Hear how wholesale distributors are using NetSuite to grow their businesses.
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In Part One of this two-part series on news from SuiteWorld, we examined SuiteCloud, NetSuite’s platform strategy, and their drive to serve ever larger companies. Here in Part Two, is what we learned about what NetSuite is doing in Wholesale Distribution.
NetSuite for Wholesale Distributors
NetSuite has its roots in financial systems, ecommerce, and CRM. Over time, they have added specific capabilities for wholesale distribution and manufacturing. ChainLink recently conducted a webinar with top executives from two rapidly growing wholesale distributors—Emerge Surgical’s founder/CTO and DiscounTechnology’s CIO. They attribute their success, at least in part, to advantages achieved by running their companies on NetSuite.
At SuiteWorld, Ranga Bodla, NetSuite’s Director of Software Vertical Marketing, and Steven Bisset, Vertical Market Expert, discussed top Wholesale Distributor (WD) customers' priorities:
Manage Margins—For this sector, always under margin pressure, tools like price discount management, rebate management, and cost control are critical.
Improve Automation—Wholesale Distributors are always looking for ways to remove manual labor from the organization, by reducing data rekeying, using ecommerce, customer self-service, supplier self-service and workflow to automate and reduce errors.
Value Add Services—WD need to differentiate and add value to survive and thrive. For example, kitting and light assembly, capabilities to accept and process returns, repairs and warranty, superior customer help desk services, analytic services, and so forth.
Warehouse Optimization—Looking for ways to further automate and streamline.
Mobile Solutions—Putting power into the hands of the sales force and warehouse workers.
These and other insights into Wholesale Distribution were highlighted in a recent report “Wholesale Distributors: Meeting 21st Century Challenges.” In addition to the capabilities built by NetSuite, their partners integrate through SuiteCloud to provide customers a much richer set of capabilities than NetSuite could develop by themselves. Examples include:
PACEjet—Shipping, Logistics, Mobile Software Solutions
JustEnough and Valogix—Demand Forecasting and Planning
GProxy and SuiteCommerce—ecommerce Design Services
Hubspan, Celigo, OZ Development, and B2BGateway.NET—Cloud Integration Solutions
SPS Commerce—Supply Chain Solutions and Trading Partner Integration for Retailers and their Suppliers
ConfigureOne—Web-Based Product Configurator for Manufacturers
JLan Technologies—Mobile Sales Software
Ryan Murphy, Principal Consultant at NetSuite, described how their inventory costing tools can be used to help manage gross margins. Sophisticated inventory costing can be done using NetSuite’s Product Cost Breakdown tool. This adds various elements of cost in stages as a product travels through the operation. For example, a high tech reseller might sell a bundle that has the purchase costs for the various components of the package, warranty costs, software license fees, and perhaps NRE (Non-Recurring Engineering) costs which are all added together to create a total “Ex-Works” cost. Then they might add inbound logistic, customs/duties, and 3PL costs to get an “Ex-Hub” cost; finally kitting/assembly costs, pick/pack/ship and/or other outbound handling costs are added to get the total “sold cost.” With this sold cost, margins can be more accurately calculated and alerts generated whenever products are being sold below target margins. This also enables measuring profit by region, product line, sales representative, and other types of analyses to help control costs in a smart, targeted way.
One furniture refurbishment company asked about tracking costs in their operations. Ron said they could use the light manufacturing module to incorporate job-specific labor costs and raw material costs, enabling them to view profitability by customer job.
Some NetSuite customers are small enough that they do not have an IT person with scripting or programming skills on staff, and even the largest customers may want to customize and automate without requiring the use of on-staff programmers. SuiteFlow (NetSuite’s workflow system) provides a graphical interface that enables power users to create workflows without knowledge of code. (See Figure 1.) For example, they can do things such as add an approval button to email messages, create a new record, send a specific record to someone, and set field values in the database.
Customized Workflows without Programming
SuiteFlow workflows can send emails, as well as customize various users’ interactions with NetSuite. These customized user interactions could be for an employee, a customer buying on ecommerce, or a supplier interacting with NetSuite. For example, one firm uses NetSuite workflow to automate its case management. The workflow categorizes incoming customer cases (service requests, complaints, suggestions, etc.) and puts each into a different queue based on the type of case. A subordinate workflow for each queue assigns each case to the appropriate support staff and then provides the steps to follow it through to resolution, including escalation if not responded to or resolved within certain timeframes.
Another firm uses SuiteFlow within ecommerce to identify potentially fraudulent activities. For suspicious activities on their ecommerce website, an email is automatically sent to the user and the reply is analyzed to categorize it as potentially fraudulent vs. a genuine and, likely, safe customer transaction. In another example, when someone selects the payment type, only the fields that apply to that payment type are made available. Thus, SuiteFlow can be used to automate activities, make things simpler for the end-user, and reduce the chances of “rogue data” being entered.
Wholesale Distributor Panel
In one of the sessions at SuiteWorld were three Wholesale Distributors: EndoChoice, Ridout Plastics, and Mariner Supply. They talked about why they selected NetSuite and how they use it.
