Distribution

Help drive down costs for distributing manufactured good by integrating business and financial systems

Increase visibility and flexibility to improve competitive advantage

If you're a distributor, you can't talk about how easy it is to do business with your company unless you examine how you are using information technology (IT) tools to increase your service capabilities. Better service starts with better visibility—between customer, distributor, and vendors, and across your entire organization. Customers want answers now, not later. Your people can be the best in the business, but if customers can't access quote, order, inventory, and other information easily and quickly, they will have a hard time differentiating your value from alternate suppliers.

Distributors also have to build out their ability to gather and process information about customers and suppliers and then share that within the organization to compete effectively in increasingly global markets. They have to stay flexible to respond faster, better, and cost-effectively to customer needs. For years, wholesale distributors have used IT tools to increase efficiencies in processing, billing, and inventory and warehouse management. But today these tools are required just to stay competitive. If you want to differentiate, you must strategically apply the tools that are right for your business and customer segments.

This article gives examples of how you can use technology to improve your competitive advantage by creating deeper customer relationships and improving relations with your vendors.

Customer opportunities

Technology tools available today create deeper customer relationships by delivering better information to customers faster. This strategic information flow allows distributors to increase service levels far beyond traditional industry metrics, such as fill rate, on-time delivery, and other product-focused measures. Distributors who build visibility into and across their organizations through a strategic application of IT tools can impact profitability in big ways.

Here are a few examples of how distributors have delivered better information to customers:

  • Web-based ordering. A large independent hard goods distributor analyzed customer order behavior. It identified unprofitable customers who placed multiple daily orders through their distributor's sales representatives by phone. The distributor provided these customers with cost-saving incentives to use its Web-based ordering capabilities. Result: The Web orders reduced order, invoice, and delivery costs. These self-service tools freed up the distributor's sales force to focus on more strategic activities with high-potential customers and prospects. And the unprofitable customers became profitable.

  • Intranet dashboards. A small industrial distributor developed an intranet to allow workers to share information about customers, vendors, and form letters. The distributor pulled data from its business system and made it available on a daily basis to employees in a dashboard format. Instead of monthly reports, employees gained a real-time perspective on what was happening in the business. Salespeople could set up customized alerts on product category changes, active quotes and orders, margins, and other account information. Result: Better customer retention. This daily snapshot allowed salespeople to monitor and manage their top accounts much more effectively to prevent "dropped balls" and missed opportunities. It also allowed salespeople to document for customers the "valued-added" services provided, such as emergency deliveries, technical support, and special solutions to specific customer problems.

Strategic vendor relationships

As markets tighten, distributors have to be more strategic in their vendor selection, based on profitability criteria. The days of loading warehouse shelves with just-in-case inventory or volume incentives alone are long gone. To fight low-price providers and other alternate sourcing options that are just a click or call away, distributors have to purchase, warehouse, and fulfill with profitability as the key driver. Distributors need to select their go-to-market partners strategically, based on profitability and competitive opportunity.

Here are a few examples of how distributors can improve vendor relationships:

  • Sales force automation. A distributor selling highly engineered products and solutions gained benefits with a sales force automation solution. It helped deepen relationships with customers who specified products and relied on this distributor for its application knowledge. The distributor also used the solution to communicate updated monthly sales trends to key vendors. This has focused marketing efforts and reduced costs and redundancies.

  • Intranet collaboration. A small distributor greatly increased its flexibility and accountability when it got everyone in the organization on the same page through an intranet. It included key vendors in its visibility efforts, in addition to customers. Result: The distributor won some key lines away from a larger competitor because of its ability to communicate better and try innovative joint programs. One vendor wants to create a new system for automatic payments, further reducing costs for both. Another vendor wants to integrate the distributor into the supplier's Web site, allowing the distributor to tap into real-time inventory and product information with one click.

Beyond the technology: Process

Distributors have to be careful not to automate outdated processes. Customer needs are shifting as they gain more visibility through online sourcing options and alternate channels emerge.

For some distributors, there are basic questions to ask about how prepared employees are to truly be more visible and accessible to customers. How fluent and comfortable are your employees with email? In many customer segments, email offers capabilities for instant access and service responsiveness that can cut hours or days off of missed phone calls and answering requests for information. If your employees haven't developed the online skills to match the emerging needs of your customers, they may be missing opportunities to lock in additional loyalty.

What's ahead?

Watch for partners who are using IT tools more strategically. Recently, select marketing groups, manufacturers, and even distributors in some independent distribution channels began creating standards and incentives to get their trading partners connected and able to share critical data and market information. These efforts are driven by those who recognize the competitive edge such tools offer by reducing costs and redundant tasks.

The latest push is in the area of gaining improved point-of-sale information to make better informed decisions about joint sales and marketing efforts, forecasts, and new product and services development. That type of visibility and intelligence increases sales and profitability for all channel partners. As relationships up and down the supply chain get more complex and potentially confusing, clear vision becomes a critical competitive advantage. That vision can be close to perfect with the right IT tools in place.

Author

Thomas P. Gale

Tom Gale is publisher and executive editor of Modern Distribution Management, a specialized information service that provides insight and analysis on trends in wholesale distribution channels. Modern Distribution Management's information services include paid print/online newsletters, industry intelligence e-newsletters, a Web site, audio conferences, and book and special reports publishing—all focused on the topic of wholesale distribution.

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