Ten Myths of Cloud ERP in Distribution
As many Distribution Center Magazine readers know, the HVAC industry in the U.S. continues to remain strong. According to a report released by RnR Market Research this summer, the market will grow at a healthy 16 percent between now and the end of 2017.
As the economy flourishes, what do HVAC distribution industry leaders want? Most would say business efficiency and agility; real-time insight and control; and strong, vibrant growth to take advantage of these trends. While these “wants” would also be true decades ago, two important disruptions have shifted the “business as usual” model since that time: The internet has changed the way we interact (and transformed the way we work), and integrated business applications have become a necessity as enterprise resource planning (ERP) solutions have evolved significantly.
So, how do distributors turn these disruptions into advantages? By replacing their old, “good enough” accounting and ERP legacy software — which is holding more than 2 million businesses back — with modern, flexible platforms tailored to users; cloud-based ERP solutions can give distributors an edge and enhance growth in distribution. For those resistant to that change, 10 ‘myths’ about Cloud ERP are debunked here.
MYTH #1: My existing old legacy software works just fine! The distributors’ role is not changed all that much.
REALITY #1: This is no longer true. Instead of going through traditional distribution channels, manufacturers can deal with retailers and consumers directly in today’s online world, meaning that the distributor’s role and value have changed significantly. As a result, enhanced customer service is even more important now than managing inventory. Cloud-based ERP can provide web-based customer relationship management applications for managing leads, contacts, opportunities and existing customer accounts to allow for greater customer service.
MYTH #2: I know my customers and what they need. (I’ve been in the HVAC business a long time!)
REALITY #2: Along with an increased need for enhanced customer service, attention to constant and rapidly shifting customer demands and requirements is crucial. One of the great challenges that distributors face is effectively responding to shifting customer demands in a seamless way. Distributors must be able to stay on top of trends and see and respond to changes quickly in order to meet a customer’s demand while avoiding excess inventory.
To “wow” the customer, you have to know them. And to know them, you need to access critical information throughout the process. Cloud ERP allows businesses in the HVAC distribution industry to streamline processes by seamlessly moving from quote to cash. A solution that one builds around wholesale distribution can help balance challenges that are common to the HVAC industry, such as meeting these fast- and ever-changing customer demands and requirements.
MYTH #3: I know my products and what needs to be done. (I’ve been in the HVAC business a long time!)
REALITY #3: Similar to expanding customer demands, product lines are more complex and tailored than ever before. Cloud ERP helps manage products, record sales and track engineering changes, service records, warranty issues and other important tasks so that all business processes become streamlined and all information is in a single, secure location, which means less time is spent tracking changes and more time is available to focus on — and wow — customers.
MYTH #4: My internal processes are great. They’ve worked for years.
REALITY #4: While this may feel like it is true, without reexamining and improving those processes, business owners can become very dependent upon employees and increasingly at risk for mistakes when people move in and out of jobs.
MYTH #5: We’re a collaborative team; we work well together and the information we have is good enough.
REALITY #5: According to David M. Levy, author of Mindful Tech: How to Bring Balance to Our Digital Lives, employees spend as much as 50 percent of their time at work managing email. Employees are busier than ever, so customer orders are larger — and so are the records and information to keep.
As a result, having a totally integrated, single source of shared “truth” is invaluable. ERP can help engage customers, automate processes and effectively monitor all aspects of an organization’s operations, taking the pressure off of communicating to focus on a business’s success.
MYTH #6: The transition to cloud ERP will take too much time and energy. I need that time to grow my business.
REALITY #6: Owners must make decisions at least once and sometimes several times a day to grow their businesses, and using old legacy software with old data equals running a business by looking in the rear-view mirror. The kicker is that, as businesses grow, you can waste more time and energy on data entry and synchronization between systems.
In contrast to the accounting systems of the past, modern ERP is much faster and allows installation as necessary, along with products that offer extensive and scalable development platforms. This means that businesses can install distribution, financial, service and customer management solutions at their own pace.
MYTH #7: I’m comfortable with and like the reports I’m getting now. They work just fine for me.
REALITY #7: Modern cloud ERP offers more than the “good enough” information (often dated by a few days or more) available through legacy software. It provides up-to-the-minute information and visual dashboards so owners can be alerted of any problems in real time.
Inaccurate or dated information impacts efficiency, and it is important to have an exact understanding of inventory to truly make effective decisions throughout the supply chain. Cloud ERP allows distributors to optimize the supply side of operations better.
Additionally, while powerful analytics collect a large amount of raw data to be a foundation for financial decisions and business directions, those data are only as powerful as the information they deliver. Cloud ERP can elevate business decisions by empowering executives with the right information to make critical business and financial decisions.
MYTH #8: A mobile solution would be nice, but that requires special devices, and it’s costly to train and support.
REALITY #8: For some time now, many ERP solutions have offered a limited number of native mobile applications for both iOS and Android smartphones. These typically have a small subset of functionality, such as giving users access to on-the-go tasks like time and expense or inquiry functions. However, modern ERP solutions have significantly more “responsive designs” that adapt to whatever screen the user selects, whether it be a monitor, tablet or phone. As a result, users can perform much more extensive production work, such as reviewing inventory transfers, creating purchase orders, and entering sales or service orders. The result? Businesses can be run anytime and from anywhere.
MYTH #9: As a distributor, I don’t need a website to sell to my customers.
REALITY #9: While this may be true, having a website with self-service portals for viewing prior orders, creating new orders, viewing contracts, viewing financial statements, seeing balances due and reviewing support cases (and more) can go a long way toward customer loyalty and satisfaction.
These helpful tools enable customers to see all the relevant information about their interaction and perform account-related activities online. Customer support questions can also be reduced by providing anytime access to a knowledge base and document sharing. These portals enable distributors to more efficiently work and communicate by creating an experience where customers can access their information.
MYTH #10: It’s far too expensive to invest in a new system.
REALITY #10: There is always a cost for doing nothing. Legacy systems require an annual license maintenance fee, hardware maintenance and significant IT staff expenses. By contrast, the cost to implement highly flexible and fully functional distribution software has been significantly reduced over the last decade, especially with cloud and software as a service availability.
Customer-centric and reasonably priced cloud licensing models offer flexibility in deployment and usage, and by paying a monthly fee for five years, the total cost of ownership is comparable to legacy. The return on investment (ROI) is also clear. For example, Nucleus Research notes in a 2016 report that shifting to cloud ERP can reduce costs for support personnel by 55 percent, and cloud solutions deliver 2.1 times the ROI of on-premise ones. Additionally, the Aberdeen Group recently compared cloud versus noncloud ERP in midsize companies over a two-year period and found a 14 percent reduction in the time to make decisions and an 8 percent profitability over those without cloud ERP.
As it is clear to see, ERP is essential for ensuring a dynamic wholesale distribution business, including the HVAC industry. ERPs can increase sales and improve customer service, improve cash management and reduce outstanding receivables, reduce purchasing costs, increase efficiency, improve inventory turnover, and help distributors better utilize people, equipment and materials.
Companies that invest in better technology are more likely to pull ahead in the long run. Smart distributors are setting their companies up for success now by investing in dynamically functioning ERP.