By: Derek Gittoes, V.P. Supply Chain Management Product Strategy, Oracle and Guy Blissett, Client Relationship Executive, Deloitte Consulting LLP
Perhaps more than any other industry, wholesale distribution has felt the brunt of the global pandemic’s disruptive power. Supply chains for products as diverse as food, building supplies, and electronics have been stretched to their limits by unpredictable swings in both supply and demand. Manufacturers have struggled to maintain production, and both B2B and B2C end customers have managed through shortages and out-of-stock situations. In the middle, distributors have rapidly shifted infrastructure, inventory, and personnel to keep their businesses and the economy functioning.
The good news is that innovation is thriving amid the adversity. Opportunities abound for distributors to hone their competitive edge and forge new, more profitable ways of doing business. To help weather the turbulence – and harness the upside potential of the new normal – distributors are tapping new technologies and reshaping their work to continue fueling the supply chain.
We are seeing tech-driven innovation spreading rapidly across key areas of the $7 trillion wholesale distribution industry, from digital commerce, to planning and forecasting, to warehousing and logistics. Distributors are also using new technology solutions to reimagine how they manage rebates to optimize revenue.
In a sense, the pandemic has served to reinforce trends that started more than a decade ago, when globalization and mounting competitive pressures spurred the adoption of modern, lean supply chain practices.
But with the sudden onset of the pandemic, things began changing faster than ever, uncovering inefficiencies that had gone unnoticed in the past. It’s as though the virus exposed the nine-tenths of the iceberg sitting below the ocean’s surface.
In the wake of the outbreak, we saw many of the current ways of managing supply chains quickly break down. The infamous shortage of paper towels – not to mention the empty fastener shelves at many hardware stores – showed us just how fragile these supply chains were when faced with a supply and demand disruption.
The pandemic also revealed that while distributors had gotten good at the basics of supply chain, they needed to master a whole new set of skills to effectively deal with the virus’ impact as it rippled through the sector:
Despite the turmoil – or perhaps because of it – huge opportunities have emerged for wholesale distributors to continue to drive revenue and profit. Many companies are picking up new customers and opening new sales channels. Foodservice distributors, for example, are selling directly to groceries and ghost kitchens. And many distributors are carrying brand new lines of products – personal protective equipment (PPE) being the prime example – and launching private labels aimed at consumers who have become less brand sensitive.
Some distributors are rethinking their operating models and investing in cloud technologies to squeeze more efficiencies out of their networks. Many have found that early investments in innovation positioned them to thrive in the new environment.
Even before COVID-19, one industrial product distributor we work with decided to try a new way of moving its products. Instead of selling work tools and accessories through its branch offices, it installed specialized vending machines at customer sites. Now, workers can buy gloves, nuts and bolts, and work tools in a contactless manner and avoid risky trips to branch stores.
Rolling out the new channel was the right move at the right time. The company has seen a 10% boost in sales and has grown its network to more than 100,000 machines. To avoid stockouts, it set up strategically located “mini distribution centers” and it manages the entire operation using Oracle’s cloud-based warehouse management system. That’s just one example of how wholesale distributors are flexibly navigating through the pandemic and optimizing profits in the process.
The impact of the global pandemic on wholesale distributors is a key focus of our special five-part Webcast series featuring experts from Oracle and Deloitte. The first Webcast, Wholesale Distribution for Growth Post COVID-19 was broadcast on September 2. Watch the replay here.
The next four Webcasts will drill down into critical areas of whole distribution and explore prime opportunities for driving growth and profitability. We’ll spotlight several distributors that are finding success with innovative technologies and business strategies.
If you’re in the wholesale distribution industry, you won’t want to miss these important presentations.