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Is Your Distribution Supply Chain Future-Proof? (Part I)

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Is Your Distribution Supply Chain Future-Proof? (Part I)

If you’re not using data and insights to figure out what your customers need before they need it, it’s time to start thinking about how to get up to speed and start shaping the supply chain of the future.

 

Take a hard look at your distributorship’s supply chain right now and ask yourself whether it’s truly centered on what your customers need… or not. Is it being planned from historical forecasts and executed based on customer orders—all with a primary focus of moving product from point A to point B in the most efficient, affordable, possible manner? Or, does your supply chain correlate data points like customer sentiment, purchase orders, product availability, product location, and even weather forecasts to determine exactly what your customers need before they even ask for it?

If your distributorship’s supply chain strategy doesn’t fall into that second bucket—or, if it’s not at least working toward that goal right now—it’s time for a change. More demanding and tech-enabled than they’ve ever been, your B2B buyers want to be able to order something online and get it the same or next day. They also want to know that you don’t have to search the entire continent to get them that product, and it’s in stock within a reasonable distance of their job site or other location.

Responding to these needs requires very detailed data that can be gathered, analyzed, and acted upon—all with the goal of servicing a specific order, customer, and/or market segment. And as more and more electrical distributors are pulled kicking and screaming into this “digital economy,” they’ll need to sharpen their supply chain skills or risk getting left behind.

The good news is that the effort should start with something independent distributors have been doing well for decades: figuring out what their customers need, fulfilling those needs, and then upselling those buyers on additional products, value-added services, and stuff that they really didn’t even know they needed. Add demand planning—or, the practice of using past demand patterns and forecasts to reliably predict demand for different items throughout the supply chain—to the equation, and the end result is a much smarter, predictive supply chain.

“Wholesale distributors act as aggregators of demand, buffering manufacturers from small orders and logistics complexity. As consolidators, they represent multiple, sometimes competing suppliers, placing the manufacturer’s inventory closer to consumption for faster delivery, and some provide a local contact for technical product information, repair, and customer service,” Logility’s Karin Bursa writes. “This ensures the right products are ready when and where the customer needs them, and at the right price.”

In Building a Profitable Wholesale Distribution Supply Chain, Logility tells how aligning inventories with customer demands can help distributors boost service levels, shorten cycle times, and reduce obsolescence. The problem is that distributors don’t always have access to those customer demand patterns. “For this reason, demand planning platforms should include advanced forecasting methods that anticipate future inventory needs based on factors,” the supply chain management software developer adds, “including demand history, customer orders, new product introductions, and forward-buying opportunities.”

 

Here’s What it Will Look Like

We don’t have a crystal ball, but based on the marketplace shifts that have taken place over the last couple of years, it’s pretty clear that the supply chain of the future will:

  • Rely on high levels of customer connectivity.
  • Is going to be more about anticipating customer needs than getting products from point A to point B as quickly as possible.
  • Will be driven by customers that want to work with mind readers who know what they want in advance (versus just fulfilling placed orders).
  • Interface directly with customers—both in person on via digital communications—on a B2i (business to individual) level.

Consider this:  Amazon allocates goods to distribution centers near its customers two days before those buyers even place orders for those goods. Based on the e-tailer’s analytics, it knows those customers will be ordering soon, so it puts the goods on the shelves as close to the end delivery point as possible. It’s a smart supply chain model and one that electrical distributors should consider replicating. After all, no buyer wants its distributor to have to search the country high and low for every essential item every time he or she places an order.

As someone who helps a lot of industrial distributors develop and hone their digital business models, Justin King, co-founder of the DigitalBranch, and senior partner at B2X Partners, says it all starts with knowing your customers. That means not only forming relationships with them on an individual basis, but also knowing what projects they’re working on and what’s coming down the pike for them over the next 3-6 months.

King says that level of knowledge correlates directly with good data. “The reason Amazon can make those predictions is because of the vast amount of data it has on both sides of its supply chain,” King explains. “It has both buying data and selling data from the vendors. It can then marry those pieces together, add in other key points (e.g., weather data, traffic pattern data, etc.), and then make accurate projections.”

 

Leveraging Good Data

Acknowledging that the typical small- to mid-sized distributor is probably still trying to find its place in the digital economy, King says a good first step is to start using data to make good projections. So, rather than waiting for an order to come in and then scrambling to fulfill it within a day or two, maximize the data that’s already sitting in your enterprise resource planning (ERP) system, and then dissect it by customer, project, branch, region, and/or distribution center.

Then, look at ways to pair that information with other data sets, like weather and traffic reports, both of which can significantly impact the end-to-end supply chain. “You can also use any of the open datasets that are available (in Maryland, for example, opendata.maryland.gov is an open database that anyone can use),” says King, “to incorporate agricultural, budget, housing, geoscientific, and utility data into the mix.”

Supplier data also comes into play here, says King. Tie their inventory availability data into your own internal systems, for example, and it won’t be long before your company is on the right path to a future-proofed supply chain. “If you know their inventory levels, you’ll be able to electronically drop-ship at the drop of hat,” King says, “and leverage your partner’s on-hand inventory instead of tapping into your own.”

 

In Part II of this article series, we’ll delve further into what electrical distributors need to start doing today to make sure their supply chains are future-proof.

 

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Bridget McCrea  is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.

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