ERP Vendor Selection Criteria for Wholesale Distribution

Hi Everyone,

Here is a situation: “We are a $20M wholesale distribution company, and we need a help finding the right vendor and ERP system. What are you thoughts and considerations?”

The first thing I would do is find an ERP vendor that is an expert in wholesale distribution. A company growing through $20M faces a unique set of challenges including accurate costing, automation of processes, barcoding, commission tracking, quality certifications, value added service management, and lean pick/pack/ship processing. Banking and audit begin to play a much bigger role, and ultimately, you must be able to defend GL and subleger balances across growing complexity (sometimes mullti-company and multi-currency). This is my experience.

There are really only three options in choosing an ERP system: (1) vertical market specific solutions, (2) general purpose proprietary ERP like the Microsoft Dynamics family, and (3) open source ERP like ADempiere and OpenERP.

I cannot state the value of a proof of concept enough. The typical $20M company will have only one or two Happy Path scenarios that encompass 80% of all the functionality needed. This is especially true for critical path operations. Confidence goes way up when you see your vendors, customers, products flow though a system. Make sure your people drive the product demonstration (not the vendor/integrator!!). The integrator should be your coach at this point. Happy Path demonstrations will cost you a little money; however, you will help ensure you land with the right product and ERP coach for the next 10 years of growth.

I recommend you start with open source ERP. ADempiere and OpenERP are free and can handle up to several hundred concurrent users. Here is a review of how ADempiere and iDempiere support high-volume distribution. Your challenge with open source ERP is integrator talent. There are 10 Dynamics integrators for every 1 open source ERP integrator.

Find your Dynamics or Sage distribution expert to ensure you are creating an accurate ROI and product comparison. Your biggest challenge will be Microsoft. They will be almost no help. They will go out of their way to defend the ‘Integrator of Record’ for your account. Finding the ‘right’ Dynamics vendor was tough for me. This was my experience as the Director of IT.

Find your wholesale distribution vertical market solution. This product will ensure you understand all the bells and whistles of distribution nirvana. The down sides to vertical market solutions are the cost and system flexibility. They typically drive the highest price tag and offer the least configuration without customization.

If you are a growing company, I would stay away SaaS offerings. If you are a 10-user company, NetSuite’s canned solution creates a model of efficiency – many can attest to this. However, as you grow, you will face the pains of high user costs, hidden data access costs, dependency on adapters to gain access to critical information, and limited data visibility. The rigors of keeping financial data safe inside a single pool of data is tough, and there are many highly paid employees and safeguards to ensure everyone swims in their own lanes even though the water is shared by all.

A much better option is to use cloud hosting to obtain the same level of reliability and flexibility using off-the-shelf commodity tools. Cloud hosting means using services like Amazon’s AWS infrastructure to scale your ERP to meet the size of your company. Doing so prevents you from incurring the engineering overhead of SaaS.

There are typically four goals when improving processes by installing an ERP: Accuracy, Productivity, Insight and Accountability. Your path to accomplish these goals include creating a proof of concept in a test environment, using the proof settings to configure your real environment, and lastly, auditing your data, configuration, and people training for a clean go-live. My strongest point here is that your integrators should have strong experience and referable success stories in accomplishing these goals. Here is much more detail about the above goals and processes.

I hope this helps!!

ADempiere vs iDempiere vs Openbravo vs Compiere

Please note that ADempiere, iDempiere and Openbravo are forks or copies from Compiere. Therefore, they have similar abilities mentioned above. The biggest difference is that ADempiere and iDempiere are pure open source. There are no features held behind a commercial or paid license.