The Digital Age

DIGITIZATION 01Digitization matters more to wholesale distribution than you might think.

By Danny Halim

If you ask a wholesale distributor the question of whether digitization matters, you may get different answers based on their interpretation of what digitization means to them. Some may respond in the context of e-commerce, retail or enterprise resource planning. The majority may agree that it matters, but since current processes and systems are working fine, it’s more superfluous than necessary; and others may think that it’s simply a strong buzzword. The truth is, digitization is impacting wholesale distributors even more than it’s impacting retailers or manufacturers.

Digitization is real, and it’s here. First, it allows wholesale distributors to engage with customers and suppliers differently, and react faster and better against supply chain disruptions. It’s not just a retail or manufacturing thing, especially when your suppliers or customers have the means to directly connect and engage, or when Amazon continues to expand and offer wholesale delivery services faster and at lower costs.

New Kind of Buyers

Today’s wholesale buyers have a different mindset. Their personal buying experience using mobile or tablet devices is shaping their expectation in the whole buying experience from researching to receiving. They don’t want or rely on one-on-one personal service anymore. Instead, they expect instant gratification and information on pricing, availability, confirmation and status to be readily available anytime, anywhere via their mobile or tablet devices. They also expect more customized and expanded product choices, consistency in price and experience, transparency and accurate information on shipments and faster delivery options.

A Changing Role

The channels are blurring. Manufacturers are heavily pursuing a variety of new ways to directly reach their consumers. Retailers invest in new channels that offer wider assortments, faster and flexible services and competitive pricing leading to purchasing directly from manufacturers to shorten lead times, and in some cases, create their own brands to develop customer loyalty. On the B2B side, similar trends are happening where industrial buyers now have the ability to research and connect directly with their suppliers. The entire supply chain has become non-linear and all of this is a result of digitization.

Transparency, Accuracy, Speed

Transparency and accuracy are always the theme when doing business. But in the digitized economy, speed is the essence. Customers and suppliers don’t want to wait 24 hours or longer to receive order confirmations, shipment notices, order forecasts, inventory projections, etc. They especially want to shy away from having to manage all of those documents via paper invoices, spreadsheet or document attachments over e-mail, or even telephone calls because these antiquated methods consume resource time and are prone to error. In the digital economy, customers and suppliers expect their distribution partners to be easy to do business with and support their businesses to grow profitably as well.

Digitizing the Supply Chain

Winning and growing in today’s market requires more than having the best purchasing and sales teams. The typical wholesale distribution model is becoming commoditized. Beyond differentiating, wholesale distributors are challenged to create and redefine value propositions, filling the gaps that manufacturers and retailers cannot fulfill, even if this means they need to change their business models. For example, some wholesale distributors offer e-commerce and direct-to-consumer/customer fulfillment, light manufacturing services such as final assembly or repairs, personalization services (perhaps leveraging 3-D printers), and even creatively deliver products all the way to the production line or – in the case of healthcare – patient bed, just-in-time so customers don’t need to hold and manage inventory.

The way technology is advancing is causing wholesale distributors to place most of their emphasis on the e-commerce side of digitization in order to keep up with buyers’ expectations. Despite high corporate priority on the e-commerce side, there’s a substantial lack of emphasis on the supply chain processes that are critical to profitability and deliver the actual products and services to the customers at the speed that they want. This is leading to a series of disruptions and uncertainties in the supply chain and presenting a whole new realm of challenges to wholesale distributors.

One of the issues many wholesale distribution companies face is that they’re burdened by many systems that are often complex due to growth and acquisitions and too expensive to maintain, not to mention update or replace. More specifically, large companies have accumulated complex IT footprints, making it a challenge to combine and extract relevant data across all of the disparate systems in a timely manner. These constraints make it difficult for companies to respond with agility and accuracy. Additionally, many companies are constrained by siloed functions within their organization, making visibility into their global supply, inventory and logistics networks difficult. Lack of integration between order management, transportation management and warehouse management systems has led to a variety of execution problems, such as expediting, incomplete or late customer shipments, inaccurate invoices and inadequate warehouse space. Many wholesale distributors actually understand these issues but hesitate to initiate transformational changes because of existing company culture or sensitivity to taking major risk.

Developing a Roadmap

Digitizing the supply chain isn’t just about creating some pretty portals and website facelifts. It’s about reimagining and rethinking the end-to-end value chain processes, removing latency and manual processes, and shrinking the gap between sensing and responding. Start the vision with a clean slate instead of applying band aids.

And so this initiative requires wholesale distributors to assess their end-to-end supply chain processes, think about the art of the possible with most current best practices, trends and technology capabilities, align with customer and supplier expectations, identify the best roadmap to get there based on current infrastructure, constraints and budget; and then start with a prototype or pilot project to get a quick win, validate the ROI potential and finally rollout to the rest of the organization.

With the right digitization strategy, wholesale distributors can improve how they engage with suppliers and customers, offer more flexibility and speed than before and comfortably react to disruptions in the market – all while meeting profitability goals. Achieving this requires some fundamental changes in the organization that begin with developing a digital culture mindset, recruiting the right talent, a feasible roadmap of transformation and often bringing in perspectives from outside of the organization. Danny Halim is vice president of industry strategy of JDA Software. In his 17-year tenure with JDA, Danny has built a reputation for building go-to-market strategies, incubating new business models, and directly getting involved with customers to identify opportunities and develop solutions. 

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