In a world of high competition and low margins, this is a difficult time for thedistribution industry.Supply chain uncertainties,inventory issues,andrisingcompetition from e-commerce chains such as Amazon havemade it hard to compete.Understanding the right approach to solving thesechallengesis essentialfor distributors toadapt, transform and differentiatethemselvesin this new challenging business landscape.
Looming competition
Manufacturers and retailers are increasingly cuttingdistributorsout of business, while the existence of huge marketplace platforms likeAmazonhas drastically increased competition.This process of cutting out the middleman is called “supplier disintermediation,” and it has the potential to seriously disrupt thedistribution industry.Distributorsarestrugglingto differentiate themselves and offer personalization services that have come to be expected by B2B buyers on marketplaces.
How the distribution industry can overcome this:
Distributors must find a way to compete with direct deliveries (from manufacturers to retailers or straight to consumers) with faster delivery times,quality products,easier returns, cheaperlogisticsand expanded personalization options.
Rebates can be a way to reward loyalty, helping your regular or large customers feel valued. Offering rebates to your customers can also be a great way to sell specific products within a specific time and encourage greater purchasing volumes. Even if this results in a lower margin on each sale, you can still make more profit overall.
A disrupted global supply chain
The global pandemic, travelrestrictionsand supply shortages have all had a majorimpact onsupply chainsandhave been an ongoing concern.TheInstitute of Supply Management (ISM)surveyed 559 respondents and reported that since the pandemic, average lead times for inputs are at least twice what is normal. For China lead times increased by 222%, Europe by 201% and the US by 200%.
How the distribution industry can overcome this:
A good place for the distribution industry to start isthroughauditingtheirsupply chains,bypinpointingportions of the chain that are either struggling to deliver, have fallen apart outright, or are showing signs of stress.It’s essential to have a contingency plan for when things go wrong.
While there’s a shortage of goods on a global level, it’s always a great idea to have connections to backup suppliers in case your normal supplier experiences any shortages.If you have the storage facilities to allow for holding more inventory, this can help manage slow deliveries of stock and supply chain issues in the future.
Those distributors who can best manage their supply chain and provide reliable insight to their end customer ultimately deliver a positive customer experience and ensure customer loyalty.
Silo’d data
Data has become one of the most valuable assets available to the distribution industry.However, withvolumes of databeing generated every day, there’sno way to manage it from an organizational standpointwhen reliant on manual processes and legacy systems.Modern supply chains are stretched thin and pressured to make quick decisions. Having accurate information based on the most current data available could mean the difference between a floundering and flourishing distribution business.
How the distribution industry can overcome this:
Digitization is transforming the waythedistributionindustrycan control the end-to-end supply chaindataandcapturewhatisfundamental to that process.The first step to fixing this is by centralizing that data into a single system, which can be accessed easily by team members throughout the organization. This removes both technical incompatibilities and cross-functional dependencies, allowing all internal stakeholders to operate more autonomously and efficiently.
Manual processes
Traditionally, distribution businesses have relied onmanual processeswhich are time-consuming, tedious and error prone. For example, theystart out managing their rebates in spreadsheets and/or rely on data from trading partners, but thisbecomesa slippery slope. This soon graduates to using ERP systems or even systems created internally, however,these systems are not created by experts in rebatemanagementand often fail to handledeals witheventhe slightest of complexities.
How the distribution industry can overcome this:
While managing distribution channels can be challenging, making them more efficient can lead to a boost in profits and a drop in costs.Distributors need complete visibility to keep costs low while delivering the products on-time and correctly.Byautomatingkeyprocesses'distributorscanhelp toimprove staff productivity, keep a manageable workload, and identify any potential problem areas.
Lack of collaboration
There are numerous stakeholders across the supply chain and meaningful collaboration between all parties is important to ensure the end customer receives the ‘joined up’ service they expect. The challenge is to get all companies aligned on theirgoals,so everybody knows what success looks like, and how to win.
Many manufacturers are having trouble collaborating with their distribution companies. Distributors also often have extremely demanding requirements, much like customers do. If suppliers don’t meet their needs, the relationship will falter.
McKinsey says “The vision of a truly integrated supply chainhas proven difficult to realize. Companies seeking to increase data sharing and collaboration across their supply networks have faced three principal hurdles.” Those include trust issues, the operating model, and technology.
How the distribution industry can overcome this:
Organizationsfrequently underestimate the resources required tomake collaborations work,assuming thatthey can leave it up to staff in various functions to do what's required in addition to their otherresponsibilities, but this is where digital tools come into play.
For example, distributors managing rebate programs can userebatesto reward collaboration throughout the supply chain, which result in improved business performance for all participants. Benefits include greater market share, increased revenue and better relationships between supply chain partners.A collaboration platform can ensureinformation is delivered in real time,that any long-term deals stay on track and deliver the results it shouldfor the distribution industry.
Cloud-based rebate management software is here to transform the distribution industry
Cloud technology is a way to combatindustry challenges, but thedistribution industryhasbeen slow to digitalize.A2020 Grant Thornton surveyfound that two-thirds of manufacturers say their external supply chains (which encompass partnerships with distributors) are partially digitized, while just 11% saythey’refully digitized. Meanwhile, one-fifth of manufacturers say their supply chains are “still largely in ananalogstate.”
One tool that iscrucial for any distribution industryis an effective rebate management platform. Distributors can shift spending to maximize rebates and incentives across manufacturers, reduce rogue spending, track compliance more rigorously, ensure earned rebates are captured and use insights to negotiate more effectively with suppliers.
Schedule a demo to see how Enable can help you overcome your rebate management challenges.