The first panelist was Lou Malice, COO at EndoChoice, a manufacturer and distributor of supplies to gastroenterologists. They have about 1800 customers and 113 employees managing $2M of inventory in 25 locations. EndoChoice has their own manufacturing assembly plant in Georgia and uses manufacturing partners in China, Korea, and Europe. Lou has worked in the past with BPICS, JD Edwards and other large ERP systems, which he called “the epitome of the NetSuite hairball.”
When Lou came to EndoChoice in 2003, they were a small company running on QuickBooks, but outgrowing it. They looked at SAP BusinessByDesign and Microsoft Great Plains, finally selecting NetSuite in part because of the advantages of its cloud-based delivery model. Malice said, “We have people traveling all over the world. All they need is a browser and bandwidth—it’s great to have access anywhere, anytime. Everyone can see the exact status of orders, even from their iPhone. We were a startup without much cash. NetSuite provided something high powered at a price we could afford. And our transition to NetSuite wasnearly as seamless as you can get—literally a download.”
About half of EndoChoice’s sales were via their website, so NetSuite’s integrated ecommerce was very important. Lou added, “We were able to take NetSuite’s case management system, which was originally designed for a help desk, and reconfigured it to use for FDA compliance. We capture all the issues from the field and then track corrective actions. Location control, lot control, serialization, and work order management for the shop floor are all critical for our business and work well in NetSuite.”
EndoChoice also implemented NetSuite’s Partner Center to integrate their suppliers. They actually bought a NetSuite license for one of their vendors that services the endoscopes. Now that vendor can do the whole process—from providing the service to invoicing and closeout.
Founded in 1914, Ridout Plastics distributes pre-cut plastics worldwide. Much of what they sell is cut, so they have to manage whole and partial sheets. In addition, they are a job shop providing light manufacturing services. They have had a presence on the web since 1995. The President of Ridout, Elliott Rabin, said they chose NetSuite over several other alternatives they looked at largely because of its easy customizability and well-integrated ecommerce capabilities. Rabin said, “It is satisfying to see my people being productive. When we implemented NetSuite, we reduced paperwork by 75%, saved one FTE, and increased sales efficiency by 45%. It has enabled us to grow by 65% over the past four years.”
One attendee asked Rabin how he got employees to adopt the system. Rabin said the key was to make it easy to use and familiar to users so that they would be comfortable using it. Rabin said the customizability of NetSuite allowed them do this, and that he didn’t see that level and ease of customizability in any of the other systems they looked at.
Mariner Supply is a distributor of marine-related products and supplies, with three websites and around 200 suppliers, shipping to over 170 countries. Drop shipping from their suppliers to their customers is critical to Mariner Supply’s business strategy, enabling them to offer a very broad array of products—over 180,000 items that can be ordered 24 hours a day by customers anywhere in the world. Although they maintain certain inventory, the flexibility of NetSuite’s capability to properly ship and account for all transactions, regardless of origin, is paramount. Mariner Supply’s CTO, Keith Fetterman, said drop shipping requires a lot of paperwork going back and forth to make sure that the manufacturer ships correctly and on time. He said many of these manufacturers are not used to shipping directly to customers.
Mariner Supply was on QuickBooks until 2005 when they moved to Sage ACCPAC. They found that system difficult to use—they still had homegrown order management and content management; returns were still being done on paper; they lacked integration; and they had no holistic view across their whole order-management system. Because of the paperwork-intensive nature of their drop shipping business, they realized that they would be unable to grow their business much further without improving order processing efficiency.
Fetterman had worked for Shell, where he was used to having their own data behind the firewall in their own data centers. He said it was not easy for him to decide to trust NetSuite with all his data and systems. He did thorough due diligence on NetSuite’s security, redundancy, backup, and recovery processes before agreeing to take the plunge.
According to Fetterman, connecting suppliers via EDI was ideal for Mariner. He said, “When we converted our first two suppliers to EDI, it was transformational. We no longer have to rekey their invoices. Only when there is an exception alert, like double billing or incorrect amounts, do we ever have to touch the invoice. We also do a lot of faxing. Now we use the eFax plug-in for NetSuite to automate those transactions as well.”
Mariner does 100% of their sales via ecommerce. Fetterman said that NetSuite gives them a standard framework that others can plug into. They replaced all email links on their website with forms fed into NetSuite’s case management system. Fetterman said, “That has transformed our customer relationships.”
Strong Capabilities for Wholesale Distributors
Today’s wholesale distributors are keen to differentiate their business with value-add services. At the same time, they are extremely sensitive to cost and margin pressures, and are therefore looking for affordable ways to optimize and automate their business. Many rapidly growing wholesale distributors have selected NetSuite for a variety of reasons, such as:
the ability to customize and extend NetSuite to meet their needs
the rich array of tightly integrated partner capabilities upon which to draw
rapid implementation with no capital investment due to the pure SaaS model
true total cost calculations, enabling highly targeted cost reduction and margin improvement initiatives
In addition, my impression seeing NetSuite interact with their customers at the conference was that this is a customer-friendly company. During one Q&A session, a customer stood up just to praise NetSuite and give them high marks on being very customer-feedback driven, in contrast to other ERP vendors they had worked with. For this and many other reasons, any wholesale distributor that has outgrown or is dissatisfied with their current system should give serious consideration to evaluating NetSuite for running and growing their own business.
To view other articles from this issue of the brief, click here.