A great deal of discussion regarding the roles of vendors in supply chain management involves two areas: ways to lower costs to remain competitive and ways to add valuable services that give a vendor a competitive advantage. The reality is that most suppliers cannot go any lower on their prices and still remain in business. With offshoring cutting into the profits of these sellers, most have already had to shave off excesses and cut costs significantly. Therefore, for many of the supplies in cost competitive industries, the answer may be more of adding services instead of cutting prices. For many of these companies, the big question is how to accomplish this.
One way for businesses to add services is through the use of distribution software. However to understand why the software offers a solution, one must first understand the complexity of the distributor (aka vendor) and end user (aka buyer) relationship. In this relationship, buyers must walk a thin line between buying too much that leads to high inventory costs and not buying enough that can prevent the production and sales processes from running smoothly. This can cost them in lost productivity and cycle delays. Most buyers have a difficult time maintaining that middle ground, and this is where vendors can provide a valuable service. Vendors are in the position to help them find that balance because they can use the information about past orders to predict what these customers will need in the future.
The best example of this is scheduled orders. The vendor may look back at past purchases made by the buyer and notice that roughly every 4 weeks that buyer orders another shipment of goods. The vendor could then use that information to create a blanket order, which would include the shipment of that quantity of goods every four weeks automatically. The buyer would be saving time and money on each transaction. Meanwhile the vendor is guaranteed a continuing relationship with that buyer during the life of the agreement and possibly even beyond.
None of these benefits are really new. Vendors could have done the same thing for their buyers a decade ago. The difference is that they would have had to create the blanket order by hand and would have had to remember the shipments themselves. Today, distribution software can handle these tasks automatically, thus making such added services convenient for vendors as well as buyers.
Distribution software can also make it possible to offer other benefits that would not have been available previously. For example, the software can make it possible for a vendor not to only to track its existing inventory of a product but to also check its buyer's inventory without leaving their desk or even picking up a phone. So if the vendor notices a buyer is running low on pens, for example, he can send an email or give a call to let them know it may be time to reorder. Furthermore, with the popularity of e-procurement and online catalogs, distribution software can help vendors create their product listings and update their prices as necessary. Some software can even allow the vendors to figure in buyer discounts in the stated price.
All of these issues make it easier for the buyer to get the goods that it needs while also allowing the vendor to gain a competitive advantage over some both local and foreign competitors. However, vendors must be selective in purchasing their distribution software. The software should be compatible with any supply chain management programs that the vendors is already using and should work well with the ERP system that's in place. Additionally, the vendor needs to be sure that the selected software will make all of these benefits possible for their end users. Then, the vendor only needs to promote the benefits to secure mutually beneficial buyer/seller relationships.