How not to become a

Wholesale Distribution Disaster

Times are changing, and some of us are doing it tough in the world of wholesale distribution. A recent study by Modern Distribution Management titled "Wholesale Distribution Outlook for 2017" identified some of the challenges expressed by executives in the industry. It captures concerns around economic uncertainty, changes in technology, recruitment and training, and customer demand. This got me thinking about ways to ease the pain, and begin the journey of steering your business down the right track.

Growing in a low-growth environment

Effective channels can be a great source of growth, strategic advantage and a way to maintain competitiveness. By focusing on channels that create traffic for your business, while evaluating margins and the expense of efforts in managing them, you can ensure a maximum Return On Investment (ROI).

By segmenting your channels, you can effectively grow partners who facilitate demand activation and retail advocacy. Of course, we know it's not that easy. Keeping partners motivated to support your business is a major challenge, especially when markets are tough. Channel member profitability is a significant driver, but not the only factor that affects partner satisfaction and motivation. A good channel manager measures and monitors profitability and the channel members' ROI. You can also adopt a variety of financial and non-financial incentives and value-adds to motivate members. These can range from policies, market development support, end-user contact, direct mail, merchandise programs to event management. 

According to research*, wholesale distribution businesses experienced growth by adopting the following methods. Some with impressive results. 

  • 69% of distributors experienced growth through client referrals
  • 42% improved their business by communicating upcoming events to their clients
  • 24% experienced sales growth by obtaining referrals from other divisions or departments of the client company
  • 4% increased their business by highlighting new product ideas from suppliers
  • 9% experienced sales growth by presenting new ideas used by other clients
  • 8% increased sales and improved business growth by highlighting the way promotional products provide ROI

*Source: http://www.abvt.com.au/5-ways-of-how-to-grow-your-distribution-business/

Finding, retaining and developing the next generation of leaders

Finding talent

If you're finding it difficult to recruit the right talent, you may need to cast a wider net. Posting on jobs boards only gets you so far. Broaden your search to include your own networks, social media, trade groups, professional associations and existing staff with their own referral systems.

Sell the strengths of your business, because not everyone is motivated by money. If your business has a great working environment and culture, that can be as much of a draw card as providing genuine development opportunities.

Retaining and developing valued staff

Retaining valuable staff means putting in the effort to nurture them, and it doesn't necessarily cost you money. You can shape roles to free up particular staff from low-value, repetitive tasks such as fulfillment, transaction processing, logistics and warehouse management. Have them concentrate on high-value and challenging tasks instead, like resolving customer issues to strengthen relationships. Get them thinking on their feet and being solution focused.

The first building block for staff development is understanding capabilities and behaviour. This can be done through 360 feedback surveys, a tool to assesses someone based on what they think about themselves, and what other people have experienced while working with them. The results compare self-assessment scores with those of the individual's manager, direct reports and peer reports. It's a great way to establish a starting point, put things into context, and then formulating ways to build relevant competencies.

There are also plenty of resources on developing staff into leaders. Here are some for further reading:

Managing cost

There are many ways to achieve leaner operations. Two quick wins that can ease pain are outsourcing, and maximising your efforts by investing in solutions that address multiple issue at once. For example, automating processes can cut overheads, improve productivity and reduce monotonous and repetitive tasks (which can lead to job dissatisfaction). If you need to take drastic measures, such as cutting staff or salaries, factor in the risks associated with poor implementation, and skilled people leaving because of lowered staff morale.

Investing in technology can be a daunting but worthwhile endeavour. Many wholesale distribution businesses rely on aged, on-premise Enterprise Resource Planning (ERP) systems that can’t adapt to today's demands.

Everyday issues with data, inventory, warehousing, distribution and logistics can slowly bleed a business over time. As complexity, manual work and workarounds increase, so do the number of potential points of failure.

Implementing a system that directly combats those issues is the best solution. An ERP product that's been supporting the wholesale distribution industry for nearly two decades is NetSuite. It's a cloud-based product that provides centralised order management, company-wide inventory visibility, order allocation intelligence, remote access and much more.

A study by SL Associates found wholesale distribution companies reported vast improvements after switching to NetSuite's cloud-based solution:

  • 1% to 5% increase in gross margin performance
  • 2% to 10% increase in revenue performance
  • 20% to 30% decrease in inventory costs
  • 60% to 80% decrease in customer backorders
  • 50% to 75% decrease in IT resource costs
  • 50% to 75% decrease in disaster recovery costs


I'm not sure if other ERPs can provide that kind of return, but this one is certainly worth a look. For more information, download our NetSuite eBook.

Preventing client loss

Human interaction is vital for retaining clients. Some businesses think they don't need to continue charming the client after a sale, right? Wrong. The after-sale process is when your client gets to affirm that they’ve made a genuinely good decision. The relationship is nurtured by being helpful and ever present. Businesses that don't focus on providing high quality customer service risk losing precious repeat business.

*Accenture's Global Consumer Pulse Survey found:

  • 52% switched providers in the past year due to poor customer service
  • 45% are willing to pay more for better customer service
  • 83% of clients who switched indicated a point of contact with better customer service would have retained them 

*Source: "https://www.accenture.com/au-en/insight-digital-disconnect-customer-engagement" 

We're known for our customer focus at Fusion5. We’re seeing more are more businesses coming on board because they weren't happy with their previous provider's level of service. Developing great relationships with clients is great for business. These customers are more loyal and more likely to refer you to others. They are also more willing to share feedback, knowledge and ideas, which can lead to innovations that help your business grow.

Customer service isn't just about direct face-to-face interactions either. Inefficient internal systems, weak processes and poor management practices affect your staff. And the chances are, inaccuracies and frustrations are carried forward to your clients in one form or another. Having the right systems in place definitely helps customer satisfaction. So invest in services and upgrades that enhance the customer experience. These could be anything from shorter service response times, to new product features, samples, upgrades, bonuses, or increasing the number of in-person visits. 

Keeping up with the faster supply chain with e-Commerce

Online shopping has been available for at least 20 years. But the Business-to-Business (B2B) e-commerce evolution has been quite slow, with some wholesale distribution businesses only now creating their first e-commerce sites. Business buyers expect to perform their own product research and place orders online. Increasingly, they also want their B2B vendors to support complex purchase processes such as contracts, negotiated prices, delivery schedules, credit, and payment plans. Now is a good time to invest in your online store to better serve your clients’ needs. E-commerce helps distributors generate more commodity-type and low-value sales. It doesn't take time away from customer service and sales staff, who can focus attention on high-value customers instead.

Conclusion

The role of distributors is changing at an increasing rate. Businesses that build on their strengths, creating and maintaining customer engagement, have a distinct advantage. Those operating in ‘business as usual’ mode get left behind by smart suppliers, nimble competitors and demanding customers.

Which strategies will have the biggest impact on your business? 

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