Wholesale Evolution

As markets evolve, distribution companies need to innovate around customers, analytics, and supply networks

By: Roman Bukary, Head Of Manufacturing And Distribution Industries

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 fornyour trouble. Like so many things innour 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 margin. The launch of AmazonSupply. com sets the stage for B2B buyers to take advantage of economies of scale that are virtually impossible for midmarket distributors to match.

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. In Q2 2013, more than 500 distributors and manufacturers surveyed by Modern Distribution Management in cooperation with Robert W. Baird & Co. scaled back their year-over-year growth projections for 2013 to 3.1 percent, down from 5.2 percent expected a year earlier.

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. Areas of customer relationships, analytics, and supply networks are ripe for innovation and adapting processes and technology.

Customer centricity. Flexibility in purchasing is essential, from phone for old-school buyers to richly functionally ecommerce sites in both B2B and B2C. 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, bidirectional 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 also 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 (CLTV)? What are the upsell/cross-sell opportunities and what are the full product lifecycle costs once support, RMAs, and MRO costs are included?

Insight into your total costs versus revenue for a customer is critical to pricing decisions and maintaining margin. 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
Achieving these ideals with a fragmented infrastructure of on-premise software tools and point products is a daunting task. Lack of integration across disparate applications means poor visibility, delays, and unproductive manual work. As wholesale distributors running NetSuite customers have found, the cloud changes the equation.

Cloud technology can be a key enabler to meeting revenue growth goals identified by wholesale distributors surveyed for NetSuite by Modern Distribution Management through growth with existing customers (56 percent of respondents), followed by adding new products or categories, improving ecommerce, and adding new channels.

On the cost side, an integrated cloud suite can dramatically improve employee productivity, the #1 (at 59 percent) cost-reduction strategy in our survey, followed by streamlining and automating processes and reducing product costs.

The NetSuite Wholesale Distribution Edition is purpose-built to give wholesale distributors the control, visibility, and process efficiency needed to evolve in an increasingly competitive environment. Distribution customers are streamlining lead to cash, strengthening customer relationships with CRM and SuiteCommerce, and optimizing inventory with demand planning.

A growing selection of SuiteCloud Developer Network partner solutions for forecasting, EDI, shipping, 3PL, mobile, sales tax compliance, and more lets customers enrich their NetSuite environments. Moreover, the cloud gives wholesale distributors the agility to adapt to emerging and future trends, from the disruptive implications of 3D printing to the move toward mass customization and a “batch size of one.”

For instance, Allied Valve took advantage of cloud mobility and NetSuite capabilities for multi-location inventory and project management to supply industrial valves and field service to address the shale oil boom in North Dakota and eastern Montana, well ahead of the competition. La Sportiva North America, the U.S. distributor of high-quality apparel and ski gear for its Italian parent, has turned real-time visibility into inventory and sales data and rich operational and financial reporting into double-digit revenue growth since implementing NetSuite in June 2012.

Meanwhile, S-One Holdings Corp. with a half-dozen subsidiaries supplying products in the graphics and media industries, has rolled out the NetSuite OneWorld global solution for greater end-to-end efficiency across a number of subsidiaries. Launched first at LexJet in early 2012, NetSuite supports S-One’s 25 percent year-over- year revenue growth and efficient distribution from 19 warehouses in the U.S., Europe, and Asia.

The challenges and opportunities facing wholesale distribution recall a motto of the U.S. Army Corps of Engineers: “The difficult we do immediately. The impossible takes a little longer.” In other words, many distributors have already mastered the low-hanging fruit of the business. Now’s the time for distributors to raise their sights to the next level and explore new possibilities in the cloud.