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New developments in recent years have caused much disruption in the wholesale distribution industry, and caused new challenges to emerge for businesses like in the sector, like yours.
This disruption have only been compounded by the impact of the COVID-19 pandemic, which ravaged supply chains across the world in 2020.
In turn, it has also highlighted the necessity of wholesale distributors like yourself to take advantage of technological trends that are emerging in response to these industry challenges.
To ensure that your wholesale distribution business is equipped to meet these new industry challenges, especially in the wake of the COVID-19 pandemic, you'll need to stay up-to-date with these emerging trends as well.
That's why we've put together a breakdown of the most common industry challenges you're likely to face as a wholesale distributor in the near future, and the trends that are emerging as a response to them.
It also includes some technologies and solutions that your wholesale distribution business can adopt and implement, to provide it with the tools it needs to overcome these challenges.
We hope this will serve you as a resource that'll inform how to digitalise your wholesale distribution business, and prepare it for the post COVID-19 new normal.
The key to achieving effective inventory management for your wholesale distribution business, is to ensure that you can obtain full and complete visibility over your inventory levels.
However, as your wholesale distribution business grows in scale, your inventory management needs will grow more complex as well.
Without robust inventory management processes capable of fulfilling these needs, your business will experience frequent stock-outs, delays in order fulfillment, and frustrated customers who may take their business somewhere else.
It could also lead to disorganisation in your warehouses, complicating efforts by your employees to locate, pack and ship the desired good to your customers in a timely manner.
To ensure your wholesale distribution business is able to manage the growing complexity of inventory management, you'll need to take a data-driven approach.
According to research by the Aberdeen Group, market leaders in the wholesale distribution sector are 72% more likely to have business analytics integrated into their ERP software.
This provides them with the data they need to make better business decisions that are supported by concrete evidence, and to perform more accurate demand planning.
In addition, these market leaders are also 31% more likely to have real-time visibility in the current status of all their processes and their data.
In the scope of inventory management, wholesale distributors like your business are turning to inventory management solutions which gives them the visibility needed to make such data-driven decisions.
How Data & Analytics Can Help; Source: Aberdeen Group (2017)
With such solutions, wholesale distributors are better able to decide what products to stock, in what amounts, and the right time to order new stocks of popular products in their inventory.
More sophisticated inventory management solutions (such as the inventory management module on an ERP software) can provide advanced analytics and detailed consumer behaviour reports.
This provides wholesale distributors like yours with the necessary data to make informed decisions for marketing, sales, and internal operations matters, taking away a lot of the guesswork of managing a wholesale distribution business like yours.
Another solution that's critical for a wholesale distribution business like yours, is a warehouse management system (WMS) such as Tasklet Factory's Mobile WMS solution.
Introduction to Tasklet Factory's Mobile WMS; Source: TaskletFactory
Modern WMS solutions are not only sophisticated enough to help you allocate orders and perform advanced tracking on your inventory, but can even often optimise how you position good within your warehouses.
This can minimise the distance your warehouse employees need to cover in order to locate products as necessary, and help to lower your average order fulfillment times in the long run.
If you'd like your wholesale distribution business to take advantage of this trend, consider implementing an ERP software like SAP Business One, which provides robust inventory management capabilities.
Business-to-business (B2B) customers - including those that bring their business to wholesale distributors like your business - are adopting the use of e-Commerce platforms for their purchasing needs at an increasing rate.
According to a study by Deloitte, the year-on-year growth of B2B commerce was projected to be 19% by 2020.
But the shift towards B2B e-Commerce really hit a spike as a result of COVID-19, with the global B2B e-Commerce market projected to reach US$26.4 trillion by 2028.
Your customers would therefore be familiar with the prompt and responsive customer service provided by business-to-customer (B2C) e-Commerce platforms, and expect the same level of service from B2B businesses like yours.
Because of this, your competitors in the wholesale distribution industry are moving to e-Commerce platforms at a significant rate.
According to a McKinsey study which surveyed B2B businesses such as wholesale distributors, 41% of B2B respondents ranked e-Commerce platforms as the most effective means of marketing their products in 2020.
While the shift to e-Commerce presents new challenges for wholesale distributors like your business, there’s a very good reason why it’s happening; it opens up new opportunities that were not available to businesses in the industry before.
For example, instead of sending physical catalogues to customers in their mailing list like was done in the past, wholesale distributors with an e-Commerce store makes their entire selection of products available to their customers online.
This makes the purchasing experience so much more convenient for your customers in the retail industry, who can now enjoy the same customer experience purchasing your products for their businesses that they would for a B2C e-Commerce store.
