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Today, there are 30 major ERP systems marketed to distributors. In addition, there are literally hundreds of smaller packages. You would think that there would be at least one solution available to meet all of a STAFDA distributor’s specific needs.

But, over our 30 years in business, we have rarely found a situation where a STAFDA distributor was totally satisfied with the features and capabilities in the software they purchased.

During the demonstrations and interviews, the salespeople and technical staff of the software provider appear to understand, and have solutions, for each challenge faced by the STAFDA distributor. But after implementation, the company discovered that software features were not available to address specific situations. To deal with each of these “discovered” challenges, most distributors consider:

• Manually performing the task outside of the system.

• Investing in expensive software modification or enhancement to address the situation.

We have found that in many instances a single challenge did not justify a major investment, but there were so many of these challenges that accommodating them manually lead to significant lost time and inefficient purchasing.

In many cases these unique requirements can be addressed, at a reasonable cost, with customized solutions that can interface with, or compliment, a company’s ERP software package. This is a middle ground. The idea is to develop processes to handle the specific challenges outside of the distributor’s ERP system. This alleviates the need to manually deal with each situation on a regular basis.

In this article we will explore several of the common challenges faced by STAFDA distributors that are not addressed by most ERP systems. Each of these dilemmas can be resolved with some simple spreadsheets and thinking performed outside of their systems.

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BUYING A PRODUCT FROM BOTH DOMESTIC AND OVERSEAS SOURCES

One of our clients uses an overseas supplier as the primary source of supply for a major product line. The significant lower cost (compared with domestic vendors) compensates for the longer lead times, container constraints, and less reliable availability of popular items.

Their ERP system maintains a reorder point quantity (ROP) for each item. This ROP is calculated based on average lead times and order cycles from the primary source of supply (i.e., the overseas vendor) and a safety stock quantity:

Average Lead Time – The average amount of time between placing the replenishment order with the vendor and receiving the shipment. The average lead time for this vendor is 120 days.

Order Cycle – Frequency of placing orders with the vendor. In this case they place an order that meets the target order requirement every 30 days.

Safety Stock – Reserve inventory to prevent stockouts due to unusually high demand or delays in receiving a replenishment shipment during the lead time.

A replenishment order is issued by the ERP system when the “net available quantity” (On-Hand – Committed on Outgoing Orders + Quantities on Current Replenishment Orders) drops to the ROP.

But the vendor’s inconsistent performance resulted in stock shortages that could not be fulfilled with safety stock. There was a need to supplement on-hand inventory of the product with shipments from a local, higher cost supplier. But our client’s buyers were faced with two challenges in working with a second replenishment source:

• When do you issue a supplemental replenishment order?

• What is the minimum quantity to buy to prevent a stockout?

Buyers couldn’t determine when to issue supplemental replenishment orders by comparing the current net available quantity to the ROP. Why? Because while there might be a sufficient quantity on replenishment orders to keep the net available quantity above the ROP, the overseas shipments might not arrive on time to prevent a stock out. They also needed some way to find what minimum quantity to buy to satisfy customer demand before the anticipated receipt of a replenishment shipment from the overseas vendor.

The ERP vendor proposed an expensive enhancement to their system to provide a solution to this problem. We delivered a comprehensive solution in a spreadsheet that would lead the buyers to make intelligent decisions:

• Notify the buyer when the available quantity (On-Hand – Quantity Committed on Current Outgoing Orders) is not adequate to meet expected demand before the projected delivery of the product from the primary source of supply. We refer to this as a “shortfall” situation:

[(Anticipated Receipt Date – Current Date) * (Anticipated Demand/Day)] > Current Available Quantity

• Calculate the “short fall” purchase quantity. That is the quantity needed to fulfill customer demand before the next shipment replenishment arrives (or enough from the overseas vendor to fulfill the shortfall quantity):

[(Anticipated Receipt Date – Current Date) * (Anticipated Demand/Day)] – Current Available Quantity

Buyers review this spreadsheet every day. They then place “fill in” orders with local vendors to prevent anticipated stockouts. Note that existing “fill in” order quantities are added to the calculated current available quantity to prevent items from inadvertently being listed as having shortfalls after a fill in order has already been placed. This simple spreadsheet provided an affordable solution to a major problem.

