Distribution Software - ERP Solutions for Distributors

Narrow wholesale distribution is falling by the wayside as the lines between manufacturing, wholesale and retail
blur. Online sales channels are reducing the role of wholesale distributors as manufacturers are selling directly to
retailers and often directly to consumers.

At the same time, eCommerce giants such as Amazon are using their platforms and logistical expertise to expand
from the business-to-consumer model to also include business-to-business offerings.

These shifts are forcing distributors to similarly expand. Specialized distribution is giving way to a broader portfolio
of product and service offerings, such as moving from strict wholesale distribution of plumbing supplies to also
including electrical and HVAC. Narrow product distribution is also being replaced by a basket of offerings that
includes value-added services.

Both the way that customers are buying and their expectations are changing as a result of technology.The typical
business customer is more strapped for time than in the past and has come to expect a buying experience that
resembles consumer purchasing. This has raised expectations around speed, simplicity, availability, reliability and
personalization when it comes to purchasing from wholesale distributors.

The buying journey has increasingly become digital, too, with purchases taking place through mobile and
web-based channels, as well as text messages, voice commands, chatbots, automated ordering through enterprise
resource planning systems, and through a variety of online marketplaces. Wholesale distributors are faced with
expanding their range of channels for sales and support and making the handoff seamless among these channels.

Buyers are also researching purchases online more before the sale, coming in with far greater knowledge, and
requiring that product and service information be readily available online. Roughly 64 percent of B2B buyers now
research at least half of their work purchases online, according to Forrester Research.

Along with these changes comes the demand for a more robust customer experience, including seamless
multi-channel communication, greater product information, and more communication among departments.

Traditionally, wholesale distributors have acted as intermediaries between suppliers and customers. The basic business model of warehousing products is no longer sufficient given the blurring of the lines brought about by online purchasing, so distributors now must reinvent their businesses. This requires both new technology and fresh thinking in management approaches.

"Best-run" wholesale distributors leverage technology and empower employees to focus on-value tasks, improved decision-making, and the ability to move opportunistically into adjacent market” notes a recent IDC report, Becoming a Best-Run Midsize Wholesale Distributor

Attracting top talent is an urgent need for many distributors today. This requires modernizing operations and creating a positive work environment with easy-to-use tools, employee collaboration, and a minimum of mindless tasks.

At the same time, developing innovative business models requires the best of current and future technology. Many wholesale distributors run their operations with aging or patched-together systems that served the industry in the past but now limit innovation and changing business models.

Specifically, legacy IT systems cage data in system silos that reduce informational use and overall operational visibility and hinder real-time operations. Aging IT systems also limit the opportunities for taking advantage of advanced automation and new technologies such as artificial intelligence. They discourage the top talent needed for innovation from joining firms, too.

How Top Distributors are Handling Modernization

Wholesale distributors are addressing the changing distribution landscape in a variety of ways, but three clear priori- ties emerge for distributors that are considered the best run.

Improving productivity. Roughly 39 percent of the best-run wholesale distributors consider productivity improvements a key business priority, according to IDC research. Among all wholesale distributors, only 28 percent consider it important.

Adding new revenue streams. A second top priority right now for the most successful wholesale distributors is adding additional revenue streams to combat the chipping away of traditional lines of business. IDC research has found that 38 percent of the best-run wholesale distributors are focusing on the development of new revenue streams, compared with only 24 percent overall and 20 percent of the wholesale distributors that are lagging behind.

Transforming the business. The most significant difference between best-run wholesale distributors and the competition is a focus on overall business transformation from management to ground-floor operations. IDC found that 34 percent of wholesale distributors that are considered best-run believe business transformation a top priority, compared with only 23 percent of wholesale distributors overall and 10 percent among the businesses that are lagging behind.

The wholesale distribution industry, partially owing to its foundation in bridging the gap between manufacturers and customers, has historically focused on operational needs. The best-run wholesale distributors are shifting instead to a more strategic focus that aligns operations with the larger management goals of business growth and better serving customers.

Establishing strategic metrics and monitoring these metrics through data intelligence is a big part of addressing industry change for the most successful wholesale distributors. These wholesale distributors are shifting to analyzing data as a central part of their business management.

While the typical wholesale distributor primarily uses data for increased operational efficiency, according to IDC research, top distributors focus less on data for operational efficiency and use it instead for a wider range of business goals. These uses include:
• Improving customer service
• Gaining customer insights
• Improving access to employee data
• Generating additional revenue streams
• Gaining competitive insights
• Driving product innovation

Of course, the best wholesale distributors also use data for operational efficiency. This focus on data and strategic priorities makes wholesale distributors more agile and able to balance operational realities with insights to drive growth.

Innovation has not traditionally been an emphasis for wholesale distributors, which focus primarily on logistics within their ecosystem. As the industry looks for new sources of growth, however, top wholesale distributors are using management innovation for additional revenue streams and novel business models.

This is a key difference between wholesale distributors that are modernizing and those that are falling behind. While nearly all of the best-run wholesale distributors say they use innovation well or very well, according to IDC research, only 8 percent of distributors that are struggling say the same thing.

Wholesale distributors are using a range of new technologies to foster this innovation, including:

• Mobile devices that can execute all core business functions
• Advanced data analytics and management dashboards for easy access
• Enterprise collaboration tools
• Cloud computing
• Internet-connected devices (Internet of Things)
• Cognitive computing
• Machine learning
• Blockchain

They also are encouraging innovation in a variety of ways, including actively looking outside their company and industry, having programs that reward innovation, launching internal innovation teams, and designating time during the workweek for employees to explore and play around with innovative ideas.

With heightened competition, wholesale distributors are under significant pressure to differentiate their businesses and cultivate loyal customers. This is leading the top distributors to double down on customer service and focus on exceeding buyer expectations.

Wholesale distributors are doing this in two primary ways.

First, they are supporting a wider range of customer channels such as chat and text messaging, and unifying these channels on the backend so all customer interactions are centrally stored and accessible. This creates a more unified customer experience and more continuity between interactions.

Second, wholesale distributors are breaking down operational silos and using enterprise resource planning software that serves as a single source of truth instead of data being spread across multiple databases with no overarching management. This enables analytics and a much clearer picture of the customer, which in turn is being used for an improved customer experience.

Meeting the challenges that wholesale distributors face today requires employees that can develop innovation, think creatively, and better support customers. This requires that wholesale distributors attract and retain top
talent, a struggle for many firms.

Wholesale distributors that are modernizing and meeting the challenges of the industry are therefore stressing an improved employee experience. Some of the methods that top wholesale distributors are using:

• Process automation
• Talent management software
• User-friendly computer systems
• Enhanced employee needs awareness
• Programs for employee development
• Increased collaboration
• Mobile-enabled operations

Roughly 73 percent of the best-run wholesale distributors are currently using talent management software, according to IDC research, and 82 percent of wholesale distributors strive to empower employees with process automation.

A central component of modernizing wholesale distribution among top distributors is breaking down operational silos and improving automation through the use of a centralized enterprise resource planning system (ERP) that serves as a single source of truth.

IDC research has shown that there is a large discrepancy between the IT capabilities of the best-run wholesale distributors and those that are struggling today.

The use of a centralized, cloud-based ERP system is a key component of the strategy for meeting the challenges of the wholesale distribution industry because it helps with the collection and analysis of operational data, drives automation enables innovative business models, and generally serves as the foundation for digital transformation.