By Andrew Butt, co-founder and CEO at Enable, a modern, cloud-based software solution for B2B rebate management.
At a time when suppliers and retailers are working to slash costs and time-to-market, many are considering the possibility of severing their relationships with wholesale distributors. This process of cutting out the middleman is called “supplier disintermediation,” and it has the potential to seriously disrupt the wholesale distribution industry. However, there are many ways wholesale distributors can resist this trend, from reducing costs to meeting a wider array of customer needs.
While the wholesale distribution industry is growing, this means distributors don’t just face the threat of being cut out of the supply chain, but there is also stiffer competition from their peers. This is why now is the time for business leaders in the industry to improve customer service and streamline their processes in an effort to lower costs and improve margins. Wholesale distributors also have to move beyond merely meeting customers’ needs — they need to use consumer data to anticipate and shape those needs.
The wholesale distribution industry is rapidly evolving, and leaders who don’t have a clear view of the challenges they face will fall behind. But these leaders should also recognize that distributors still have a vital role to play in supply chains around the world and, while they’re under pressure like never before, they have unprecedented opportunities for growth.
Building more efficient processes.
Wholesale distributors should always remember that retailers and manufacturers only adopt measures like disintermediation because they want to decrease costs and increase efficiency. If distributors can help customers accomplish these goals more effectively, they’ll have an incentive to maintain the relationship. This process begins with an effort to make operations quicker, more adaptable and less wasteful, which will optimize supply chains across the board.
According to a global survey of supply chain professionals conducted by Gartner, 89% say they will make investments to improve supply chain agility, while 87% say they’re planning to invest in resilience. These are two critical components of overall efficiency, as the ability to adjust when circumstances change and maintain operations (even in the middle of a once-in-a-century pandemic) keep supply chains running smoothly and avoid costly shutdowns and disruptions.
Wholesale distributors must find a way to compete with direct deliveries (from manufacturers to retailers or straight to consumers) with faster delivery times, easier returns, cheaper logistics and expanded personalization options. Retailers want to pay less and receive more to meet the ever-shifting demands of their customers, while manufacturers want to charge more because commodity prices are rising and their overhead is increasing. Distributors should help both parties address these issues by facilitating deliveries as quickly and cost-effectively as possible.
Turning data into actionable insights.
One of the most powerful tools wholesale distributors have at their disposal is access to huge amounts of data on everything from supply chain operations to consumer behavior. Traditional approaches to inventory, logistics, pricing, rebates and network management can be reimagined through the application of advanced analytics. But despite the availability of data and the analytical tools necessary to interpret them, many supply chains still aren’t nearly as data-driven as they should be.
A 2020 Grant Thornton survey found that two-thirds of manufacturers say their external supply chains (which encompass partnerships with distributors) are partially digitized, while just 11% say they’re fully digitized. Meanwhile, one-fifth of manufacturers say their supply chains are “still largely in an analog state.” It’s no surprise that similar proportions of respondents say their supply chains are siloed versus integrated.
While the survey is focused on manufacturers, it provides essential information for distributors looking to add value and maintain relationships with their partners. By improving data acquisition and analysis processes, wholesale distributors will be able to help their partners leverage digital insights to identify pain points, predict and drive consumer behavior and improve efficiency for every link of the supply chain.
Using all the resources available.
Beyond more robust data collection and analysis, there’s a large suite of tools wholesale distributors can use to become more competitive. For example, effective rebate management is crucial for any distribution business — distributors can shift spending to maximize rebates and incentives across manufacturers, reduce rogue spending, track compliance more rigorously, ensure earned rebates are captured and use insights (such as net cost comparisons) to negotiate more effectively with suppliers.
Considering the slow adoption rate of new technology in the supply chain sector, it’s no surprise that companies aren’t taking full advantage of tools like rebates. A survey by my company, Enable, found that 34% of companies still use spreadsheets to manually negotiate and document deals — a major impediment to transparency and quality control, as it’s much easier to make mistakes and harder to correct them with cumbersome tracking methods like spreadsheets. For many distributors, a significant source of reduced margins is mismanagement of vendor rebates, chargebacks and deviated pricing — all problems that can be alleviated with a quality digital rebate management platform.
Another tool that is beneficial for distributors is a customer relationship management solution (CRM) that allows companies to gather customer data swiftly, identify the most valuable customers over time and increase loyalty by providing customized products and services. This can help your business maximize customer satisfaction and lifetime value, drive more sales and resolve issues faster. Ultimately, a CRM is key to creating an accurate picture of the customer and engaging them with content that is both targeted and compelling. Like a rebate management tool, a CRM can be integrated with an enterprise resource planning (ERP) system. These two combined will allow you to target, engage, win and maintain customers.
This is a difficult time for wholesale distributors. Manufacturers and retailers are increasingly cutting them out of business, while the existence of huge marketplace platforms like Amazon has drastically increased competition among distributors. However, by focusing on efficiency, data-driven operations and the implementation of helpful resources, distributors can make their businesses more resilient and prepare for the future.