Sales and Distribution Management and Training

    August 6, 2003

Are you interested in distributing products using the web? With the customer-centric distribution chain today, the role that a distributor plays includes enabling direct ordering and tracking of orders over the Internet. Does it mean that you switch your current operations to the Internet? Or does it mean making use of the Internet in such a manner that optimizes your role in the value chain.

In the good old days…A wholesaler procures an order, acquires goods and stores them in a warehouse, supplies order-based stock for a calculated amount of profits. He played a number of roles – he was an intermediary who took care of logistics and moved stock around, a consolidated sales agent for suppliers, a local customer service point and a demand buffer for manufacturers.

Yes, multitasking existed even then, but within a limited scope. But there were limitations – of the physical kind – all these roles could be played out only within a certain geographical terrain.

An online distribution network today

Today, the role of the distributor as an intermediary has morphed into that of a ‘disintermediary’. A distributor plays a virtual role, an almost invisible part of a smooth supply chain. Third-party logistics providers help ship goods from one part of the globe to another in a day, while a more customer-centric distribution chain enables direct ordering and tracking of orders over the Internet.

Remote means of customer service diminishes the importance of a local customer. Today’s supply chains have become extended value chains where distributor operations have shifted from the buy, hold and sell paradigm to the sell, source and ship paradigm.

To make these necessary shifts the distributor needs to have more information about all customers, learn to manage inventory from other distributors and have a workflow-based information system.

Effective supply chain management is an intricate loop, one that begins with the customer and ends with the customer.

The use of databases, communication systems and the foremost advanced software are crucial to any supply chain management system. Optimal management of a supply chain results in revenue enhancement through high customer satisfaction and repeat sales. Web enabling a supply chain helps connect an enterprise to all its trading partners taking away all the weak links existing within it.

This diagram shows how manufacturing trends have changed over time.

What does online distribution management mean today?

A web enabled distribution network helps a distributor work with multiple business models; collaborate with business partners for better pricing and a smoother supply chain. Selling, sourcing and shipping constitutes a part of virtual operations and the sales agent, logistics coordinator is the distributor himself.

Selling is accomplished through the Internet and traditional channels and information about customers helps forecast demands. A no risk, no title approach to sourcing and negotiating pricing along with collaborated working with other distributors, partners and manufacturers creates demand forecasts and negotiate allocations through vendor managed and demand managed information.

Let’s study the features of an online distribution network:

  • Web enabled distribution chains
  • Online order management
  • Warehousing

A distributor takes orders over the net. These orders may be for goods that he does not hold or source. In short, the distributor does not own the inventory! This order is added into a combined pool of orders that are from a consolidated list of clients. Manufacturers have already worked in combination with this pool in forecasting demand, reserving allocation and even agreed on pricing.

The order that comes in is matched with the shared pool of orders for preferred manufacturers and then drop-shipped directly to the customer from the manufacturer using a third-party logistics provider. Payment to the manufacturer happens at the time of the shipment and not at the time of the delivery of the goods.

Whole sale distribution factors that are driven by e-business are:

  • Collaboration – between distributors, customers, suppliers, logistic providers
  • Consolidation – mergers and acquisitions and many other suitable cooperative arrangements
  • E-commerce initiatives between businesses and customers
  • Value-enabled supply chains – multiple methods to expand and distribute
  • Reduction in costs and quicker response times

Online Order Management:

Online catalogs

Another predominant means of leveraging the Internet for distribution are the online catalogs. Apart from acting as a sales channel and a procurement and sourcing tool, online ordering helps integrate an enterprise’s order management system with the web storefront. Back office systems integrated with front-end order entry comprise the truly enabled e-commerce success store of today.

Integrating the backend with the front-end systems mean integrating an aging legacy system, transporting data that was confined within the enterprise to valuable information that e-enables the entire distribution network.

Electronic Information integration or the sharing of data that can affect all members within the chain – be it demand data, inventory status, production schedules or shipment plans. All this information is processed and forwarded to the destination without actually being stored anywhere.

What else does it accomplish?

  • Incorporates an organized planning system
  • Shares costs, products and pricing
  • Displays order status and order tracking
  • Initiates the order-to-cash process
  • Provides a reliable delivery date
  • Adds precious data to demand forecasting
  • Relieves call center and sales force of routine orders
  • Reduces transaction costs
  • Enables exemplary customer service at all points for speed and convergence

When airlines shifted reservation systems to an open network, involving other airlines and even car rental companies, customers found the package extremely attractive. Apart from better price management and the ability to move inventory within the supply chain in response to finely tuned demand signals, it fostered closer relationships between all the players in the supply chain.


We spoke about global marketplaces that can reach customers anywhere in the world anytime. Interconnected and collaborative supply chain partnering demands new capabilities to fill in cross-organizational plans.

The ability to treat each customer as a unique entity and provide customer-specific value-added services and fulfill joint forecasting plans is what any data warehouse should accomplish today.

It is no more a specific physical location, instead it is a dynamic storehouse of information that offers mass customization – real-time information, 100% accuracy; and is also mass accessible and capable of integrating with other business systems.

The main role of the warehouse in supply chain management is execution. Paper and an occasional PC were what supported a traditional warehouse. The storage center of the e-connected world enables a continuous flow of distribution operations. Apart from storing and shipping material, it tracks demands, cross docking, manages inventory from vendors and custom labels products.

A web enabled warehouse implements the right kind of technology package – be it web enabling an existing ERP system, or a custom-software solution designed specifically for own operations or a packaged solution that is plugged onto the existing ERP system.

The need for a web solution:

  • Distribution execution today is more complex and needs a strong technological backbone.
  • Smaller order sizes are executed in larger volumes
  • Shipment on the same day
  • Need for a complex distribution operation with real-time, highly integrated information system capabilities.
  • Prioritizing, managing and executing all tasks in real time.
  • Ability to support 100% accuracy in all information it stores.

Poor inventory management at the warehouse floors lead to failures in delivery and collaborative forecasting methods. All trading partners need to have adequate execution capabilities in their distribution operations. If the warehouse is running on paper and operating in “batch mode”, distribution data is less than 100% accurate and will in turn the limit the accuracy in the data in an ERP system within an organization. That’s why it is imperative that the peripheral systems that connect with an ERP system also integrate well within the whole.

A warehouse picks, packs, checks and ships products. Materials management, order management integration, labor management, the Internet and the ERP system in place play a major role in the newly transformed warehouse. Inventories are more visible, information is accessible 24 x 7 x 365 and the warehouse operates from a precise and time definite delivery window now.

In each and every one of the sections of the distributor network that we examined, we figured that information technology and to be more specific the Internet was the chief enabler.

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