Online marketplaces have dramatically reshaped the landscape for distributors of all sizes. The distribution industry is in the middle of a big shift, and modernization has become an imperative for survival.
Given changes in technology, evolving buying patterns, availability of real-time data and advances in artificial intelligence, the key to thriving in today’s marketplace is having the right product, at the right price, at the right place, and at the right time. Adjusting your business model to keep up with rapid change can be daunting, but it also presents an opportunity to capture larger market share.
How can distributors streamline their priorities in this ever-changing landscape? Here are five tips to help chart a way forward.
Stay Nimble and Adapt to Changing Market Demands
Business transformation is a top priority of 34 percent of best-run wholesale distributors, according to research from IDC. The small and midsize companies that have grown the most in the past seven years have adopted an entrepreneurial approach, with a focus on pure distribution—an area many larger companies have exited—and drop-ship fulfillment for digital marketplaces like Amazon and eBay. The previous focus on low-margin businesses, like big-box retailers, has given way to diversification.
Specialized distribution is shifting from a narrow product scope to include a broader array of offerings—for example, expanding distribution of plumbing supplies by also including electrical and HVAC products. Another tactic is offering more value-added services.
Adopt a D2C Mindset in Your B2B Relationship
Today’s consumers use online research to become savvier about what they are buying, and the buying journey has become more digitized with the reliance on online shopping and instant service via text messages, voice commands, chatbots, and automated ordering. The greater expectations on speed have led merchants to place new expectations on their distributors in terms of speed, simplicity, availability, reliability, and personalization.
“The expectations of a business-to-business (B2B) relationship are now being influenced by everybody’s own personal shopping experience,” explains Ralph Hess, vice president of sales for Navigator Business Solutions, during a recent interview about the changing role of distribution. “People are actually bringing their consumer experience into their business relationships.”
Accordingly, wholesale distributors can borrow techniques from the direct-to-consumer (D2C) world by expanding sales ranges and support channels such as chat and text messaging, and by unifying back-end channels to facilitate centrally stored and accessible customer interactions. This can help create a more seamless customer experience and more continuity between interactions.
Upgrade Outdated Business Models with New Technology
This is arguably the most critical component of modernizing a distribution business. It’s time to ditch aging or patched-together systems that offer very limited operational visibility.
Developing an innovative business model requires technology investments to eliminate silos and improve automation. Centralized enterprise resource planning (ERP) systems offer a robust business management platform with an intelligent digital core. Such a system replaces spreadsheets with an inventory management platform that automates routine, repetitive tasks such as data entry, payment processing and report reconciliation.
Many distributors with outdated systems lack the right information to make quick decisions that could take their business to the next level. With an ERP system, “you have all this information at your fingertips and can make better, more rapid decisions,” according to Hess.
Online marketplaces, like those operated for third-party sellers by Amazon, provide another opportunity for distributors. An electronic data interchange (EDI) connection, used in conjunction with an ERP, can greatly help streamline a distributor’s relationships with these marketplaces.
Imagine, for example, that you need a solution to manage all the ways Amazon is paying your commissions, which differs from the way Target is paying commissions, and so on. Today’s digital core platforms can help sort out all relationship structures and provide insight into demand trends (who’s buying, why, at what price, and at what profitability) to simplify forecasting. These real-time reports enable more powerful vendor-performance analysis and stronger buying decisions.
Focus More on Strategy, Less on Operations
The most successful wholesale distributors are changing their historically singular view of operations. They are finding that spending more time on strategy actually helps better align operations with larger business goals: growth, profitability, and stronger customer service.
To be truly strategic, you must first establish proper metrics, then leverage data analytics to monitor those metrics. Data analysis is central to modernizing distribution operations, and it helps provide insight into growth potential.
Innovate, Innovate, Innovate
Investments in ERP and EDI systems will fuel innovation by providing advanced analytics and dashboards for easy access, along with collaboration tools, cloud computing, cognitive computing, machine learning, and blockchain technology. These advances empower employees to gain a more complete picture of the business and derive new insights to develop new ideas.
Beyond technology, it’s also important for distributors to continuously look outside the industry to identify trends, opportunities, and new threats.
Finally, consider launching internal innovation teams and giving employees a designated time to explore and discuss new ideas. And don’t forget to reward innovation when you spot it!
Invest in Talent
The ongoing talent war undoubtedly poses a challenge in attracting and retaining the top talent needed to grow the business. The good news is that SAP and Oxford Economics found that 64 percent of business leaders say digital transformation has improved employee engagement.
Easy-to-use and constantly updated, ERP can help improve morale by providing functionality similar to the consumer web services that employees are already used to. As a bonus, employees can access the information they need anywhere and anytime, offering flexibility to work from any device at any location and enhancing work/life balance.
Embrace Change or Die
Changing a business model is never without challenges. But for distributors, change is an imperative that must be tackled to reap the opportunities available in the digital age.
Revenue growth and increased market share are there for the taking, but they will be reserved only for those brave enough to embrace a new mindset and modernize operations to become stronger and more competitive. The first step is to find out how an ERP system can provide the backbone of a modern digital core for your business.
For more information about how ERP can help modernize your distribution business, contact one of our ERP consultants at (801) 642-0123 or info@nbs-us.com.
