By Dan Kaminstein
For every product, for every customer, there is a price that produces an optimal gross margin. Until now, determining that price had been an extremely complex task. Technology has streamlined that process by adding strategic pricing functionality to ERP solutions.
Strategic pricing modules analyze distributors' databases for customer and order information and then classify a) customers by type and size, and b) items by relative sensitivity. The module then recommends how to best price items based on the combination of these factors.
Features, such as Pricing Structure and Customer SKU services, further enhance the pricing optimization functionality and help enable distributors to more tightly control pricing schedules. In addition to enabling optimal pricing, the strategic pricing modules also allow distributors to better manage freight recovery within their business to further ensure that they do not leave money on the table.
Distributors who have implemented a strategic pricing module report increases in their gross margins from two to four percentage points in the first year alone. For many distributors, that would mean a quick return on their investment in a strategic pricing module – for some in as little as three months.
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Dan Kaminstein is a product manager of Activant. Find out more about Activant at distribution.activant.com or call 1-800-776-7438.
Friday, May 14, 2010
Tuesday, May 4, 2010
Move over Gordon Graham
by Neil Van Walbeck
Advanced demand forecasting is quickly becoming the standard for forecasting item usage for inventory management.
While Gordon Graham's inventory management concepts and practices revolutionized distribution, distributors using his methods have a much higher percent error rate when compared to system generated forecasts, often 200 to 600 percent off. Advanced demand forecasting takes forecasting to a whole new level by including item trends and more complete forecasting formulas. Together with real time processing and advanced concepts, advanced demand forecasting can reduce the error percentage to 30 to 60 percent, lowering inventories and increasing customer service levels.
Utilizing such features as trend percentages, advance demand forecasting patterns your items using demand categories, identifying them as level, slow, seasonal, trend, or erratic. The system then applies best fit algorithms in real time to formulate a demand forecast based on the item's demand category.
Earlier versions of seasonal set-ups only looked at year-old data. Current advanced demand forecasting tools look back to at least three years of history to better predict upward or downward swings.
The real benefit is that buyers can now focus on inventory that needs attention and better manage items as they see fit; such as following items that have been identified with a demand category trend, or setting those items identified as erratic with a fixed purchase method.
Other features of advanced demand forecasting allow buyers to set safety stock for an item using that item's service level, which results in lower inventory values, lower safety stock numbers, and better service levels for the customer.
More accurate forecasting can result in savings from lower inventory levels, reduced time spent on analyzing inventories by buyers, and a better understanding of inventories overall, that are staggering and can lead to significant competitive advantages for distributors.
Neil Van Walbeck is an application consultant for Activant. Find out more about Activant at http://distribution.activant.com/ or call 1-800-776-7438.
Advanced demand forecasting is quickly becoming the standard for forecasting item usage for inventory management.
While Gordon Graham's inventory management concepts and practices revolutionized distribution, distributors using his methods have a much higher percent error rate when compared to system generated forecasts, often 200 to 600 percent off. Advanced demand forecasting takes forecasting to a whole new level by including item trends and more complete forecasting formulas. Together with real time processing and advanced concepts, advanced demand forecasting can reduce the error percentage to 30 to 60 percent, lowering inventories and increasing customer service levels.
Utilizing such features as trend percentages, advance demand forecasting patterns your items using demand categories, identifying them as level, slow, seasonal, trend, or erratic. The system then applies best fit algorithms in real time to formulate a demand forecast based on the item's demand category.
Earlier versions of seasonal set-ups only looked at year-old data. Current advanced demand forecasting tools look back to at least three years of history to better predict upward or downward swings.
The real benefit is that buyers can now focus on inventory that needs attention and better manage items as they see fit; such as following items that have been identified with a demand category trend, or setting those items identified as erratic with a fixed purchase method.
Other features of advanced demand forecasting allow buyers to set safety stock for an item using that item's service level, which results in lower inventory values, lower safety stock numbers, and better service levels for the customer.
More accurate forecasting can result in savings from lower inventory levels, reduced time spent on analyzing inventories by buyers, and a better understanding of inventories overall, that are staggering and can lead to significant competitive advantages for distributors.
Neil Van Walbeck is an application consultant for Activant. Find out more about Activant at http://distribution.activant.com/ or call 1-800-776-7438.
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