Published May 5, 2021 Digital transformation in distribution: An awakening

Digital transformation in distribution: An awakening

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In Asia, one family business contributes to almost half of a country’s GDP numbers. Examples of this market dominance include Reliance, Birlas, and Tatas in India, Vingroup in Vietnam, CP Group and Thaibev in Thailand, and Djarum group in Indonesia.

This is even more prevalent in the wholesale distribution industry, as it is run by traditional families across multiple generations in a very conventional manner. However, things are changing as digital transformation in distribution begins to take hold.

The need for digital transformation in distribution becomes clear

Because of their market dominance, most Asian distribution businesses are not technology-driven. They’ve been running for generations with manual processes, homegrown or inexpensive software solutions, and still enjoyed steadily growing wealth. Access to cheap labor and loyal staff contributed to restricted investments in new technology.

Given the state of legacy business, having conversations about digital transformation within the Asian wholesale distribution industry can be a daunting task. However, the extended pandemic situation makes it hard to see a path to normalization, which has prevented these businesses from remaining profitable.

These market changes have forced mid-market companies to rethink their technology needs and priorities, opening them up to conversations around digital technology.

Supporting digital transformation in distribution

Many mid-market companies assume and expect that just by implementing state-of-the-art solutions they can achieve digital transformation. Digital solutions can help support digital transformation goals, but transformation isn’t just about implementing technology – it’s about fundamentally changing the ways employees leverage that technology to produce business outcomes.

An intelligent ERP overcomes historical legacy limitations such as batch latency, manually-driven processes, and product-centric delivery models. What matters in the digital economy is the speed of change, quick adaption to innovation, and intelligent business automation.

Technology and software can help support business ambitions by providing sufficient and credible information at the right time. It empowers employees to continuously identify better ways to meet changing market trends, demands, and customer needs.

The dispersion of wholesale distribution is varied across healthcare, food and beverage, high tech, and industrial subsegments. For example, grocery and foodservice distributors have high inventory turns whereas industrial distributors have extremely low inventory turns.

The same applies to margins in each wholesale distribution subsegment. These margins are significantly influenced by competitive pressures within each subsegment as well as the organization’s ability to differentiate offerings in its respective segment.

New, intelligent technologies can help distributors address these challenges.

Technologies & benefits

Mid-market players are now prioritizing investments in robotic process automation (RPA), machine learning, artificial intelligence (AI), predictive analytics, and other emerging technologies to gain a competitive edge, reskill employees, and redesign jobs. They’re seamlessly integrating people and machines, enabling their customers to achieve business outcomes like the following:

  1. Revenue growth: Increase upsell and cross-sell opportunities, new revenue streams
  2. Profitability: Intelligent and autonomous processes reduces costs, increases sourcing savings, improves vendor spend compliance, and increases sales productivity
  3. Asset efficiency: Reduced inventory levels
  4. Strategic: Improve customer satisfaction, reduce TCO, improve agility, reduce business & technology risk, improve decision making, reduce emissions from operations

Digital transformation in distribution: Examples

Depending on a distributor’s point of departure or how fast they want to progress along a digital journey, there are ample ways that intelligent technologies can be adopted to show a quick, meaningful impact on the business.

For example, wholesale distributors Powell Electronics and Zespri have recently benefited from powerful digital transformations supported by cloud technology. Their adoption of new technology has led to a lower TCO (total cost of ownership), increased business agility, and better customer experiences.

While margins prove critical for distributors to remain viable, sustainable organizations, conquering the concept of pricing is not enough. To win in today’s often unpredictable and competitive B2B market, distributors must explore progressive ways to drive higher volumes and prices with technology at the forefront.

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Supply chain content at SAPPHIRE NOW 2021

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Vivek Magoo

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