Distributors seeking to improve profitability should focus on five areas of business, supported by an ERP manufacturing system that enables tracking the numbers. When you combine the right systems with clear metrics, powerful results follow. CFOs and accounting leaders at manufacturing and distribution companies who use modern, flexible ERP manufacturing systems can help their companies profit and grow. Let’s take a look at five areas to focus on for profitability and the metrics that matter.

Five Areas to Focus on for Profitability

There’s an old Peter Drucker quote that’s almost become a cliche: “You can’t improve what you don’t measure.” Distributors serious about increasing profitability would be smart to measure each of the following. By measuring progress towards goals, you can make midstream course corrections if you find your business drifting away from them.

1.   Sales and Marketing Metrics

Sales and marketing metrics go well beyond units sold. Sure, that’s an important metric, but consider conducting a customer profitability analysis as well. Examining the profitability of each customer account can help you identify which customers contribute the most to net profits. Many companies further segment their customers based on the profitability analysis, offering perks to the most profitable customers. For example, perhaps you can offer “gold tier” accounts expedited shipping, a dedicated support line, or another perk. 

Next, market segmentation is another sales and marketing metric that many distributors overlook. Using data from your accounting or ERP system, examine which markets are growing and which aren’t. The data can guide you towards high-growth industries and markets. This will help you avoid scattering your sales efforts and focus on the markets with the best chance of growth and profitability. 

2.   Cost Analysis

Any CFO worth their salt will conduct cost analysis, but an ERP manufacturing system makes it easier to look at costs. Consider all costs associated with distribution: direct, indirect, fixed, and variable. Direct costs include procurement, warehousing, and transportation, while indirect costs may include everything from personnel to facility and IT maintenance. 

3.   Optimize Inventory

Distributors know that inventory can be their biggest expense. Optimizing inventory management and costing through accurate tracking and forecasting can go a long way towards maximizing profits. An ERP manufacturing system can prevent stockouts and overstocking through real-time inventory updates and automated alerts. Additionally, newer ERPs are AI-enabled, which helps with forecasting. AI forecasting looks at past and present data to forecast the future, and it’s pretty amazing. By using an AI-enabled ERP platform to analyze your inventory, you can optimize it, ensuring you don’t run out of popular products or overstock those that aren’t moving from inventory.

4.   Accurate Reports

If you’re downloading data into Excel spreadsheets to generate reports, using an ERP manufacturing system is a treat. Not only can you run accurate reports quickly, you can generate data visualizations that help others understand the data at a glance.

Which reports can make the most difference when looking for ways to improve profits? Look at the inventory turnover ratio, days sales outstanding, and costs of fulfilling customer orders. Each of these areas can give you insight into places where a few small changes can yield big profits.

5.   Real-Time Visibility

 Are you stuck with systems that take 24 hours—or longer—to update? These dinosaurs are still with us. Many invested in technology years ago and failed to update it since. That’s a problem. Markets today change rapidly. To keep up with the pace of change, you need systems that respond rapidly and even automatically to marketplace conditions (based on rules that you set for them, of course). A cloud-based ERP manufacturing system gives you that flexibility through real-time data. Because it’s on the cloud, changes made in one location flow through the system, updating the data in near real-time. 

Think about it: as stock is scanned out of inventory, the ERP updates the inventory count. Because you’ve set an automated alert when stock counts drop below a certain level, you receive a quick text or email letting you know you need to order widgets immediately. It’s your best-selling widget. Thanks to real-time visibility, you know exactly how many widgets to order to avoid stockouts. It’s a win-win!

But you can’t access data this rapidly on aging systems. If you don’t have such flexibility now, you’re missing a crucial competitive advantage. 

Sage 300 ERP for Distributors and Manufacturers

 A great ERP manufacturing system is Sage 300. With Sage 300 ERP, you get the freedom to choose the edition that fits your business best: Standard, Advanced, or Premium. Each one comes packed with powerful modules, easy customization, and the flexibility to grow with you. Everything connects seamlessly, so your business management tools work together without the headaches.

The best part? You only pay for what you actually need. That means a lower total cost of ownership, strong protection for your investment, and none of the extras that don’t add value to your business. It’s ERP made simple, practical, and built around you.

Sage 300 offers multi-location inventory management, so you can get fast access to stock counts and availability. E-commerce integrations with many of the most popular online platforms, including Shopify and Amazon, make it easy to keep customers updated. Financial forecasting with real-time analytics and tools to automate warehouse tasks not only improve efficiency, they help you make decisions that can improve profitability, too.

With the right ERP manufacturing system, distributors and manufacturers have the best platform at their fingertips to leverage data and analytics for profitability. You can’t improve what you don’t measure, and with Sage 300, measurement of all areas of your business is easy.

PositiveVision, Chicago Area ERP Manufacturing System Consultants

PositiveVision is an ERP manufacturing system consultant in the Chicago area with many years of experience helping companies like yours choose the best system for their needs. We’re a full-service consulting firm dedicated to small and medium-sized businesses. We’d love to help you find new ways to improve profits. Please contact us for more information.

Robert Baran

Robert Baran is the founder and President of PositiveVision. He has worked in a variety of positions including system analyst, computer consultant and programmer, project manager, and division manager.