Challenges and Opportunities in an Increasingly Competitive Distribution Landscape

Competitive Distribution Landscape

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Distribution is competitive, and as the market tightens, it will become harder and harder to keep the relationships you spent years or decades to build. The commoditization of distribution has created a landscape controlled by the companies who can move fast, maintain or reduce costs, and continue to meet their customer needs.

In a recent blog on the potential opportunities for a distributor to get more competitive (even during the pandemic), we explored some of the common trends and how they may push the competitive landscape forward. Understandably, these are sensible approaches—many distributors had to get leaner, smarter, and more customer-focused during the last few months.

You might be sick of hearing the phrase “new normal.” You’ve been in this business long enough to know that trends come and go—and that every decision you make needs to have a lasting impression on your margins, your customers, and your operations.

But that’s the thing. The distribution industry has been in its own “new normal” environment since Amazon launched a distribution initiative—becoming the fourth-largest distributor within years of launching.

Customer expectations changed. The buying process changed. The business became commoditized seemingly overnight. That’s a “new normal” that will last a bit longer than masks and kiosks—and a “new normal” that should be pushing your long-term initiatives.

Hills to Climb: Challenges in Adjusting to an Increasingly Fast and Competitive Distribution Environment

Standing up to Amazon’s distribution push requires you to think like Amazon—yet do so without their budget.

Increasing your speed, reducing the amount of work, and improving your planning are all goals that you want to accomplish, but without the right tools or processes in place, you may end up fighting a losing battle. Luckily, you have options to make your initiatives work without breaking the bank. In fact, Sage Inventory Advisor, powered by Netstock, is one of those products that can augment one of the most popular ERP solutions for distributors and help you put your distribution business on a path to success. Here’s how it helps you:

Challenge: Making and Keeping Promises in a Commoditized Landscape

One of the reasons Amazon can deliver rapid shipping is that no matter how many facilities they have, they know what’s inside and can provide that information immediately. Have you ever completed a purchase on the consumer side only to find out they were out of stock? Probably not in the last decade.

When you order, you can rest assured that it will be in your hands when (or before) they say you’ll have it. Amazon has taken this mentality to their Amazon Business side, meaning that customers now expect a similar experience in B2B purchasing as they do in their personal lives.

As you continue to grow—taking on new customers, adding SKUs, or both—it gets easier and easier to fall behind. If you fall behind, you become more likely to make a mistake. No one wants to make the call to say, “sorry, but we made a mistake and you’re going to have to wait.”

Solution: Accurate, Well-Measured Inventory Built to Connect

The problem often lies in manual processes used to manage inventory levels. Often, companies will rely on a mishmash of spreadsheets to track inventory and a lot of copying and pasting to connect it with other business functions. Often, this leaves your business days, hours, or weeks behind when you should have the information within seconds.

However, with a connected and intelligent inventory management solution like Sage Inventory Advisor, you can mitigate the risk of stock-outs and broken promises. This solution not only is able to instantly show you which items are stocked out, but provide warnings to reorder before this becomes an issue.

Challenge: Keeping Costs Low When You Could Easily Be Undercut

Amazon is much more diversified than the average distribution business. In fact, if you look at their profits, the majority of their money isn’t coming from physical goods (even if the storefront represents the majority of revenue).

If you look at your profits, it’s safe to assume you don’t have a cloud hosting platform that can subsidize your business. This is a company who can (and does) lose money on many of their goods. This is also a company who has leverage to minimize costs on their own end.

You have to turn to a different approach to keep your costs low—good old-fashioned efficiency.

Solution: An Inventory Product Built to Help You Free Up Working Capital

Though stock-outs may be deadly for your relationships, the opposite is something that constantly saps your business of working capital. Excess inventory takes up space on your floor and balance sheet, and keeps you from maintaining your flexibility. Higher costs for you often turn into higher costs for your customers, and in an industry where relationships are becoming less important than costs, you can only survive so long if you’re wasting away.

Knowing this, the right solution can keep you ahead of the curve. Not only does Sage Inventory Advisor give you a clear picture of your current stock holding, it will leverage trends in your business to provide you with an ideal stock holding model. With user-friendly dashboards, you can always be in the know regarding the items you need to get rid of, and even avoid accidental re-ordering that would add to the problem.

Challenge: Meet Your Customer Where They Stand

Whether it’s Amazon or any of the other giants in the distribution space, these companies have scientifically selected each location to be as close to customers as possible—and do so in a way that meets the needs of the customer. Whether it’s Amazon strategically placing its 110 distribution facilities, or one of the many others offering local and convenient pickup, the locations aren’t only scientifically placed, they’re scientifically stocked. 

These companies can track demand for each SKU, plan for changes, and route items with accuracy and precision. You might not have hundreds of facilities, but that’s not to say that you can’t leverage the same mentality. As your customers increase their expectations, you still have the ability to meet them with ease—if you can see the big picture.

This is the problem for many distributors. When something as mundane as an extra day of shipping could hurt you, being able to stock your facilities with the right products can go a long way in ensuring you exceed expectations.

Solution: Centralized Procurement with Smart Distributing

To address this, you need to understand how items flow into and out of your facilities. When a customer buys, where does it ship from and how did it get to each facility up the supply chain? Whether it is forecast demand or firm Customer Orders, the correct demand needs to flow smoothly all the way through to your supplier.

Sage Inventory Advisor helps you track every single node in your supply chain, intelligently taking into account each facility and the risk that exists. Not only does this help you to facilitate the flow of demand and the flow of products, it will give you visibility into the way each node works together.

For example, if an item is out of stock (or at risk of being out of stock), Inventory Advisor will make it easy to see if there’s an over-stock at a different facility. Now, rather than purchasing an item you may not need, you have the instant knowledge and the tools to transfer—saving you time and money.

The Connected Inventory Solution for Your Business

You can only manage what you measure well. If you’re relying on spreadsheets and manual processes to measure your inventory and connect to ERP, you’re putting your business at risk. With a powerful cloud-based solution like Sage Inventory Advisor (or NETSTOCK for Acumatica), you can empower decision makers to reduce both stock outs and excess inventory, while improving working capital.

The distribution world will only get more challenging, complex, and competitive in the coming years, and it’s on business leaders to adapt. At Kissinger, we can help you bring your business closer to its goals with the right tools and enhancements you need to thrive. Ready to learn more? Request a demo of Sage Inventory Advisor here or contact us for a consultation.

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