A new survey among managers in the thriving Midlands wholesale and distribution sector reveals that employee cost is the key factor affecting company profitability.
The survey, undertaken by Kidderminster-based OGL Computer, revealed that 56% of respondents cited it as a top three reason, followed by Brexit impact and inaccurate data, both at 44%.
With the fate of Brexit still to be decided, a danger for wholesale businesses lies around stockpiling products and parts that are currently freely available from Europe. The National Living Wage is rising to at least £9 an hour by 2020, which will affect some warehouse employees. Inaccurate data is the only major concern that can, however, be influenced by wholesale businesses. Inaccurate data can lead to potential loss of revenue and inability to correctly assess performance and sales.
One respondent cited major factors damaging profitability as: “sloppy work from our sales team where they follow an old price rather than checking up-to-date prices with suppliers, and price increases from suppliers which are difficult to pass on to customers in the current climate.”
Leonie Pannell, MD of South Midlands based Cablecraft, said: “The major factors affecting profitability are the state of the economy, with the weakening pound, competition lowering prices and lack of investment by the government.”
Entering a potentially uncertain economic period, wholesalers’ efforts to increase profitability are critical. Technology is at the heart of this. 80% of respondents agreed that technology is vital to the efficient running of their business, while 65% agreed that automating business processes helps their companies stay competitive.
A key finding was the widespread of technologies used and the disparate nature of systems that are not necessarily “talking to each other” to provide a full view of operations. Wholesale businesses use a range of software systems to function: 98.5% of respondents use one or more software systems to run their business, from warehouse management, inventory/stock control to accounting software, CRM (customer relationship management) and ERP (enterprise resource planning).
All respondents still use some form of manual data processing, in spite of more than a quarter (28%) citing manual processes to be ineffective in managing business operations.
Mr Pannell added: “The single ERP system brings all the customer data including orders and quotes into one screen. The fully integrated, live data, stock module within the ERP System enabled Cablecraft to go down the e-commerce route. The fully automated system between sales and warehouse also allows us to offer a very fast and reactive service.”
The main barriers to deploying an integrated software solution were cost, with 42% citing budget as the top hurdle, followed by 37% selecting business disruption and 33% with fear of change. Cost is associated with the misconception that ERP systems are only for larger businesses, and the lack of information about affordable subscription-based models.
Nick Davies, Head of Software Development at OGL Computer, said: “The survey findings correlate with much of what we are hearing from our wholesale and distribution clients. The uncertainty of Brexit and impact of wage increases is leading companies to focus on increasing profitability, with technology playing a huge role in business success.
“Many smaller businesses just don’t have the time or money to prepare for Brexit and are waiting for a decision, and whatever the outcome they are hoping that EU and British governments take a pragmatic approach to enable continued business with EU suppliers and customers.
“It’s great to see businesses adopting more technology instead of inefficient manual processes, but disparate systems are not always leading to efficiency. A single view of a business, with the same information available to multiple users will lead to better profitability, increased productivity and accurate data for planning purposes. It also enables wholesalers to extract data much more easily and analyse and manipulate the data to assist with reporting.
“At OGL Computer, we take our clients through a comprehensive process to ensure we fully understand their business and the way they operate and then map their processes into our software. We also plan the migration process from data transfer to go live in detail to minimise business disruption.”