Supply Chain Optimization for Wholesale Distributors

Danielle Lobo

A supply chain is the life cycle of a product from production to purchase. Compiled of organizations, people, and resources, a supply chain will also include transportation of the product, marketing, operations, finances and even customer service. Wholesale distributors play a large role in the supply chain and are often the middleman who purchase the finished good, hold it, and sell it at wholesale prices to retailers or in some cases directly to the consumer. In wholesale distribution, supply chain optimization is necessary for reducing costs and remaining competitive in the business landscape. In this post, we outline 3 areas of business you can focus on to optimize your supply chain and grow your business.

Ensure Good Communication With All Players in Your Supply Chain

Good communication will help you build trust with your partners. You may have heard before that trust is hard to build and easy to lose and with that being said, think about how dependable you are as a partner and be sure to follow through with your word. Don’t make promises you can’t keep and communicate any issues you may have that would affect your partners. We’ve spoken about managing seasonal inventory before and in some industries, it is common to order something from a wholesale distributor that doesn’t need to be delivered until a later date. Do you have the proper software in place that can manage these types of orders? If you do, it’s important to share this information with your partners so that their order process is smooth and any integrations are seamless. Another great example is big-box retailers who often require that their suppliers and vendors can support EDI transactions. An all-in-one ERP system has functionality for both examples and allows you to be the reliable partner that you promised to be. Whether it’s the manufacturers you’re buying from or the retailers you’re selling to ensuring you have the right level of software to manage your needs and your customers’ needs is the best place to start when thinking about supply chain optimization.

Costing Methods for Supply Chain Optimization

Landed Costs – Tracking your landed costs takes into account all costs associated with getting inventory to your warehouse – your true inventory costs. Common landed costs include duty, brokerage, freight, insurance, storage, wharfage and more. By tracking landed costs, you can determine how to get products to the consumer in the most cost-efficient way. Blue Link’s landed cost tracking software allows you to determine the actual cost of your inventory and gives you the ability to make informed purchasing and pricing decisions, improving your supply chain.

FIFO – First In, First Out is a method that suggests selling the oldest items in your inventory first so that there is a constant flow of fresh products and carrying costs are reduced. This is especially helpful for companies in the food and beverage industry who want to avoid large losses due to spoilage. This also gives you insight into how long you are holding your products – the longer you hold them, the more costly it is to your business.

The video below outlines additional costing methods that will aid your supply chain.



Maintain Visibility of Your Stock

Distributors share the same supply chain challenge as manufacturers and retailers when it comes to the visibility of stock. With a cloud-based ERP system like Blue Link, you will have visibility of your stock in real-time by using inventory management and WMS functionality. A good example of an inventory management technique that can be used for supply chain optimization is consolidated shipping. This means combining different customer orders into one shipment and sending it to a location that is central and in close proximity to each individual order. You can then use local carriers to ship the products to the end consumer.

Warehouse management is integral to business success especially when planning inventory levels and purchasing to meet customer demand. ERP warehouse management will give you the ability to track the movement of products from your supplier to your customer. If you don’t have enough stock, you will drive customers straight to the competition and if you have too much, it will cost you to hold the extra product. If you have an eCommerce platform and/or a brick-and-mortar store, you’ll also need visibility into the flow of goods in and out of those selling channels. When researching for software ask about order management functionality and analyze historical sales data to help you automate the sales order process, understand the best time to order more products and keep up with demand.

So, as a wholesale distributor who is buying and selling products, you may not have given supply chain optimization enough thought. At the end of the day, the main goal is to balance customer demand and costs which you can do with the right software – ERP software.