Hear from industry experts and NetSuite customers on the key trends facing modern distributors and how to turn them into opportunities.
To the untrained eye, distribution may appear to be a fairly straightforward industry—in reality, however, it is evolving more rapidly than ever before. From increased competition and changing business models to a barrage of new, innovative technologies, the way distributors do business is starkly different than it was even five years ago. In an age with such pronounced structural change and competitive pressures, to risk not changing is to risk failing.
There are five key trends distributors need to pay attention to as they adapt and innovate to the changing industry:
|•||The modern consumer is always online – commerce is key for continued success.|
|•||Competition is everywhere and they are more innovative and tech-savvy than ever before.|
|•||Business models are rapidly changing as distributors explore new ways of going to market.|
|•||Investing in technology is critical for the success of every type of business, not just the Amazons of the world.|
|•||Enabling employee productivity—particularly among millennials—is critical for achieving long-term goals.|
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The SuitePeople experience ensures that your most valuable asset, your people, are effective, engaged and motivated.NetSuite SuitePeople securely weaves people data throughout the Suite, giving businesses complete control over their Core HR processes. SuitePeople empowers Managers and HR professionals to streamline employee information, new hires, employee onboarding, payroll, promotions and compensation changes, all from a single Suite. While also enabling employees by providing them with the ability to request time-off, access employee directories and organization charts, monitor upcoming vacation schedules, monitor new hires, and publicly recognize peers for good work.
There’s no time like the present, as manufacturers and wholesale distributors are in the midst of a digital revolution. With so many technologies changing the way things are done in the manufacturing world, the next few years figure to bring a significant "digital transformation" trend to the industry.IDC predicts that by the end of 2017, half of all manufacturers will be leveraging the cloud, mobility and advanced analytics to facilitate innovation on their shop floors. What's more, IDC expects that by the following year, 75 percent of manufacturers will have transformed their operations with digitally connected processes that improve responsiveness and productivity. Wherever you look in the manufacturing and wholesale distribution markets, companies are looking to transform for different reasons.
- Food and beverage distributors are largely looking to get ahead of increasingly onerous regulatory and compliance requirements.
- Consumer and industrial electronics manufacturers are focused on streamlining their supply chains to facilitate new product introductions.
- And industrial supply firms are looking to bring new levels of efficiency to their business-to-business commerce channels.
Transformation a Matter of When, not If
Finding Your Way to the Cloud
Manufacturing has evolved and gone are the days when it was common practice to produce items in bulk, only to be stored in inventory until they were needed. Today’s environment of rapidly changing and variable products recognizes that excess inventory means reduced liquid capital and obsolete materials.
What is a Phantom?
Bill of Materials (BOM) Inventory
From the Internet of Things and predictive analytics to big data, new technologies are touching every part of the business – particularly the supply chain.
Here’s what thought leaders at the Modern Supply Chain Experience conference in San Jose, Calif., had to say about the challenges facing today’s supply chain leaders and their predictions for the future:
- By 2020, over 50 percent of manufacturing supply chain models will benefit from investment in new technologies and 50 percent of manufacturers will be using cognitive computing and artificial intelligence as well as advanced analytics for planning and long term forecasting.
- Ecommerce will be imperative for business expansion and will help to drive growth in the supply chain. Roughly 90 percent of product businesses will be using B2B and B2C ecommerce in the next 10 years, and 50 percent of manufacturing supply chains will reach the end consumers directly for increased profitability.
- Businesses will need to prioritize improving business processes and streamlining the supply chain to most effectively reduce costs and improve efficiencies, drive growth, and improve the customer experience for long-term business success.
- The supply chain is the lifeblood of the business, and those that choose to innovate and invest their time into it will have the opportunity to not only succeed, but rather thrive in our increasingly connected business world.
- The cost advantages of a cloud solution - from decreased investment in software development to lower maintenance costs - are only part of the equation driving businesses to the cloud.
- Businesses leveraging innovative process changes, tech transformations and cloud applications – or some combination of these – will be the ones to get ahead. The businesses to innovate and capitalize on new technologies will thrive, while those who do not will become obsolete.
