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Expert gives advice for distributors competing in digital economy

15 Jan 2018

Article by Doug Smith, director of product marketing, retail and distribution at Epicor

It’s no secret ecommerce is changing the way we all do business, and distributors are no exception.

The new digital economy has created B2B and B2C convergence that puts tremendous pressure on distributors to either find new ways to offset increasing costs or reinvent themselves in some way. Simply put - buyers’ behaviours are changing and distributors need to adapt quickly to fulfil these new needs.

A major shift distributors are seeing is that due to the popularity of large ecommerce sites, same-day and next day services are becoming the norm. This change from traditional bulk shipments to unit shipments drives up cost, resulting in lower profitability for the business.

To offset these new requirements, distributors need to improve their efficiency through automation and rethink how they are managing resources. It’s time for them to start identifying new ways to focus their business, such as utilising relationships with customers, manufacturers and suppliers, to better understand their needs, and investing in new technologies that enable them to deliver fast, efficient and responsive customer solutions.

So, how are distributors getting ahead beyond rethinking the supply chain? The reality is they’re really not – according to new research conducted by Morar Consulting on behalf of Epicor Software, only 18 percent of surveyed distributors say they are adapting business models to conform to new business realities brought on by the “we-want-it-yesterday” economy.

Little do they know, however, there is an “x-factor” to all of this that they can leverage to maximise ever-tightening margins – the fear of missing out (some may have heard it as FOMO for short), or the reduction thereof. 

FOMO – Fear of Missing Out

The answer to succeeding in this new era lies in reducing that “fear of missing out”. In a more formal sense of the word, it’s a new twist on the old concept of opportunity cost – the cost of foregoing an opportunity to be able to execute another one.

Distributors need to develop strategies that adapt their business models to make the most out of business opportunities while being aware of other potential outcomes from other changes in a world where they are consistently squeezed by industry giants who can afford to take in business at even lower margins, or even at a loss.

For one, investing in new, innovative technology such as Integrated Enterprise Resource Planning (ERP), Customer Relationship Management (CRM) and Warehouse Management Solutions (WMS) are key for distributors to get ahead. These systems automate tasks and allow distributors to manage their resources more efficiently while reducing uncertainty from known variables.

By becoming more automated and integrated in capability and analytical tools, distributors become more customer-focused and operationally ready to provide a seamless, connected, and unified customer experience. Improving automation and efficiency also offsets the increasing shipping costs mentioned earlier.

Many organisations choose not to implement an ERP system because they consider themselves to be “too small” and have had success operating without this new technology to date. And therein lies the rub of opportunity costs - what they don’t realise is that without investing in new technology, their company is being held back from its full potential and will not grow in the future. Doing nothing avoids costs in the short term, but it is not worth it in the long run. Continuing to operate with a “business as usual” approach is a mistake distributors cannot afford to make anymore – they must learn how to mitigate risk to make the soundest decisions for their business.

In an ever-changing business landscape, wholesalers must adapt to their surroundings or risk getting left behind. Integrated ERP, CRM and WMS provides the means by which to identify new opportunities - developing a more informed understanding of the varying needs of the distribution network. Industry-leading distributors will be those that take advantage of these tools and  have the ability to assimilate and synchronise data across business functions and derive actionable business insight, in real-time.

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