Implementing the Perfect Business Landscape

ERP Software in today’s rapidly evolving business environment can only enhance chaos into pure organization.   The changing business landscape is a battleground for companies aiming to enhance their market position and financial stability. The complexities introduced by global events, such as the COVID-19 pandemic and geopolitical tensions, have underscored the need for robust, adaptable business strategies that withstand the pressures of an unpredictable global market.

The article describes how the above events affected the modern corporate world, including real-world case studies that illustrate the critical challenges and opportunities faced by companies. By examining the successes and pitfalls of various business scenarios, the article provides insights into effective business practices and the importance of integrated technology solutions in facilitating smooth transitions and sustained growth. As we navigate this ‘Brave New World’, the lessons learned from these experiences are invaluable in shaping strategies that not only respond to immediate challenges but also pave the way for long-term success.

The Fragility of Global Supply Networks

The fragility of global supply networks can be compared to “Brave New World” by Aldous Huxley which is the searching vision of an unequal, technologically advanced future.

  • Companies assumed that having products manufactured in the Far East where the labor cost is lower would improve their bottom-line profit.
  • This “Perfect World” worked well until the COVID-19 virus.
  • The virus affected countries worldwide upsetting this “perfect world” resulting in ships lining up for weeks to get into ports.
  • This caused Business Disruptions and Supply Chain Shortages affecting the End Consumer.

Today’s Supply Chain Reality

The Middle East War forcing ships to go around Africa created a new Supply Chain Reality leading to business disruptions.

  • Inventory arriving late caused production issues.
  • Orders delivered behind schedule were canceled accompanied by penalties.
  • The returned orders become excess inventory affecting warehouse space and can lead to cash flow issues.
  • The accounting department is so busy issuing credits or adjustments, that often it can’t take advantage of the vendor’s early payment discount.

New Business Roles Companies Assume

As the business landscape evolves, companies are continuously adapting and redefining their roles to stay competitive and meet changing market demands. This shift has been particularly evident in the distribution dynamics among manufacturers, distributors, and retailers.

Manufacturers are increasingly circumventing traditional distribution channels to sell directly to retail stores, while distributors are not just importing but also assembling products to add value.

Meanwhile, the rise of online retail has reshaped consumer interactions, directly impacting physical retail spaces and necessitating strategic adjustments from established retailers.

These changes highlight a significant transformation in how products are delivered to the consumer, underscoring the agility needed to thrive in today’s market.

  • Manufacturers bypass the Distributors by selling to the Retail Stores.
  • Distributors importing products from overseas and assembling them at their warehouses bypass the Manufacturers.
  • Online Retailers order directly from overseas and bring the finished products to their distribution centers, where they are re-packaged and shipped to consumers.
  • E-commerce has become a new fact of life affecting shopping malls.
  • Large retailers who face a decrease in sales are forced to consolidate stores while others go out of business.

Plastic Manufacturer and Distributor M&A Case Study

The Plastic Manufacturer who has 76 locations worldwide, decided to acquire a distributor to boost sales and improve its bottom-line profit.

The M&A resulted in having three ERP Systems leading to Raw Material and Finished Goods issues.

Business Disruption Resulting from Multiple ERP Software.

  • The above ERP Systems could not support both Manufacturing and Distribution.
  • Issues keeping track of Raw Materials and Finished Goods resulted in Inventory Accuracy dropping to 90%.
  • Changing to Integrated Single Database ERP/WMS Software, led to accurate Manufacturing and Distribution capacities.
  • Using the new ERP/WMS Software resulted in 99.95% Inventory Accuracy and a Significant Reduction of Operating Expenses.

Large Food Distributor/Manufacturer Case Study

  • The CEO of a Food Manufacturing company decided to expand his business by acquiring a Food Distribution company. The acquisition enabled him to enlarge his sales force and gain a bigger share of the market being able to sell to supermarket chain stores that were the distributor’s clients.
  • Before the M&A took place his consultant told him that he would have integration issues because of the two ERP Software Systems. Disregarding the advice he said, “My IT manager assured me we will not have an issue. He feels his people will be able to support both software systems by having hotline support from our current software vendor and the new company vendor.”
  • When the food distribution vendor had a software upgrade the CEO realized the IT manager was wrong. It resulted in integration issues leading to inaccurate inventory with each vendor blaming the other software vendor for causing the issue.
  • The above issue was resolved when the CEO purchased Single Database Integrated ERP/WMS Food Software for Manufacturing, Distribution, and Food.

Fish and Seafood Importer Case Study with ERP Software

The COO of a Fish and Seafood company who contacted me said they import their products from all over the world, and his company was looking to replace their legacy ERP Software. Hearing this, I told him that we should discuss his business requirements before we have the demo so that we can have a “workshop-style” demo addressing his unique business needs.

His response surprised me. “You are the person who asked for my business requirements rather than rushing to give a demo. So far every software vendor we met gave a demo presenting their software’s features and functions without addressing our business requirements.”

