For wholesale distributors, the promise of an ERP system in regards to inventory purchasing is simple: streamlined operations, improved inventory metrics, and informed, up-to-date decision-making. However, based on Thrive’s 25 years of experience and analyses of hundreds of wholesalers, wholesaler ERP purchasing has some significant shortcomings. Instead of empowering wholesale buyers with optimal stocking levels and purchasing quantities, your ERP might actually be contributing to the very problems it's meant to solve—dead stock, low fill rates, bad inventory turns, and more.

If this sounds familiar, you're not alone. ERP systems are powerful tools, but without the right optimization, they often fall short of meeting wholesaler needs. The following are five telltale signs your ERP system needs help, and what you can do about it.

1. You’re Sitting on a Heap of Dead Stock

Nothing cuts into a distributor’s margins like dead stock. These are items that were ordered based on ERP recommendations, or from a salesperson’s insistence, or were new items from a vendor, and then sat. 

ERP systems often struggle to manage SKU-level forecasting, especially for low-selling SKUs, which comprise the majority of wholesaler inventory. Most ERPs are forecast based on historical sales averages or outdated demand. They’re not designed to account for the fast-changing market conditions or seasonal patterns that are common in the wholesale industry. Forecast-based systems are outdated, as they assume each item will move at least 20 times per year, when, in fact, 80% of SKUs sell fewer than 10 times per year. Additionally, ERP systems don’t do a great job of alerting buyers that new items (or items purchased for a salesperson) aren’t selling as expected.

Optimization Tip: Implement AI-driven forecasting tools alongside your ERP that analyze very granular sales data to assess and optimize your ERP settings and assumptions.. These innovations optimize inventory on unforecastable SKUs and alert you much quicker to items that aren’t selling as expected. The end result is smarter ordering and reduced dead stock—and the avoidance of a costly and disruptive new software implementation.

2. Your Fill Rates Are Less Than Ideal

When customers place an order, they expect fulfillment. Poor fill rates mean you’re either out of stock, understocked, or misdirecting inventory across warehouses. And when fill rates drop, customer trust drops right along with it. While ERP systems track inventory levels, they often lag and miss the mark when it comes to anticipating where and when stock is needed. A large gap that Thrive has identified with ERP purchasing is in maintaining optimal levels of parts and other slow-moving items. A sore issue between branch managers and buyers is often around critical parts that aren’t in stock, which can often contribute to the loss of larger sales.

Optimization Tip: Layer your ERP with an ERP Inventory Optimizer that dynamically updates Min/Max parameters. These AI solutions use unique analytics of recent sales characteristics for each SKU at each location to calculate optimal stocking levels, ensuring difficult-to-forecast inventory is placed where it's needed when it's needed.

3. Inventory Turns are Poor

Inventory turns are a key performance indicator for any distributor. If you're holding too much inventory, or the wrong inventory, your turns take a hit. Unfortunately, most ERP systems offer little insight into how to improve turns. They report what you have, not what you should have. Without advanced analytics, you can’t course-correct.

Optimization Tip: Leverage AI to easily identify the causes of excess inventory that are reducing your turns. Modern AI inventory optimization tools integrate with ERPs and provide actionable insights to drive better turns without increasing stockouts. This is done without the need for large, costly, and disruptive new software implementations. 

4. Overriding ERP Suggested Orders and Transfers Manually is Your Norm

If your buyers spend hours trying to fix what your ERP provides, that’s a red flag. Thrive’s analyses reveal that the typical wholesale buyer overrides at least 50% of the line quantities on ERP-suggested purchase orders. Manual overrides are not just inefficient—they’re risky. Every spreadsheet introduces potential human errors. This issue often stems from the ERP’s limited forecasting capabilities, since most legacy ERP systems lack the sophistication to forecast thousands of SKUs across multiple locations accurately. The forecasts are built on simple averages or last year’s sales, which don’t work well with slow-moving items.  They also severely lag when demand patterns change (eg, loss of a large customer) and vendor lead time changes. 

Optimization Tip: Augment your ERP with an AI-based ERP purchasing optimizer. These tools use machine learning rather than basic forecasts to deep dive into recent sales and lead time data, generating optimal inventory targets for unforecastable SKUs. This frees your team from countless hours in front of spreadsheets correcting ERP quantities.

5. Your Buyers Don't Trust the System

The ultimate sign that something is wrong is that your buyers (and branch managers) have lost trust in your ERP purchasing. They stop following system-generated purchase orders, bypass inventory data, make ad hoc decisions, and question forecasts. For wholesale distributors operating with thin margins, this lack of trust significantly reduces the control the business has over inventory, and can be the difference between profit and loss.

Rebuild their trust by improving the assumptions and settings in your existing ERP, especially with unforecastable SKUs. Leverage inventory AI solutions that will analyze your data and send optimal inventory levels back to your ERP, which do not rely on poor forecasts. This will also avoid a disruptive new software implementation, which would leave your buyers weary of learning and trusting a whole new system. 

Optimization Tip: Start by measuring the effectiveness of your ERP settings and assumptions.  These are often set during the implementation and then never analyzed for effectiveness and optimized. Then, implement an AI analytics layer on top of your ERP to regularly re-evaluate the effectiveness of the inventory settings, then optimizing and updating your ERP as conditions change on any given SKU...

Remember, your ERP is a foundation—not a stand-alone solution. 

It isn’t broken, but it wasn’t designed to do everything on its own. Wholesale ERP purchasing leverages math from the 1980s, designed before the advent of the very powerful cloud-based analytical tools. Wholesale distribution is a fast-moving business that must respond quickly to change, and that can only happen with complementary data-driven solutions built to handle that complexity. Optimization doesn’t mean disrupting your workflow and breaking your budget by replacing your ERP. The smarter path is to augment what you already have with AI-driven solutions. 

If you’re dealing with persistent inventory issues like dead stock, low fill rates, or poor turns, it’s time to look at supporting your ERP with complementary technologies. Talk to Thrive about elevating its performance.