A new survey commissioned by Kidderminster-based OGL Computer, among managers in the thriving Midlands wholesale and distribution sector, reveals that employee cost is the key factor affecting company profitability with 56% of respondents citing it as a top three reason, followed by Brexit impact and inaccurate data, both at 44%.
With the fate of Brexit still to be decided, a danger for wholesale businesses lies around stockpiling products and parts that are currently freely available from Europe. The National Living Wage is rising to at least £9 an hour by 2020, which will affect some warehouse employees. Inaccurate data is the only major concern that can, however, be influenced by wholesale businesses. Inaccurate data can lead to potential loss of revenue and inability to correctly assess performance and sales.
One respondent cited major factors damaging profitability as: “sloppy work from our sales team where they follow an old price rather than checking up to date prices with suppliers and price increases from suppliers which are difficult to pass on to customers in the current climate.”
Leonie Pannell, survey participant and Managing Director of South Midlands based Cablecraft, a supplier of cable marking systems, accessories and management products said that: “the major factors affecting profitability are the state of the economy, with the weakening pound, competition lowering prices and lack of investment by the government.”
Entering a potentially uncertain economic period, wholesalers’ efforts to increase profitability are critical. Technology is at the heart of this. 80% of respondents agreed that technology is vital to the efficient running of their business, while 65% agreed that automating business processes helps their companies stay competitive.
A key finding was the widespread of technologies used and the disparate nature of systems that are not necessarily “talking to each other” to provide a full view of operations. Wholesale businesses use a range of software systems to function: 98.5% of respondents use one or more software systems to run their business, from warehouse management, inventory/stock control to accounting software, CRM (customer relationship management) and ERP (enterprise resource planning).
Alarmingly, all respondents still use some form of manual data processing, in spite of more than a quarter (28%) citing those manual processes to be ineffective in managing business operations.
61% of respondents saw benefits from integrating disparate systems, with the main reasons for use of a single system as improved accuracy of information, increasing staff productivity and reducing admin time.
Single systems are beneficial for online stores, where stock checks and reporting ensure that customers have a good understanding of delivery timescales and product availability. Indeed, survey respondents confirmed that e-commerce is growing in significance in the wholesale sector, with 64% stating that being able to sell products online easily is important to them.
In the era of digital transformation, cloud computing is a driver for change, with 68% of respondents agreeing that hosting applications and data in the cloud have improved efficiencies and productivity (or would improve them if cloud were implemented). Despite the benefits of cloud, concerns about security persist and half of the respondents (50%) have concerns about security of their data in the cloud, so are reluctant to move core applications and data to the cloud.
Critically ERP systems are a key technology with 64% agreeing that ERP systems give greater availability and control of stock. ERP refers to a suite of integrated software that businesses use to manage day-to-day business activities, such as sales order management, stock control, warehouse management, CRM and more. However, 42% of respondents think that ERP systems are for large enterprises only.
Leonie Pannell added: “The single ERP system brings all the customer data including orders and quotes into one screen. The fully integrated, live data, stock module within the ERP System enabled Cablecraft to go down the e-commerce route. The fully automated system between sales and warehouse also allows us to offer a very fast and reactive service.”
The main barriers to deploying an integrated software solution were cost, with 42% citing budget as the top hurdle, followed by 37% selecting business disruption and 33% with fear of change. Cost is associated with the misconception that ERP systems are only for larger businesses, and the lack of information about affordable subscription-based models.
OGL Computer is the author and developer of prof.ITplus, a fully integrated ERP solution for stockists, distributors and wholesalers across the UK. Nick Davies, Head of Software Development at OGL Computer, commented: “The survey findings correlate with much of what we are hearing from our wholesale and distribution clients. The uncertainty of Brexit and impact of wage increases is leading companies to focus on increasing profitability, with technology playing a huge role in business success.
“Many smaller businesses just don’t have the time or money to prepare for Brexit and are waiting for a decision, and whatever the outcome they are hoping that EU and British governments take a pragmatic approach to enable continued business with EU suppliers and customers.
“It’s great to see businesses adopting more technology instead of inefficient manual processes, but disparate systems are not always leading to efficiency. A single view of a business, with the same information available to multiple users will lead to better profitability, increased productivity and accurate data for planning purposes. It also enables wholesalers to extract data much more easily and analyse and manipulate the data to assist with reporting.
“At OGL Computer, we take our clients through a comprehensive process to ensure we fully understand their business and the way they operate and then map their processes into our software. We also plan the migration process from data transfer to go live in detail to minimise business disruption.”
OGL Computer’s top 5 tips for a smooth ERP implementation
- Select an ERP product based on your future business strategy and goals – choose a software solution that will grow with you and support your needs in the future.
- Conduct a Business Process Review – changing software is a great time to review your existing processes to see how you can use new technology to enhance and redesign your processes to increase effectiveness.
- Review and clean data – take the time to review and clean your customer, supplier and product data to make sure you transfer quality data to avoid further complication and data errors.
- Don’t underestimate training – identify super users for each department at the start of the process so they can help to train staff moving forward and take ownership of their processes for their division. Quality time for training will ensure you can maximise the effectiveness of the system.
- Choose the right partner – invest in a software provider that can support you and help you to achieve maximum potential from your investment.
NB: survey conducted in September 2019. Respondents were given a number of options for each question.