Wholesale distribution industry: Imagining new possibilities
Innovation in the wholesale distribution industry has become table stakes for survival, meaning wholesale distributors must find new ways to run their business on multiple fronts.
Why do some digital transformation initiatives in wholesale distribution have amazing results while others fall short?
Not having a clear goal is a big factor. But there’s another common culprit: Not giving IT the lead role in digitalization of wholesale distribution.
Digitalization of wholesale distribution is a fundamental, technology- and data-driven shift in how an organization operates and serves its customers. To successfully achieve a transformation of this magnitude, a distributor needs a change agent.
Who better than IT to fill that role, given its position at the confluence of people, processes and digital technology?
Delving into digitalization of wholesale distribution
To better understand the role of IT, let’s look at why organizations pursue digitalization in the first place. Digital transformation, in essence, is the continuous effort to capture quantitative and qualitative business-related elements as data points, which then can be used with technology to augment or substitute human agents.
The goal is to optimize, extend and transform how a company conducts business to achieve competitive advantage.For a distributor, this could mean moving along a continuum:
- descriptive analytics
- diagnostic analytics
- predictive analytics
- prescriptive analytics
Applied to customer incentive programs, for example, analytics could help a company see areas that need improvement. Using intelligent technologies, a distributor could develop new programs to drive a higher margin or larger sales volumes.
Digital transformation could also involve using a digital twin of the organization or an operational area to develop better B2B e-commerce processes or redesign solutions. Another approach is using the industrial internet of things (IIoT) to develop new business models
Clearly, the IT team is best suited to drive this kind of change.
Under pressure: Top challenges in wholesale distribution
The wholesale distribution business of pick, pack, and ship may sound simple, but the industry faces significant challenges. Here, we look at the major issues facing distributors today.
IT’s evolving role in distribution
Digitalization and the move to the cloud are forcing IT out of its traditional role of managing hardware, software releases, large-scale tech infrastructure projects, and code development. The logical evolution of that role is to support end-to-end digitization and drive change.
What might that new role involve? The job should focus on two key areas: lifecycle management and operational management.
In the area of lifecycle management, IT should be given the reins to oversee:
- Process lifecycle. Process excellence is one of the cornerstones of successful digital transformation. IT teams can bring process transparency to the entire organization, using technologies like digital twins to streamline processes, minimize process deviations, measure and control improvement initiatives, fix bottlenecks, and drive automation and compliance.
- Data lifecycle. Data excellence is another pillar of successful digitalization, and another area where IT can drive change by implementing technologies that enable a distributor to collect, integrate, harmonize, standardize and understand both quantitative and qualitative data — from both internal and external sources.
- Solution lifecycle. Nowadays, business capabilities are consumed in a modular fashion. IT’s responsibilities must shift from managing monolithic on-premise software solutions to architecting a modular digital infrastructure in which all the pieces are tightly integrated by default, regardless of where they’re running.
Perilous economy has distributors rethinking wholesale revenue management
In a challenging economy, automating wholesale revenue management helps distributors drive new revenue and growth.
Digitalization of distribution: Operations management
In addition to managing lifecycles, IT needs to focus on operational management in three key areas:
- Innovation. IT must take the lead in bringing to bear technology and systems that enable an organization to innovate on an ongoing basis. Customer experience is one area where supporting innovation with technology is critical. For example, IT can help create touchless digital experiences, recognizing that since the onset of the pandemic, some distributors reportedly have seen more than a 700-basis point shift toward e-commerce, e-procurement and other digital channels. Data and digital modeling tools also are critical in helping distributors develop, launch and sustain more of the outcome-based services that customers want.
- Value. As tight as margins are these days for distributors, IT must also help tap new sources of value. IT can help uncover new ways to reduce risk, increase efficiency, drive sales and improve decision-making. IT could, for example, improve cost recovery by identifying margin destroyers, inefficient sales rebates, etc., while highlighting the best promotional buying opportunities and order channels on the procurement side.
- Change. Digital transformation puts a whole new set of tools at employees’ disposal. IT teams should be responsible for improving adoption, overcoming resistance to change, and shrinking time to value. In short, IT will be critical to shaping the business user’s experience, from the C-suite all the way to the warehouse.
The same holds true for many of the responsibilities that accompany digitalization within a wholesale distribution organization. For a digital transformation effort to succeed, decision-makers must continually ask themselves, “If not IT, then who?”
Then they must give their IT teams the breathing room they need to evolve into their new role as change agent.