Change is inevitable, especially in an age when technology is constantly advancing and businesses are innovating and iterating day after day. With this in mind, as hard as investing in your supply chain may seem, can your business really afford to stay the same?
What does it take to remain competitive in the constantly changing world of distribution?
From increased competition and changing business models to a barrage of new, innovative technologies, the way distributors do business is starkly and fundamentally different than it was even five years ago. In an age with such pronounced structural change and competitive pressures to risk not changing is to risk failing.
Your Target Market is Online, and You Should be Too
The modern consumer across all parts of the supply chain turns to the internet as the ultimate source of knowledge for purchase decisions - thus, a strong online presence is crucial for continued business success, whether in the world of B2B or B2C commerce. Ecommerce continues to be a key topic and distributors need to be ahead of it if they want to remain relevant and fresh in the face of major industry changes.
Competition is Everywhere and They are Leaner, Meaner and More Tech-savvy Than Ever
In today’s distribution landscape, it is only getting harder to differentiate. With the ever growing number of competitors, how do distributors position themselves as unique and stay a step ahead? What trends are affecting our industry? Assessing and reassessing these questions on a regular basis is absolutely essential for continued success in the constantly evolving world of distribution.
Business Models are Rapidly Changing
Distributors are exploring new ways of going to market. Between the internet’s pervasiveness among modern consumers and the constant flood of technological advances in the business world, companies have to fundamentally change the way they operate in order to hold up against their competitors.
Investing in Tech is not Just for the Amazons of the World
In order to remain competitive, distributors need to continue upgrading their work environments and stay on the cutting edge of technology. Gone are the days of paper pushing and manual processes – tablets, scanners, and cloud systems are changing the game and making the modern distributor warehouse sleeker, cleaner, and more efficient.
Employee Productivity is Critical for Success
Tech upgrades - although very important - are useless without the employees to act on the efficiencies they bring. Employee productivity for the modern distributor is key to success long term; much of that productivity can be facilitated with new technologies. Warehouse automation, CRM, ecommerce, pricing and analytics are just some of the updates modern distributors implement to streamline their processes while increasing employee productivity to improve the output of their operations.
NetSuite Advanced Procurement helps companies improve the procurement process by exerting tighter control over spending, simplifying requests for goods and services, and rendering real-time visibility end-to-end.
- Reduce work and errors associated with multiple buyer/vendor phone conversations and emails for every purchase.
- Enforce compliance by requiring purchases to be made only through contracted vendors.
- Minimize transaction costs by consolidating multiple requisitions into fewer purchase orders.
- Take advantage of negotiating quantity-based terms and discounts for bulk purchases.
Creating and managing vendors, purchase orders, receipts and all other relevant transactions is one of the simplest, yet comprehensive aspects of our system. Before establishing a purchase contract, NetSuite allows purchasing buyers to email Request for Quotes (RFQs) to vendors and suppliers to get quoted prices on particular items detailing: open bid period, expected order and receive dates, tiered pricing and volume discount. It also notes the postposed incoterms, vendor instructions and payment terms.
With NetSuite, RFQs are sent directly to vendors via emails, allowing targeted vendors to respond with their bid prices via NetSuite vendor center. This allows your vendors extended capabilities to get involved independently without the buyer to enter bid prices from different vendors.
Buyers are able to customize the buying options with quoted rates, volume and/or overall order discount. Once vendors respond to the RFQs, our Advanced Procurement module enables your purchasing department to itemize and analyze extra details before a purchase contract is signed to the awarded vendors.
When the RFQs are awarded to the vendors, you also have the capability to automate the purchasing process in NetSuite. Once purchase contracts are signed and prices are confirmed, subsequent procurement processes are straightforward.
If you would like to learn more about this feature, please do not hesitate to contact our team at NXTurn. Our certified consultants can work with you to customize a NetSuite implementation that meets your individual business requirements.
