The world of wholesale distribution has been changing. It used to be fairly simple, wholesale-distributors focused their attention on driving out costs in delivering for their customers. But increasing numbers of millennials are now involved in purchasing decisions and in fact more than a third are empowered to make their own. This new generation of buyers has different expectations than previous generations – they go to the internet to research vendors and products, and they expect instant availability of information from pricing to shipment status. Most wholesale-distributors are not prepared to deal with this level of digital commerce.
New ways to engage customers level the playing field
Customer intimacy is being redefined by technology to the point where many companies no longer need a salesperson to make calls or visits; their customers are already connected via mobility and social media. This overturns traditional B2B and B2C boundaries and creates a more direct B2Me world. And that creates an equal opportunity environment for every segment of the supply chain; manufacturers are now selling direct to end consumers, retailers are beginning to run their own manufacturing. And distributors are now free to redefine and expand their own role. This shift away from the old boundaries of what is possible and appropriate for distributors couldn’t come at a better time because it is the surest path to avoid commoditization and enables them to deliver higher-margin services. But to capitalize on the opportunity, distributors need to evolve from their traditional “wholesaling” mindset and quickly adapt their business models to meet today’s buyers’ needs.
Keep the entrepreneurial spirit, but break the silos
Most distributors used to operate decentralized networks of distribution centers, purchasing teams and sales organizations because this model had delivered the maximum in customer responsiveness. In today’s world, not only is this inefficient, it is inhibiting growth. Customer buying behaviors changed, suppliers’ manufacturing capabilities changed, cost structures are different, and logistics is far more complex. While many distributors now have the big picture — almost a control-tower view of their business — there are still many distributors lagging in terms of integrating their purchasing, sales and logistics operations.
Leading wholesale-distributors are already investing in technologies that enable them to centralize their purchasing, integrate purchasing supply chain operations, remodel their distribution system, and digitize their business. And digitization is not just their website, updating the latest version of office tools or standing up a new collaboration portal, but their supply chain backbone too. This means they have the ability to create transparency from suppliers all the way to the customers, from planned orders to when the orders are received by the customers, and are able to identify and resolve logistics issues instantly.
Leverage technology to deliver agility
Emerging technologies such as warehouse automation, robotics and 3D printing are also beginning to roll-out. These are not just buzzwords anymore. The right technologies have helped leading distributors offer differentiated services to their customers and deliver profits, especially as their customers venture more and more into e-commerce, direct fulfillment and next-day/same-day delivery.
Look to ROI for where to begin
While many see the potential of emerging technologies, as a practical matter we should first focus on those implementations that can deliver strong returns on investment (ROI) as soon as possible. Areas that can deliver a relatively quick ROI include adopting a demand planning discipline to gain visibility beyond warehouse orders and shipments, all the way to the customers. Leading companies have proven that they can increase service levels while improving inventory turn. Or how about getting visibility to employee-level task and productivity in the warehouse – if you have between 300-400 people in the warehouse today, there’s probably about a half-million to a million dollars in savings that can be realized just by having this level of visibility.
Besides the financial payoff, these initiatives also help IT build credibility with the C-Suite, pave the way for future investment approvals and begin changing the culture of warehouse-distributors to step up and begin playing a strategic role in a multi-channel world.