And since many B2B e-Commerce marketplaces are designed as search engines, your potential customers would be able to connect with your wholesale distribution business much more easily, especially if you can provide the products that they need.
To transition your wholesale distribution business to the e-Commerce space, you should set up a modernised website that meets all of your B2B customers’ needs.
These include detailed product descriptions, answers to frequently asked questions (FAQs), and other relevant information that your customers may wish to know.
Your e-Commerce website should also include chatbots and online helpdesks, to assist in providing customer service to your prospective customers as needed.
If you’re not sure where to begin when it comes to building an e-Commerce store for your company’s website, a solution such as Sana Commerce can help you get started.
Introduction to Sana Commerce; Source: Sana Commerce
Sana Commerce is even able to integrate with ERP software like SAP Business One or Microsoft Dynamics 365 Business Central, allowing it to share relevant information between your business systems and your e-Commerce store.
B2B customers across the board, including those of wholesale distributors like your business, have become more likely to expect the same kind of buying experience they've gotten used to from B2C businesses.
This means that they expect a seamless buying process across all sales channels, access to high-quality information, and websites that offer easy access to relevant content about your business's products and services.
This rise in expectations is due to your customers being increasingly managed by millennials, who are digital natives used to ordering things online, and accessing the Internet on their mobile devices.
To meet this rise in the expectations of your customers, your wholesale distribution business must thus respond with greater agility and accuracy than before.
To provide the new breed of B2B customers with the streamlined purchasing experiencing they expect, wholesale distributors like your business are increasingly turning to an omni-channel distribution strategy.
Such an approach is only possible if the software systems in your wholesale distribution business are fully integrated and sharing data with each other, such as with the implementation of an ERP software.
With omni-channel distribution, all of your customer-related departments are linked internally.
This allows your customers to make their orders through various channels, and the relevant information would then be stored in a central database.
Your customer service officers can then access all of the information related to your customer’s orders (such as the initial order, the shipment, the delivery and the billing), no matter which channel they used to make an order with your business.
With all the information at their fingertips, your customer service officers will be able to provide service for your customers throughout the entire purchasing cycle, ensuring a smooth and seamless customer service experience.
With e-Commerce and online retail becoming a bigger part of how customers purchase goods, businesses in your industry are facing the risk of disintermediation.
This is when manufacturers and retailers attempt to increase their profit margins by cutting out the middleman i.e. wholesale distributors like your business, and selling in a direct-to-customer (D2C) model.
This is possible because of advances in technology, which has allowed retailers to get in touch with manufacturers directly through online marketplaces.
It has also enabled the practice of dropshipping, where manufacturers make use of dropshipper’s website as an e-Commerce storefront for the purposes of handling orders and sales, but carries out the shipping directly to the customers.
While disintermediation poses a threat to the business model of wholesale distributors such as your business, there are several ways to reverse this. and achieve the reintermediation of your wholesale distribution business
For example, you could get your wholesale distribution business involved in the dropshipping business as well, serving the same role for your manufacturers and retailers as the dropshippers.
This can serve two purposes:
Another route that wholesale distributors like your business can take to combat dropshipping, is to embrace the use of technology that manufacturers are not inclined to adopt at present.
For example, vendor-managed Inventory (VMI) is a business model where the buyers of a product provide information about their inventory to the vendor of that product.
The vendor is then responsible for helping the buyer maintain a certain level of inventory for the product, through VMI tools that alert the vendor when the buyer’s inventory levels fall below a certain point.
In the case of the wholesale distribution industry, it can mean:
With a VMI solution, you can help your manufacturers reduce their workload when it comes to anticipating the orders from your wholesale distribution business, and planning their production accordingly.
You can also help your retailers avoid stock-out situations, by automating the delivery of product from your wholesale distribution business whenever their inventory of your products runs low.
With the help of VMI solutions, you can provide this kind of value-added service that a dropshipper could never match.
And this can help you convince your manufacturing and retail partners of the value of your wholesale distribution business in their supply chain, and persuade them to retain their working relationship with you.
The COVID-19 pandemic which affected the whole world in 2020 exposed the weak points of global supply chains at the time, such as geographic dependencies, slowdowns in manufacturing, and regulatory restrictions.
These caused disruptions across the global supply chain, and forced wholesale distributors like your business to search for alternatives.
For example, wholesale distributors like your business have had to search for alternative suppliers when the manufacturers which usually supply their product were shut down due to regulations.
