Distribution Key Performance Indicators (KPIs) Can Do More Than Just Provide a Financial Snapshot

When someone references the term KPI, most often we think about financial data – the good old bottom line of profitability. Are we making money and where? This is for good reason. Business leaders have to keep a close watch on the financial health of the company by looking back at past events and by attempting to predict and thus steer how the company performs in the future. It’s natural to prioritize the KPIs that give visibility into the health of the entire distribution operation.

But monitoring KPIs is no longer just for giving you financial data or only a good fit for giant distribution companies. In order to keep up and get ahead, small and medium sized distributors also need to think seriously about how to harness KPI data to move the company forward. Below you’ll see some very quick KPI definitions and then I’ll talk about how you can use this information to steer your organization more effectively towards success.

Historical Data: Looking backwards into past business performance is usually termed historical KPI data. Summaries of completed projects, viewing their profitability, and looking at past trends can help you formulate how you approach your forward-looking business plan.

Predictive Data: Looking into the future is typically called predictive KPI data. Your management team can set goals to guide how decisions are made. In distribution, this might mean analyzing demographics and understanding the profitability of certain products.

Ok, that’s good information, but how can you improve your KPI tracking as a distributor?

Many existing distribution ERP platforms, such as Acumatica, now come with a pre-defined set of KPIs to help you get started. You should expect your ERP to have interactive dashboards that are easy to set up, adjust and change by an employee’s role so each person has access to the information they need. This is something that Acumatica Distribution Edition does seamlessly. With the click of your mouse or even a tap on your mobile screen you can drill down into data for clarity and understanding.

While a great starting point, once you master those base KPI sets, you can move on to tailoring them for metrics specific to your distribution operations. Make this a transparent and group process to be sure your department heads are invested and able to obtain the data they need to streamline how they perform their jobs. The dashboards and views you set up will enable all your teams to become more effective and in turn, more profitable.

We have found that many of our distribution customers look at KPIs in relation to inventory. They need to be able to have real-time visibility into where their inventory is and the reorder costs. Determine profitability at the product and warehouse level to better control costs across the entire supply chain.

Other important areas that you will want to be sure you can track closely include:

Aktion Associates is a Gold Certified Acumatica Partner. Please reach out to me so we can either set up an Acumatica Distribution demo or to get the Distribution ERP discussion started.

 
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Over time businesses makes decisions to grow in new directions which can lead to challenges in the future. We’re seeing three distinct types of companies in our target industries of Construction, Distribution and Manufacturing that have adopted new avenues of growth. We call these multi-industry hybrid companies.

One type is a distribution company that starts a lucrative value-add business to convert lower margin products into higher margin by offering modified or tailored products. An example is a packaging product distributor that creates custom packaging for a product used by an Original Equipment Manufacturer (OEM) looking to reduce its manufacturing labor costs.

The second type is a manufacturing company that reaches capacity in its production operation and decides to add more buy-sell products. Expanding a manufacturing operation can be costly so dedicating some floor space to warehouse consigned or purchased inventory can add margin without a large investment.

The third type is a manufacturer that manufactures and installs a product. Aktion has a few clients that make cast concrete products and also need to install and service their products. This example has combined needs for inventory, manufacturing and project accounting which is an interesting combination of requirements.

Again these are just three examples. There are many more and I will go into a detailed analysis of specific challenges and solutions for these Multi-Industry hybrid businesses.

Of these three types, the majority are running their business using multiple disparate, disconnected software systems or, even worse, using a central accounting system and manually managing these additional requirements using spreadsheets and other home-grown methods.

As an ERP reseller and technology adviser, Aktion receives inquiries weekly from companies who need to modernize their business software and are looking for a single, integrated ERP system that meets the company’s diverse needs and growth capacity.

We anticipated these diverse and evolving requirements and earlier this year invested in adding staff, services, skills, and deliverables to provide these multi-industry companies with the software and support they need to run their business. The Multi-Industry (MI) Division was launched in January 2020.

The MI Division includes application consultants and software engineers focused on servicing the complex needs of a multi-industry company. To ensure the success of the new division, Aktion transitioned senior staff from our Distribution, Construction and Manufacturing practices.

The cornerstone solution of the MI Division is Acumatica Cloud ERP. Four years ago, Aktion became an Acumatica Gold Partner. Acumatica is a modern, cloud-based, integrated ERP solution that delivers everything a hybrid company needs to manage operations. Acumatica developed its own XRP platform which gives each customer control over integrations and upgrades, even in a SaaS environment.

Acumatica offers Construction, Distribution, Manufacturing, Field Service and Commerce editions. Each of these editions may be combined to include cross-over functionality needed for hybrid company requirements making it an ideal platform for Multi-Industry division customers.

In future blogs, I’ll go into more detail about some of the common hybrid business scenarios we’re addressing. Every business is unique and presents its own set of challenges, however; we’re seeing commonality and repeat scenarios to solving these complex challenges.

If you’re a hybrid company that’s struggling to find a solution, just know there is one available – Acumatica.