Make smart and accurate
software selection decisions
Podcasts, Webinars, and Videos
Interactive Case Studies
ERGO Decision Support System
Private Label Partnerships
TEC Case Studies
Software Evaluation Reports
Meet TEC's Experts
News and Press Releases
Working at TEC
Partner with TEC
Future Trends in Wholesale Distribution—Part 1: Disruptive Innovation...
Future Trends in Wholesale Distribution—Part 1: Disruptive Innovations
September 24 2013
was in full swing last week, with a full slate of vendor demonstrations from
, as well as presentations and dynamic discussions.
’s Bob Heaney,
’s Jonathan Gross, and I had a great time at the end of the first day talking about future trends in wholesale distribution. The main trends that we see in this area can be categorized into three groups: disruptive innovations, outside-in omnichannel fulfillment and next-day delivery, and emerging technologies. This post recaps the insight garnered at the TEC Vendor Challenge about how disruptive innovations are changing the landscape of the wholesale distribution industry. I will look at additional trends and technologies in two future posts to follow.
Wholesale distribution is a diverse industry, comprising some 70 industry-specific sectors within the wholesale distribution category. Any conversation about the wholesale distribution industry as a whole is therefore a generalization at some level, as there are industry-specific issues that distinguish some sectors in significant ways from other sectors—for example, the drug and pharma sectors compared with grocery or industrial distribution.
Multiple segments of the wholesale distribution sector are highly fragmented, perhaps none more so than the industrial distribution sector, where the 50 largest distributors comprise less than 25% of the total industry revenues. Situated between manufacturers and retailers or other downstream customers, wholesale distributors are under considerable margin pressure, which puts a premium on operational efficiency and on taking advantage of every revenue opportunity.
While wholesale distributors have always played a critical role in the movement of goods through the economy, the threat of disintermediation continually looms over the industry as manufacturers, retailers, and nearly every other member of the supply chain continually assess how to get products and services to the market more quickly with a rigorous focus on value creation through every stage of the supply chain.
With this backdrop, Lorne Goloff, vice president, Selection Services at
Technology Evaluation Centers (TEC)
kicked off a panel discussion on the first day of the TEC Vendor Challenge to address trends and issues in wholesale distribution.
I kicked off the panel discussion with a look at several disruptive innovations impacting the wholesale distribution industry:
Shopping for Suppliers
The business-to-business (B2B) and business-to-consumer (B2C) customer experience
Amazonsupply.com entered the distribution space in April 2012, with Google following with Shopping for Suppliers in January 2013. While the two offerings have little in common, it is hard to ignore the possible impact in specific sectors of the distribution industry. Reactions from the distribution range from “run” to “it is safe”—i.e., from indifference to considerable concern. Amazonsupply.com reports as many as 300 million product inquiries per month, so there seems to be little debate that these two players constitute a disruptive influence on the industry.
Many, if not most, distributors will see e-commerce counting for a greater part of their revenues, and so are making investments in e-commerce capabilities. For example,
is expecting to see e-commerce constituting 50% of its revenues in the future. Yet, the e-commerce vendor
has recently reported that many distributors in the electrical distribution sector still need to make investments in a number of areas to be able to offer state-of-the-art e-commerce capabilities.
Enhancing one’s e-commerce capabilities becomes even more paramount with the market entrance of Google and Amazon, which chief executive officer (CEO) and co-founder of
, rightly points out in his article “
Can Today’s Distributors Compete?
” is the gold standard of fulfillment.
, for one, is proving, in quite a different way, that it is possible to compete. While the company may not have pioneered the use of vending machines in the distribution industry, it is pursuing that strategy the most aggressively, with plans to have as many as 30,000 machines installed by the end of 2013, up from some 1,900 machines installed at the end of 2010. Vending machines provide customers with greater convenience, better and faster inventory replenishment, and automatic billing—providing Fastenal with a cost-saving alternative to opening more offices in more locations.
The Fastenal strategy demonstrates that there are innovations and strategies that distributors can pursue other than the more common current tactics of adding on more product lines or trying to generate more revenue from current customers.
Technology has to be an important component in the strategy of wholesale distributors, and the interest by the TEC vendor Challenge attendees in talking with Epicor, IBS, Infor, Microsoft, NetSuite, SAP, and VAI and seeing demonstrations of their solutions is testimony to this importance.
Distributors will find it very difficult to be successful, much less disruptive innovators, without a solid enterprise resource planning (ERP) system foundation in place. Distributors that try to get by with a mishmash of unintegrated or stand-alone legacy systems are at a distinct disadvantage, impairing both their operational efficiency as well as their ability to offer competitive capabilities to their customers.
The need for an updated ERP system and e-commerce capabilities becomes even more important with rising customer expectations. As consumers, we carry our experiences from the B2C world over to the (more challenging) B2B realm, with expectations for a customer experience that is just as quick, easy, and smooth as in our consumer transactions. Fair or not, I can download an app from the
store in less than a minute, so why does it take me 20–25 minutes to order voice and data access for Canada from
In Parts 2 and 3 (to follow), we will deliver more insights from the TEC Vendor Challenge Panel around the Next Day delivery mandate, delivering exceptional customer experiences, and emerging technologies for wholesale distribution.
comments powered by Disqus.
comments powered by
Interested in a better way to make software decisions?
Give us a call now: 1-800-496-1303 ext:404
Software Requirements Sets and Comparison Reports
Click here to leverage the experience of our 360 industry perspective