The Advanced Revenue Management feature is available in new accounts that have purchased the module. Those accounts using Revenue Recognition (older version) should contact a NXTurn Consultant to discuss converting to the new version or for other revenue management related needs.Comments (0)
Advanced Revenue Management redefines older terms and adds new functionality to support a variety of use cases and business models
- Revenue Commitments are now referred to as Revenue Arrangements
- Revenue Commitment Lines are now referred to as Revenue Elements
- Revenue Templates are now referred to as Revenue Rules
- Revenue Schedules are now referred to as Revenue Plans
New functionalities have been added
- Item Categories – Grouping of items with similar fair value attributes
- Fair Value Price List – Factors used in ascertaining prices for an item or item category
- Fair Value Formula – Allows for formulas to be used in calculating fair values
- Revenue Allocation Groups – Combines GROUPSUM* with Fair Value Formula
- Fair Value Dimensions – Additional criteria for fair values related to items or item categories.
FASB Accounting Standard
NetSuite’s development of Advanced Revenue Management was spurred by a new FASB accounting standard. ASC 606 was developed to streamline controls in revenue management across all industry types (transaction exclusions are covered in publication ASC 606-10). Previously, ASC 605/SAB 104 allowed for process protocols to be industry specific.
In ASC 606 there are a series of questions a business must ask in order to determine the appropriate course of action for a revenue arrangement related to a contract or obligation.
Under ASC 606 a company recognizes revenue to reflect the transfer of goods or services to it’s customers for an amount in direct correlation to the obligation of the expectations for the same goods or services.
These are the steps that follow this protocol:
- Identify the contract(s) with a customer
- Identify the performance obligations on the contract
- Determine the transaction price
- Allocate the transaction price to the performance of the contract
- Recognize revenue when (or as) the company satisfies the performance obligation
What does this mean and what does it do?
Well, namely, it removes ambiguity in revenue requirements and provides a systematic approach for handling a multitude of revenue issues. It also simplifies the number of requirements that companies must follow in preparing financial statements/disclosures.
NetSuite’s Advanced Revenue Management solutions meets the requirements set forth in the ASC 606 protocol. The solution was developed not only to meet the new protocol but to also provide a highly configurable and layered approach to how revenue contracts are managed with a focus on ease of use for accounting professionals. It provides multi-element arrangement functionality and allows revenue recognition based on specific/flexible criteria.
Improvements have also been made to revenue-based reports.
One key report is the Deferred Revenue Waterfall Report, which is used to reconcile deferred revenue account balances and display forecasted revenue. It’s incredibly useful. Additionally NetSuite has created tools within the module to assist in deferred revenue FX reclassifications and other reclassifications that were previously handled using manual processes or scripted enhancements.
*GROUPSUM is a function used to accommodate percentage-based fair value calculations. GROUP(n) refers to the revenue allocation group and the expression(expr) is another field or formula. GROUPSUM(n, expr) These tools coupled with a multitude of other features and settings allow for nearly unlimited flexibility, ensuring the correct revenue is recognized across a variety of tested uses cases. Use case example. Your company sells hardware and software but you also provide support against the hardware/software being sold. You may determine that the fair value of the support item is 10% of the sales price of the hardware and software being sold. Both your hardware and software items are part of the same revenue allocation group. Using new functionality available in Advanced Revenue Management you are able to do a few things not previously available; tie items to revenue allocation groups, establish fair value, create a fair value formula and also allocate the GROUPSUM function to the formula. Example infers that Calculated Fair Value is same as sales amounts for Hardware and Software. Revenue Plans are created for items in the following manner: Hardware (upon Fulfillment), Software (upon Fulfillment) and Support (Billing)
|Item||Rev Allocation Group (RAG)||Sales Amount||Calculated Fair Value Amount||Revenue Amount|
How is the Calculated Fair Value Amount RAG Allocation Group XX = 4000
Our use case determines the Support is 10% of the RAG total = 400
How is the Revenue Amount Determined for each item?
Total of all item Sales Amounts = 4300
Percent of item allocation (example Hardware) = 3000/4300 = .69767442
Revenue Amount (example Hardware) = .69767442*3000=2093.02
How is the Revenue Amount determined for Support?
Total Sales – Revenue amounts from Item Group XX = 1974.43
This complex example demonstrates Advanced Revenue Managements understanding of the nature in which revenue amounts are allocated to each element in a revenue arrangement.
The Advanced Revenue Management feature is available in new accounts that have purchased the module. Those accounts using Revenue Recognition (older version) should contact a NXTurn Consultant to discuss converting to the new version or for other revenue management related needs.