We spent the next hour discussing his business requirements and he shared with me the issues his company encountered:

  • Being a Distribution and Manufacturing Company, they had Two Software Vendors and had to call separate hotlines when support was needed.
  • I told him that the software house we represent has ERP/WMS Integrated Single Data Base Software for the Distribution, and Food Industries and we should discuss his unique business needs.
  • His response was: “I am glad you asked. We have issues controlling the cash.”
  • “Are you in the retail business?” I asked him,
  • “Yes and no. We do sell online and it’s not an issue, but on weekends people come to the warehouse to buy fish and seafood and pay for it in cash”
  • “How do you keep track of the cash?” I asked him.“I dealt with two companies that had the same issue.”
  • “One was a large flower distributor where the bookkeeper stole money.
  • The other was a food distributor who imported products from Italy. On weekends people bought items at the warehouse and paid in cash. The warehouse manager stole money.”
  • “That’s our CFO’s biggest issue. We don’t have a good way to control the cash purchases.”

I told him that the the company we represent has integrated ERP/WMS Software with a Retail Module that will enable his company to open a store next to the warehouse with cash registers that will update the computer in real-time mode enabling his company to keep track of the cash received.

Today, using the Software we represent, this Importer has a 25,000-square-foot Retail Supermarket next to his Warehouse selling fish, seafood, and a wide variety of food products to the public ranging from pasta to imported cheese and olive oil.

A Brave New World of Mergers & Acquisitions (M&A)

When M&A occurs the number of new users and the transaction volume might substantially increase.

  • This can result in information overload and the current computer system may not be able to handle this sudden change.
  • The acquired company might not have the same business requirements as the company taking over.
  • Having multiple software platforms will cause the same result as in the case study above of the Plastic Manufacturer & Distributor where the Raw Materials and Finished Goods Accuracy dropped to 90%.

Ensuring Smooth Business Growth

  • A business requirements study should be performed the same way as evaluating old equipment in a factory.
  • When evaluating the current software, the focus shouldn’t only be on how well it meets today’s business requirements, but whether it can meet the company’s growth when it moves to the “next level.”
  • Not planning for future growth can be very costly in today’s business reality which is changing at lightning speed.

Planning for Future Expansion with ERP Software

  • People are creatures of habit and don’t like change.
  • If the current software is outdated, it will result in business disruption and expenses down the road.
  • The question that should be asked:
  • If an unexpectedly large amount of new users or data transaction volume occurs, could the current software handle it?

Multiple ERP Software Issues

  • Having multiple ERP Software will result in integration issues and inaccurate inventory count in multiple warehouses.
  • Some warehouses might have excess inventory while others are short of inventory.
  • The warehouses that are short of inventory will need to order more, while other locations have excess inventory.

The Benefits of Integrated ERP Software

  • Inventory at warehouses that have excess inventory can either be transferred to warehouses that are short of inventory, or shipped with a common carrier to the stores or consumers.
  • Excess user efforts accessing multiple databases that result in business disruption will be eliminated.
  • Streamlining the operation will result in providing better customer service.

Preparation Before Selling the Business

When Business owners are ready to sell their business, they often feel they are not getting fair market value. This leads to difficult negotiations that can result in M&A failure.

  • Speaking with M&A advisors, I tell them that selling a business is the same as selling a house:
  • If the grass is not mowed, the house exterior is not painted and the roof is not fixed, the seller will have difficulty selling the house despite the fact it might be a solid house in a nice neighborhood.
  • When the house is finally sold, the seller will receive a lower price than he asked.

Legacy ERP Software Issues

  • Misplaced inventory will not be found until physical inventory is taken often becoming excess inventory.
  • Not being able to provide accurate inventory and financial information.
  • Inaccurate sales information on the current and prior years’ sales.
  • If any of the above issues occur, the buyers will not trust the information provided and the M&A deal might fail.

Steps that should be taken before Selling the Business.

  • Legacy software should be replaced with new ERP/WMS Software.
  • Before purchasing new inventory, product movement should be evaluated. This will eliminate having excess inventory.
  • If the customer buys less than prior years, the reason for it should be determined and payment history should be evaluated. This will provide a good analysis of the customer’s financial stability.
  • When requested, the ability to provide instant information.

Taking the above steps will increase the sellers’ position when negotiating the sale of their business.

Dani Kaplan

As the founder and driving force behind SMC Data Systems, I bring over 40 years of dedicated experience in empowering mid-market companies through transformative ERP solutions. My journey began in 1980 when I established SMC with a vision to revolutionize how businesses handle their operations through advanced technology. Today, as a trusted advisor in ERP software, supply chain management, and warehouse automation, I am passionate about helping companies achieve operational excellence and substantial ROI. SMC Data Systems, under my leadership, has been a proud representative of VAI’s integrated ERP software, leveraging IBM Cognos Analytics to deliver real-time insights that drive efficiency and growth. Please connect with me on LinkedIn at Dani Kaplan