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VERIFYING THE COMMITTED QUANTITIES SHOULD ACTUALLY BE RESERVED FOR CUSTOMERS

Most ERP systems maintain three perpetual quantities for each inventory item in each warehouse, storeroom, store or other storage facility:

• On-Hand Quantity – This is the amount of the product that is physically in the facility.

• Committed Quantity – This is the quantity that is needed to fulfill existing sales orders, transfers, assemblies and other planned disbursements.

• On Replenishment Order Quantity – This is the quantity currently on incoming orders from vendors, central warehouses and other sources.

The available quantity is defined as the on-hand quantity minus the committed quantity. Salespeople, technicians and others should figure out if there is adequate

stock to fulfill a new sale order, work order or other requirement by checking the available quantity. The net available quantity is defined as the available quantity plus the on replenishment order quantity. Buyers should use the net available quantity to determine when to order more of the product from a supply source.

Perpetual inventory tracking may seem straightforward, but many STAFDA organizations have challenges knowing what quantities of products are free for new potential disbursements. This is often because committed quantities of individual items in their system do not reflect what is needed to fulfill actual requirements. Problems with committed quantities fall into several categories including:

Old Sales, Transfer, Disbursement, and Assembly Orders – The need for the material may have disappeared but no one cancelled the requisition. Material is tied up for a requirement that no longer exists.

Personnel Trying to “Protect” Inventory for Preferred Customers – We have seen many instances where false orders were entered into an ERP system to tie up inventory so it would be available when a certain customer wanted it. When the customer was ready to place the order, the false order was cancelled instantly freeing up the protected stock. In the meantime, this inventory was not available for other requirements.

Customers Placing Orders Far in Advance of When it is Needed – In essence, they are using your warehouse as a free storage facility and preventing you from selling or using it to earn a profit. In many instances, ERP systems will commit inventory as soon as an order is entered, regardless of when the customer requests delivery.

When a quantity of a product is committed when it is not needed to fulfill an immediate need, it is not included in the available and net available quantities. As a result:

• It cannot be used to fulfill a new requirement.

• A replenishment order may be prematurely issued for the item resulting in excess inventory.

We have developed customized solutions with our clients to ensure that accurate committed quantities of products are maintained. These enhancements include:

• A policy that all outgoing sales, assembly and outgoing transfer orders must have an anticipated shipment date. A weekly listing of sales, assembly and outgoing transfer orders with committed material that is currently on hand but has a shipment date that is more than a week overdue. Salespeople and customers should be questioned as to why this material has not been shipped or delivered. If they cannot provide a good reason, the order should be cancelled and the committed quantity of the product adjusted.

• An enhancement to the order processing system committing inventory for an outgoing order not before a date equal to the sum of the anticipated lead time and order cycle for an item. The anticipated lead time is the length of time it will take to order and receive a replenishment shipment for the item from the primary source of supply. The order cycle is the frequency that replenishment shipments are placed with the primary source of supply.

Most companies aren’t selling fine wines or antiques. Their inventory will not appreciate with age. It must be used to serve customers and generate profits. Effectively managing committed quantities of products will help you maximize the productivity and profitability of your inventory investment.

SUMMARY

Though STAFDA distributors have many similarities and requirements, every organization is unique. Examine your operations and identify bottlenecks, repetitive challenges, and other obstacles that prevent you from maximizing your company’s productivity and profitability. Don’t fall into the trap of feeling that you must change the way you do business to “fit” the capabilities of your ERP system. Think outside the box! Brainstorm to develop unique solutions for your specific needs. If you need help, please send us an email or give us a call. We love challenges!

WORKSHOP

STAFDA inventory consultant Jon Schreibfeder presents “Balancing Customer Service and Inventory Investment While Maximizing Profitability” a workshop to offer practical inventory insights from his latest research.

Matt	Jon

Matt Schreibfeder is president, and Jon Schreibfeder is founder of Effective Inventory Management. STAFDA members receive a free 30-minute consulting session. Contact them via email at matts@EffectiveInventory.com or jons@EffectiveInventory.com or phone (972) 304-3325.

 

This article originally appeared in the October/November 2026 issue of Contractor Supply magazine. Copyright, 2026 Direct Business Media.