Delivery routes were affected as well, with wholesale distributors having to figure out alternative routes by which they can receive their products from their suppliers, and in turn to deliver them to their retail customers.
This has instilled in wholesale distributors like your business the importance of anticipating future disruptions to the supply chains, and preparing for future events with the possibility of a worldwide impact on the global supply chain.
The COVID-19 pandemic has taught wholesale distributors like your business that it’s important to invest in the flexibility of your supply chain, in anticipation of future events of a similar scale.
A flexible supply chain has to be demand-driven, and capable of responding to short-term changes in customer demand for your products.
You should also move away from optimising your supply chains according to the just-in-time model that wholesale distributors preferred prior to the COVID-19 pandemic.
Instead, you should starting designing your supply chains according to the just-in-time and just-in-case model, and optimise for both speed and resilience in your supply chains.
This can help your business manage your costs and resources effectively, while meeting fluctuating customer demand for your products with equal effectiveness.
It also helps you build a resilient foundation for your business, which can help it survive and even thrive in times of future economic distress.
Due to greater customer expectations and increased competition from various sources, having full visibility over your operations and accurate forecasting of customer demand will become vital to the success of your wholesale distribution business.
Many of your business rivals in the wholesale distribution industry have realised this fact, which is why they're moving away from the traditional cyclical reports, which provided data that only reflected the reality on the ground over the past month.
Instead, your direct competitors are moving towards real-time reporting, which captures the state of their businesses in the moment.
Wholesale distributors like your business are also making greater use of predictive analytics, to make better data-driven decisions and improve the agility of their businesses.
One way wholesale distributors are making use of predictive analytics, is to improve the communication and understanding between the wholesale distributor and the retailers which make up their customer base.
For example, your wholesale distribution business could use predictive analytics to isolate the data which provides the most valuable insights to your retail customer, showing them which are the most relevant and valuable products for their businesses in upcoming orders from your wholesale distributor.
Another way in which wholesale distributors have made use of predictive analytics is by analysing data on what their retail customers have purchased in the past, to predict what they will purchase in the future.
If your wholesale distribution business has this data on hand, you could in turn share it with your manufacturing suppliers. This can be valuable to them, as they usually only have data on the quantities of the raw materials they used to make your products.
With this information, your manufacturing suppliers can make a better estimate of the materials needed to manufacture the right volume of products your wholesale distributor needs, play an integral part in the product strategy of your business.
To resolve the business challenges that are emerging in the wholesale distribution industry, you need to equip your business with the tools it needs to tackle them.
Such a tool must enable your wholesale distribution business to take advantage of the trends that are emerging in the industry in response to old and new business challenges faced by all businesses in the sector.
To that end, an ERP software like SAP Business One could prove to be the solution that you need to provide an edge to your wholesale distribution business.
Because an ERP software unifies your software systems across your business to provide a single source of truth, it provides you with full visibility over your business, and helps you resolve issues with your business processes, such as in the supply chain or with your customer service.
And the right ERP software also comes with features and functionalities necessary for wholesale distributors, such as robust inventory management and lot tracking modules.
It can also integrate other solutions which provide other critical features for wholesale distribution businesses like yours, such as customer relationship management (CRM) and WMS.
To find out more about how an ERP software like SAP Business One can give you total control over your wholesale distribution business and prepare it for the challenges ahead, click on the image below.
To equip your wholesale distribution business with the means to face old and new industry challenges, you must take advantage of the emerging trends that have arisen in response to these challenges.
To resolve the growing complexities of the modern supply chain, you'll need to take a data-driven approach to inventory management.
And with the COVID-19 pandemic highlighting the importance of flexibility and resilience in your supply chains, you'll need to change the way you optimise them to the just-in-time and just-in-case model.
With customer expectations and demands growing by the day, you'll need to invest in shifting your business towards e-Commerce platforms and an omni-channel strategy in order to give your business the agility to answer their demands.
And to combat the risk of disintermediation, you'll have to show these customers the value of retaining the services of your wholesale distribution business.
All of this cannot be done with acquiring full visibility and control over your business, which is why you should consider making greater use of predictive analytics, and implementing an ERP software to integrate every process and function.
We hope that you’ve found our breakdown of common challenges in the wholesale distribution industry, as well as the trends that are emerging in response to these challenges, useful for you.
At AFON, we always keep the industry-specific challenges that your business are dealing with in mind, and have experience in recommending the right solution for your particular needs.
If you’d like to know how we can help your wholesale distribution business overcome its industry-specific challenges with the right solution, do schedule a free consultation with us today!