganized reconciliation process increases the risk of overpaying invoices, potentially leading to significant financial losses. Labor costs are a recurring theme with inefficient processes, often requiring additional staff to communicate with trading partners and manually resolve discrepancies and inaccuracies.

Modernizing the supply chain

EDI turns a labor-intensive, error-prone process into a quick and efficient information flow with minimum human effort. Automated order and inventory management removes bottlenecks, streamlines communication between trading partners and improves supplier and customer relationships. As an industry leader, SPS Commerce builds full-service EDI solutions that provide the efficiency a distributor requires to scale their business profitably.

For more information on incorporating EDI or other supply chain technologies into your business, visit the SPS website and receive a free demonstration of our different software solutions, or speak to one of our supply chain experts.

SPS Commerce Blog Team