Overcoming growth challenges in distribution: Preparing for a strong 2020

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Categories: Acumatica Cloud ERP, Distribution / Supply Chain, ERP
November 12, 2019
growth challenges distribution industry

Companies in the distribution industry will face a wide variety of challenges meeting the needs of an increasingly savvy and demanding customer base.

Whether you’re adding SKUs, warehouses, or simply looking to grow your customer base and revenue, successfully growing your distribution business in 2020 may seem like a monumental task. An industry readying itself for disruption, increased competition, and calls for transparency, companies in this industry will face a wide variety of challenges meeting the needs of an increasingly savvy and demanding customer base.

The 2020 distribution outlook

Much like other industries, disruption is on the minds of distributors. As technology continues to improve, buyers expect the B2B purchasing experience to become more commoditized and similar to their B2C experiences, and your customers are finding new ways to use data to drive purchase decisions.

Three forces challenging the status quo.

A recent McKinsey article found that the coming year will see an acceleration to disruption coming from three forces—your competition, your customers, and your own supply chain.

Fast-moving digital players eyeing the industry’s trillion-dollar revenue pools have begun to offer more convenience and improved transparency. Paired with this, sophisticated customers armed with new data are demanding deeper discounts and better promotions on more commoditized products.

How to address this: Keep up with your customers and competition.

Transparency, speed, and responsiveness are all imperative to the way you run your business. Whether by thriving in the commoditized environment or by making the shift to provide even more value-add, whichever approach you take needs to be smarter.

With countless customer-SKU combinations and constant margin pressure from manufacturers on one end and customers on the other, it pays to use the right customer data at the right time. The best distributors equip sales staff to act as business partners who can identify customer pain points and co-create business solutions. To make this happen, you need to break down silos and empower your sales staff with the right information at the right time.

The right customer relationship management solution, integrated with your ERP and warehouse management solutions, can go a long way in providing your sales, marketing, and customer service staff with the right information to help customers. Better yet, it can provide your warehouse the ability to fill orders more quickly and ultimately give you more speed if you need to succeed in a commoditized environment. Check out the following resources to learn more:

Finding a way to maintain or increase margins

With increased competition, faster shipping expectations, and continued wage pressure, distributors need to find ways to make sure their products continue to work for them. Your ability to maintain or even increase profit margins in 2020 and beyond will become even more important. Success in the coming decade will rely on your ability to retain customers, replace departing ones, and deliver in a distribution environment that is increasingly transaction focused.

How to address this: Smarter scaling.

There are ways to address this, however. Scale will continue to be an important factor. Scale helps distributors gain purchasing power, create denser delivery routes, optimize warehouse locations, increase coverage of products and sales, and reduce redundancies.

However, knowing how, where, and when to scale is vital. Whether through mergers and acquisitions, focusing on specific products, or expanding your reach, each provides a way to increase margins if approached properly. There are many ways to approach this; an engaged leadership team, well-resourced integration office and functional teams, a rigorous cadence, and careful performance management top the list.

Also imperative to scale? An understanding of your current business. One tool to help you see the bigger picture is through business intelligence. Such a solution can provide better planning and inventory management, increased profit margins, and more control of delivery, accuracy, and customer service. We recently discussed this topic in a blog, ERP and business intelligence in the distribution industry.

New technologies

New data and advances in computing power, data storage, analytics, and mobile platforms are turning industries as varied as music and healthcare upside down. Wholesale distribution is not immune, of course. Predictive and prescriptive analytics are helping the most sophisticated customers and manufacturers use dynamic pricing, predict churn, and optimize workforces and capital.

How to address this: Embrace new technology yourself

While new entrants, current competition, and buyers are leveraging new technology, it’s important to recognize that you’re not excluded from the technological improvements.

Whether it’s in the form of automated warehouse operations to speed up delivery, an investment in the future of autonomous vehicles to replace an increasingly expensive shipping landscape, or software to automate, improve visibility, and increase control, there are many opportunities to stay ahead of the curve in the coming years.

One of the first steps to taking control of your distribution business is to leverage technology that empowers people, provides visibility, and accelerates your business, helping you move faster, identify opportunities for growth, and move on them.

Taking control of your distribution operations with ERP

Finding a flexible, user friendly, and innovative ERP solution can connect your business and help you grow. With the competitive landscape more intense than ever, the right ERP can go a long way in getting your business where you need it to be.

Acumatica provides accurate and timely information, as well as the functionality needed to readily resolve issues and update management and customers. Our modern distribution business software provides true, company-wide inventory data that lets you create proactive, responsive replenishment operations and minimize inventory costs.

As a leading provider of this powerful cloud ERP, NexTec Group can help you implement this software and use it to stand up to the competition in 2020 and beyond. With more than a dozen locations and nearly a quarter of a century of experience in the distribution industry, you will be in good hands. No matter how large you are or complex your needs, we would love to help. Let’s get in touch.