Building a connected business is less about just plugging in a new technology and more about how you can use that technology to automate your business, optimize processes and power growth. As a result, NAED is committed to “Building A Connected Business For The Future”.
In 2019, the NAED Education & Research Foundation published an in-depth report, “Building a Connected Business,” which explores the industry’s transition to digital. The outcomes of the research, conducted by Frost & Sullivan, gave NAED members a roadmap for digital transformation informed by customer and manufacturer input. Since the publication of that report, a lot has changed. The pandemic accelerated digital trends that were already under way. Customer shopping and buying expectations have shifted. AI and other emerging technologies have made their way into the mainstream – widening the gap between distributors that have invested, and those that haven’t.
NAED has condensed that report into a an 18-page guide that is now available from the association’s Education and Research Foundation.
Over the next few weeks, tedmag.com will provide you with 5 parts of the report to help you map out this critical journey of where you are today – and where you want to go. Part 1 looked at the challenges electrical distributors now face. Part 2 described a more connected customer. Part 3 asked customers what they want in an ideal distributor partner. In part 4, we look at opportunities to collaborate and grow more connected with our manufacturers.
Opportunities to Collaborate with Manufacturers
Thanks to the growing sophistication of product technology and the rise of ecommerce, manufacturers are interacting directly with end-users. That means traditional distribution channels are declining in importance.
Consider this example: By 2023, the share of traditional distribution is expected to decline by 6% in the North American lighting equipment market. However, direct sales (from manufacturers to end-users) will gain a 5% share within that period, according to Frost & Sullivan’s North American Lighting Equipment Market: Forecast to 2023.
Selling increasingly sophisticated products requires qualified project partners, a factor that has been reducing manufacturers’ reliance on traditional distributors. In addition, constant upgrades to products, innovations, the emergence of technology influencers in projects, and shifting business models have prompted manufacturers to engage with their channel partners in new ways.
Electrical distributors face these three channel threats:
- Disruptive innovations creating new avenues to market: Lighting innovations and Internet of Things-based connected solutions require technological sophistication and internal and external business digitization — an area where electrical distributors are considered behind the curve — making direct sales approaches more feasible and effective for manufacturers.
- Service requirements extend customer engagement cycles: Sophisticated technology requires ongoing tuning, calibration, and predictive maintenance; these serviceability options are value-add opportunities not yet developed with traditional channel partners.
- Project delivery automation: Labor shortages and spiking delivery costs have suppliers automating processes end-to-end. Prefabrication techniques may reduce man hours. However, these techniques call for specialized installer training, which is currently inadequate.
What Manufacturers Want from Distributors
Electrical distributors must mitigate key capability gaps such as product knowledge, limited visibility into customer requirements, lack of continued support, and restricted customer reach. According to manufacturers, distributors can become better partners by mitigating these capability gaps through:
- An ecommerce strategy that supports customers’ expectations for visibility and self-service while expanding sales reach.
- Becoming business partners with their customers. Move from a transactional sales role to a consultative, advisory role.
- Offering Product-As-A-Service (PAAS). Evolve the distributor/end-user relationship by offering continued support and training for connected products long after the sale.
- Better inventory management. Distributors can modernize their inventory management and provide customers with more timely ordering and receiving for a better overall experience.
- Better support. Distributors can build a better local support model complete with contractor training to ensure lighting and electrical systems code are met, and systems are installed and working properly.
- Construction Project and Materials Management. Enhanced automated project management ensures better order management and delivery and install times.
You can read more about the Connected Business study or download a copy of the report for yourself at www.naed.org/building-a-connected-business.
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