The 2020 Mid-Year Economic Update_long

How Distributors Can Use an Economic Slowdown to Their Advantage

Three key areas to focus on to improve profits even during a business slowdown.

When business slows, it’s the perfect time for distributors to find efficiencies and take share from your competitors.

On our recent MDM Mid-Year Economic Update webcast, economist Brian Lewandowski talked in depth about a distribution slowdown period. Although no one can be 100% sure of what the economy will do, if a slowdown is coming, you can use it your advantage. 

One of my earliest distribution mentors used to say, “When business slows down, it’s the perfect time to get more efficient and take share from the competition.” If you can deliver a better customer experience when your competition is pulling back, you might find that this helps your company to avoid participating in any slowing business cycle.

Recently, I sat through an online training session with a distribution ERP provider (I was a user of this software as a distributor). I was surprised how much faster, accurate and more efficient this ERP provider has made their system in the past few years. 

Simple Upgrades

It reminded me that there are three key areas where even a simple upgrade to your ERP can net you big profits during a business slowdown:  

  1. Increase your purchasing speed.During the session, I estimated the new enhancements probably would improve the purchasing efficiency by 15%. That savings could be used to allow the purchasing team to spend more time optimizing your inventory, concentrating on slower moving C&D items and working on reducing your stagnant/obsolete inventory. As sales slow, inventory always lags and your carrying costs for inventory rise. More efficient purchasing frees up your team to adjust your slow-moving inventory.
  2. Increase your ordering speed.In that same session, I saw I could write more lines per minute, create quotes faster and locate inventory in record time. All three of these enhancements would free up your inside team, quotation, order writer and sales teams to deliver better service to your customers. As your competitors cut back on service because of a slowdown, your team can deliver better service. That’s a simple way to take share from your competitors, and hold onto to that customer share after the slowdown ends.
  3. Improve your purchasing and order accuracy. Today, an ERP upgrade will almost always move some of your manual typing work into a click-and-drag transaction. Removing as much manual line-by-line order writing to a click-and-drag approach will lower the number of customer service issues caused by mistyping an order line. That time you save by not fixing issues can be used to improve the customer experience.  

These are just three of the benefits of upgrading an ERP. During a slowdown, many of your competitors will just adjust their business by using the standard approach of removing services, inventory and people. That’s not a recipe for improving customer service — but it can create an opportunity for you take share.

Talk to your existing ERP provider about what enhancements they recommend to help your team write purchase and customer orders faster and with more accuracy.  

Upgrading your existing ERP during a slowdown period might be one of your best investment opportunities for 2020. 

As always we value your feedback. Feel free to comment below or contact me at john@mdm.com.

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