Defining the challenges of wholesale and distribution businesses
A discussion of the issues facing the industry and remedies for common issues.
Like many businesses, wholesale companies are dependent on a balanced interaction of supply and demand.
As a business grows in size and complexity, the interaction between the organisation, processes and systems of a business can become stressed.
For wholesale and distribution companies there is a constant juggling act between:
- the dependencies of business as usual
- the development of new customers, cost models and improved services, and
- the forecasting for inventory management and order processing.
As a business grows in size and complexity, the interaction between the organisation, processes and systems of a business can become stressed by a number of growth-driving activities. And although each is a specific phase in business, all three are part of a cyclical process. Which means that stress – on one directly impacts the others too.
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The challenges of changing customer requirements
Wholesale and distribution businesses are under constant pressure to reform and refine.
Customer requirements change to reflect economic changes.
So what effect does this have?
For a start, a dwindling customer base means wholesalers have to increase their marketing spend – not cut back where others might. Competition between wholesalers goes up too, which forces them to reduce prices in order to stay competitive. To balance the two, they have to change their own buying behaviours, looking for deliveries from 3rd party logistics suppliers and importing from cheaper suppliers.
Worse still, with decreasing sales, many wholesalers are no longer able to sustain their normal volumes of stock. The fewer products that are sold, the harder it becomes to justify existing distribution costs. And ultimately, wholesalers may have to cut back on the number of locations they distribute to.
Cutting back on locations reduces customer reach and further impacts on sales. And so the process goes round and round.
Wholesale and distribution business cycle
The effects of competition and other unknown variables
The competition places a very real pressure on wholesalers too especially from newer, more adaptable companies.
Technologically-savvy operations are already using radio frequency identification in their warehouses and stock tracking applications to pinpoint where in the cycle certain products are. This not only reduces the cost of stock delay but means they can inform customers of precise delivery times – something that gives them a real competitive advantage.
For those companies yet to embrace technology so wholeheartedly, it can be tempting to implement isolated solutions aimed at automating certain parts of the business. But adopting such a knee-jerk reaction without first considering the flexibility of those solutions, as well as their long-term impact on the entire business, can bring about major disruption and the need to reinvest in technology much sooner than anticipated.
The best experience: digital is the future
At the end of the day, a company stands or falls on the image it presents to its customers. They expect service that is prompt, effective and affordable. They want to feel that their business is valued and if they have a query, they expect an answer that shows they’re dealing with someone competent.
Intelligent business systems facilitate all this by giving service companies the right tools. As evidenced by recent research from PWC, 12% of CEO's are focused on boosting technology capabilities. For service providers it is integral you deliver quality information in real-time to crews on the frontline, staff at the service desk, and managers in the back office. Service professionals must embrace the age of digital technology to deliver the best customer experience.
Finding the appropriate system
As it’s essential for wholesalers to gather information from across the organisation, it’s important that any system be flexible enough to integrate into all areas of day-to-day operation – even where there are existing systems in place.
The system needs to:
- track and manage foreign transactions, tax and multiple currencies
- be usable by multiple staff, often in multiple locations
- report on accounting, finance and order processing in real time
- manage customer interactions and billing
- carry out stock assessments and inventory management
- ensure regulatory compliance
It’s essential too, that all data – orders, forecasts, stock management and payroll – can be accessed from a central point, offering management a snapshot view of any aspect of the business, at any point.
Minimising downtime and disruption is a key concern too – making it critical that the new system is not only able to adapt to the changing shape of the business, but integrate seamlessly with existing legacy systems.
It’s this ability to expand and co-exist with other systems where business management systems like MYOB’s Enterprise Solutions add value way beyond specific features or functionality. They provide a platform for growth not limited by the constraints of rigid programming – and a means of actively improving the efficiency of operational tasks and activity throughput on an ongoing basis.
"It’s essential too, that all data – orders, forecasts, stock management and payroll – can be accessed from a central point"