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

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

If you don’t already know your customers better than they know themselves, here’s how to sharpen your data and supply chain skills for today…and for the future.

 

In the first part of this article series we looked at what distributors need to do to start getting their supply chains ready for the future. Using technology, data, and a business-to-individual (B2i) approach, for example, electrical distributors can not only effectively predict customers choices, but they can also influence those buying behaviors. This is going to be the table stakes for all product-oriented supply chains in the future, and it’s something all wholesale distributors should be thinking about right now.

“In an increasingly customer-centric world, the ability to capture and use customer insights to shape products, solutions, and the buying experience as a whole is critically important,” management consultancy McKinsey & Co. reports. “Research tells us that organizations that leverage customer behavioral insights outperform peers by 85% in sales growth and more than 25% in gross margin. Customer data must be seen as strategic.”

The problem is that most companies are only using a fraction of their data, and distributors aren’t immune to this challenge. According to McKinsey, the biggest culprits are sprawling legacy systems, siloed databases, and sporadic uses of automation. And, organizations may not have a clear understanding of the specific outcomes they’re looking to actually eke out of that intelligence.

“All that is leaving significant value on the table,” McKinsey reports, noting that in a recent survey of 700 organizations that are spending on analytics to gain competitive intelligence on future market conditions (i.e., to target customers more successfully, and to optimize operations and supply chains) generated operating-profit increases of about 6 percent. “When it comes to generating measurable value from their data,” the firm concludes, “most organizations have plenty of low-hanging fruit they have yet to harvest.”

 

Getting Out in Front of It

It’s not unusual for a manufacturer to “nudge” its distributors to learn more about their buying patterns and then leverage those insights into more predictive supply chain decisions. Distributors can use the same approach with their customers—a tactic that Justin King, co-founder of the DigitalBranch, and senior partner at B2X Partners, says can put electrical distributors on the path to 1) knowing more about their customers’ wants and needs, and 2) getting out in front of those buying patterns.

“If I was a distributor that wanted my customers to share data with me so that we can better predict their needs, the first thing I would do is share my data with them,” says King, “show them how to use that data, and how it can benefit them. This, in turn, opens up the conversation about data, in general.”

For example, an electrical distributor can share real-time global inventory availability data with its customers, or even zero in more closely on the products that a specific customer has purchased over the last 1-2 years. “You want them to know what you have available so that when they call or place an order, they know where it’s at and how long it will take to get it,” says King, who suggests using verbiage like:

Hey Mr./Ms. Customer, here’s a complete list of all of the products that you bought from our distributorship in the last year, and here are the products that you buy on a regular basis that take 2-3 days for us to get in stock. Let’s talk about your future needs and about what we can do to bring that stock in for you ahead of time.

The same distributor can review past project histories and share valuable data about budgets, products, services, and other items that customers needed on those specific jobs. “Figure out the raw costs of those projects,” says King, “and help customers understand their costs before they even go into a new project.” Doing this not only helps position the distributor as a preferred supplier on those new projects, but it also shows a level of proactivity that many vendors don’t have (and especially when business is good).

Finally, King tells distributors to dig down ever deeper by scanning government bids or other opportunities on the marketplace, and then sharing that data with customers that might be a good match for those projects. “Let them know that you want to ‘win’ this bid together,” says King, “and that you’re willing to share the data (e.g., product specifications, stock availability, delivery times, etc.) it will take to make that happen.”

 

Knowing Customers Better Than They Know Themselves

Getting customers to do what you want them to do is never easy, but armed with good data and an eye on designing a future-proof supply chain, distributors can begin making strides in this direction. “Emerging customer demands are far different than they were just five years ago,” says Gregory A. Smith, VP of strategic accounts and partnerships at SPA, INC. | SPASIGMA in Cleveland. “Both traditional and non-traditional competitors are changing the entire distribution business model.”

It’s not just existing distributor-customer relationships that can benefit from a proactive data approach. Smith says new relationships also stand a much better chance of blossoming if the distributor comes to the table with data and insights that the prospect may not even be aware of. This is yet another way for electrical distributors to future-proof their B2i supply chains.

For example, distributors can leverage data to provide insights to sales teams on recommended customer types based on metrics like sales histories, buying behaviors, and product price points. “These data points can provide distributor sales teams with the information they need to be able to secure new customers,” says Smith, “start new relationships and close the sale.”

Rewind the clock back about 10 years and this proactive approach to customer acquisition really didn’t exist. “Sales reps just went out and found a newly-licensed electrician or a new industrial segment to approach, and just walked in without any prior information or data,” says Smith. “Today, the same reps are walking in with a plethora of information that’ll help them close that deal—all while letting customers know that the distributor actually knows their business before they even try to engage with them. That’s crucial.”

 

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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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