A few decades ago, running a wholesale distribution business was a relatively simple proposition. Get product X from manufacturer to customer, provide some service and support, and charge a fair markup for your trouble. Like so many things in our globally connected digital world, that basic model has taken on complex new dimensions unimaginable to the wholesale distributors of yesteryear.
Wholesale distribution companies are under increasing pressure to reassert their role in the broader supply network. Direct-to-consumer sales by manufacturers threaten to erode margins. The launch of AmazonSupply.com sets the stage for B2B buyers to take advantage of economies of scale that are virtually impossible for mid-market distributors to match. This disruptive new mega-competitor should not to be taken lightly. With $61 billion in 2012 revenue, Amazon sells more product online than its 12 biggest competitors combined, including Walmart, Target and other big box chains.
Meanwhile, consumerization has made B2B buyers far more discriminating and demanding — and equipped with the digital means to switch suppliers on a dime. The globalization of supply networks raises the stakes for efficient sourcing and sale of goods over hundreds or thousands of trading partners, some demanding EDI transactions, others dispersed across dozens of nations.
These pressures likely contribute to lackluster growth expectations in the near term.
To survive and thrive in the brave new world, many wholesale distribution companies need a wholesale evolution, if you will, in day-to-day execution and strategic direction. Customer relationships, analytics and supply networks are ripe for innovation, adapting existing processes and deploying new technology:
Customer centricity. Flexibility in purchasing is essential, from phone for old-school buyers to ecommerce sites in both B2B and B2C with rich functionality. The caliber of your ecommerce site matters a lot, as customers have grown accustomed to the ease, personalization and functionality of top sites. Customers expect omnichannel bi-directional interactions, automated transactions, history and preferences with real-time visibility into stock availability not just on a desktop, but over tablets and smartphones too.
Every day or week that a wholesale distributor fails to deliver a superior omnichannel experience increases the risk not just of a lost sale, but of churn and lost accounts. On the other hand, wholesale distributors that strive to stay at the leading edge of ecommerce build customer intimacy and are positioned to win new business by expanding reach and penetrating new markets.
BI/analytics. It’s no longer sufficient to track revenue on a month-to-month basis. To excel, wholesale distributors need business intelligence (BI) and analytic capabilities to explore data in depth. For instance, the right approach to analytics lets you size up profitability by customer — what are your distribution and support costs for a particular customer? What’s the customer lifetime value? What are the upsell/cross-sell opportunities and what is the full product lifecycle costs once support, RMAs, and MRO costs are included?
Insights into your total costs vs. revenue for a customer is critical to pricing decisions and maintaining margins. Similarly, what’s your profitability by product or by service offered? Spikes in fuel costs and manufacturer price fluctuations need to be factored into your distribution of a certain product. Strengthening your analytic prowess generates data-driven insights for informed tactical decisions as well as strategic direction, such as adopting a consignment model in certain sectors.
Supply network collaboration and management. Partnering with trading partners for mutual benefit is important in meeting today’s demands. Shared technologies and cloud integration promote transparency that helps wholesale distributors tighten processes with third-party logistics (3PL) providers and fine-tune production by manufacturing partners to fulfill available-to-promise commitments.
Demand planning is increasingly in use to reduce carrying costs, avoid stockouts and costly emergency replenishment, improve productivity and provide a buffer against erratic market conditions and seasonality. Forecasting in conjunction with a manufacturer gives both partners flexibility to adapt swiftly as demand changes. Tracking supplier performance in terms of cost, quality and speed gives distributors insights into working with the best-value partners.
Cloud Changes the Equation
Wholesale distribution companies are under increasing pressure to reassert their role in the broader supply network. Direct-to-consumer sales by manufacturers threaten to erode margins. The launch of AmazonSupply.com sets the stage for B2B buyers to take advantage of economies of scale that are virtually impossible for mid-market distributors to match.