Choosing an ERP for distribution

A distributor makes money in the details: the right price for this customer on this item in this quantity, the right stock in the right warehouse and an order shipped the same day. An ERP that is strong in manufacturing or general accounting can still be weak in those details. Below is the method we would use to evaluate systems for a wholesale distributor, whichever vendors are on your list.

Disclosure

Lumina ERP works with Epicor Prophet 21 and Epicor Kinetic software. We have tried to keep this guide vendor neutral, and it does not rank or recommend any product. Apply the same method to every system you evaluate, including the ones we work with.

Options at a glance

The first decision is the deployment model. It shapes cost, control and who does the technical work.

Model	Servers run by	Upgrades	Customization	Cost shape
Multi-tenant cloud (SaaS)	The vendor, shared across customers	Vendor schedule, usually several times a year	Most limited, with extensions through supported APIs and tools	Subscription per user or per tier
Single-tenant cloud or hosted	The vendor or a hosting partner, one environment per customer	Scheduled with you, within vendor limits	Broader, sometimes including read access to the database	Subscription or license plus hosting fee
On premises	You, or your IT provider	When you choose, within the vendor support window	Broadest, including direct database access	License or subscription, plus your hardware and staff

The questions that decide

Test the distribution capabilities

Go through this list with your own examples. The table lists each capability and what to test. A capability that needs a customization to work is a cost you will carry through every upgrade.

Capability	What to test
Pricing	Contract prices, customer and item price groups, quantity breaks, cost-plus pricing, promotions and which rule wins when several apply
Multi-warehouse	Stock by location, transfers, in-transit stock and replenishing branches from a central warehouse
Units of measure	Buying in one unit, stocking in another and selling in a third, with correct costs and prices in each. See Units of measure
Rebates	Vendor rebate programs with tiers and accruals, customer rebates and ship-and-debit or price protection claims
EDI	The X12 documents your trading partners require (orders, acknowledgments, advance ship notices, invoices), and whether EDI is built in or a third-party add-on
Lot and serial tracking	Tracking from receipt to shipment, and how fast you can find every customer who received a given lot
Warehouse management and RF	Directed put-away and picking, handheld scanning, wave or batch picking and whether it is native or an add-on
Counter sales	Fast walk-in sales, cash and card tenders and printing at the counter
Special orders and drop ship	Linking a customer order to a purchase order, and billing the customer when the vendor ships direct
Purchasing and replenishment	Demand forecasts, order points, suggested orders by vendor and buying to reach vendor minimums or freight breaks
Landed cost	Freight, duty and other costs added to inventory cost. See Landed cost and freight terms
Credit management	Credit limits, holds and releasing orders without slowing the warehouse

Total cost over five to seven years

Compare total cost of ownership over the same period for every option, rather than first-year price. The table lists the cost categories buyers most often miss.

Category	Includes
Software	Licenses or subscriptions, user growth, add-on modules, annual maintenance
Infrastructure	Servers, database licenses, backups, hosting fees or none of these for SaaS
Implementation	Partner services, project management, data migration, testing, training
Integrations	EDI provider fees, connectors, middleware and building or rebuilding interfaces
Internal time	Staff pulled from their jobs for design, testing and training, and backfill for them
Ongoing support	Partner support hours, an internal administrator, report writing
Upgrades	Testing and fixing customizations at each upgrade, which grows with every customization

Judge the implementation partner

The partner often matters as much as the software. Ask each one:

• How many distribution companies like yours have you implemented in the last three years, and can we talk to two of them?
• Who, by name, will be on our project, and how much of their time is committed to it?
• What is your implementation method, and what do you expect from our team, in hours per week by role?
• How do you handle data migration, and how many rehearsal loads are included?
• What is in the fixed scope, what is billed hourly and how are change requests priced?
• What does support look like after go-live, and what are the response times?

Script the demo

A standard vendor demo shows the product at its best on data built for it. Write a demo script instead and ask every vendor to run it.

• Use your real scenarios. Pick 10 to 20 of your hardest everyday transactions: a customer with three overlapping price rules, an item bought by the case and sold by the each, a partial shipment from two warehouses, a drop ship, a rebate claim.
• Send the script ahead with sample data. Give vendors time to set it up, and the same script to every vendor.
• Have your own people drive part of it. Ask a customer service rep to enter an order after a short walkthrough. Clicks and screen changes matter every day.
• Ask how each step was done. Configuration, a customization, an add-on or a workaround. Only the first comes with the product.
• Score during the session. Each evaluator scores each scenario before discussing it with others.

Call the references

References tell you what the demo cannot.

• Ask for references in your industry and size, live for at least a year, and call them without the vendor on the line.
• Ask what they would do differently, what took longest to stabilize and what the first upgrade was like.
• Ask whether the budget and schedule held, and what drove any overrun.
• Where you can, visit one reference site and watch a counter sale, an order entry and a pick.

Score the finalists

Agree the criteria and weights before any demo, so the scoring is not shaped by whichever demo was most recent. The template below uses a 1 to 5 score multiplied by weight. The weights are an example, so set your own.

Criterion	Weight	System A score	System A weighted	System B score	System B weighted
Pricing and rebates	20
Inventory, warehouses and units of measure	15
Warehouse management and RF	10
Purchasing and replenishment	10
EDI and integrations	10
Finance and reporting	10
Ease of use in the demo script	10
Implementation partner	10
Five to seven year total cost	5
Total	100

Weighted score is score times weight, and the maximum total is 500. Treat a close total as a tie and let the references and the partner decide.

Our recommendation

Start by writing down how your business runs: your pricing rules, your warehouses and your 10 to 20 hardest transactions. That document becomes the requirements list, the demo script and the scoring sheet, and it keeps every vendor answering the same question. Choose the system that runs your script with the least customization, from a partner who has done it for companies like yours.