Exclusive Features

Is Your Distributorship Drowning in Data? (Part I)

-
Is Your Distributorship Drowning in Data? (Part I)

If your company is overwhelmed by data, it’s not alone. Here’s why your electrical distributorship is overwhelmed by data and how you can start using it to work smarter, better, and more efficiently in today’s changing business environment.

 

In a world that’s generating 2.5 quintillion bytes of new data every day, companies across all industries are literally drowning in data right now. With 90% of the world’s data created over the last two years—and with each “connected” person interacting with data every 18 seconds—IDC predicts that the “global datasphere” is going to grow from 33 zettabytes in 2018 to 175 zettabytes by 2025.

If computer lingo isn’t your thing, it may be useful to know that a single zettabyte equals one trillion gigabytes. If that still didn’t help clear things up, the bottom line is that individuals, companies, and organizations worldwide are generating a staggering volume of data right now, and 30% of that data needs real-time processing to be useful and actionable, IDC reports.

Managing the Datasphere

Distributors are particularly prone to data overload, what with the number of suppliers, business partners, customers, and other resources that they interact with daily. Tracking purchase histories; managing billing and shipping details; orchestrating the end-to-end supply chain; and maintaining financial data and accounting information are just a few of the data-centric activities that all distributors manage on a daily basis.

“Distributors measure everything from average sales and orders per day, to sales outstanding and cash discounts, to shipping and handling and customer invoice amounts,” says David Oldfather, VP of business development at Jigsaw Systems, Inc., in Philadelphia. “Managing all of this information and more can be pretty overwhelming.”

According to Mark McGready, CEO at Jigsaw Systems, roughly 95% of all data that electrical distributors are dealing with is being generated internally via their enterprise resource planning (ERP) systems. “Most software packages can provide a huge amount of data, pulling different numbers from a variety of sources,” says McGready, who adds that getting accurate, actionable external information can be difficult in the electrical distribution industry. “Most of the time, a distributor’s data is simply a mirror of its own data reflected on itself.”

Avoiding Data Purgatory

Without good analytics, all of the internal and external information companies generate on a daily basis goes into data purgatory, never to be seen or heard from again. “Research shows that most companies are collecting data, but roughly half of them don’t have a data platform in place to get insights from it,” Attunity’s Carole Gunst writes in 10 Eye-Opening Stats About the Growth of Big Data. “When it comes to big data analytics, there are many behind-the-scenes barriers companies have to overcome to get their data to a place where it can inform decisions.”

The culprit, Gunst writes, is the increasing growth of data:

  • The volume of data created by U.S. companies alone each year is enough to fill 10,000 Libraries of Congress.
  • Most companies only analyze 12% of their data.
  • By 2020, there will be more than 50 billion smart connected devices in the world, collecting, analyzing, and sharing data.
  • Bad data costs U.S. companies $3.1 trillion annually.

“Electrical distribution is at an inflection point,” says Gregory A. Smith, VP of strategic accounts and partnerships at SPA, INC. | SPASIGMA in Cleveland. “It’s an industry that takes a long time to move; it’s like moving a large ship that’s been on the same course for 100 years. It takes a lot of energy to redirect that, but distributors have suddenly found themselves in a position where they have to change.”

Change is Imminent

Facing a host of rapidly-changing business fundamentals, distributors are dealing with customer demands that look a lot different than they did just five years ago. At the same time, supplier-distributor relationships are changing, and both traditional and non-traditional competitors are impacting the way electrical distributors do business. As a result of this “perfect storm,” Smith says distributors are beginning to ask themselves questions like, what do we do with all of this data? How can we make it actionable and useful for our businesses? And, how can we get in on this wave of digital transformation?

These questions are straightforward enough, but the answers don’t always come easily for a small to midsized electrical distributor that lacks the in-house “data scientist” expertise needed to deftly turn all of those gigabytes into useful information. This is the analytics piece of the puzzle, or the “science of analyzing raw data in order to make conclusions about that information.” Without good data analytics, the information that’s piling up isn’t useful or actionable.

“If you’re going to maintain a record of gross margin percentage or inventory terms, the next question you have to ask yourself is, what am I actually going to do with all of this information?” Oldfather points out. If you can’t answer that question, then all the data analytics in the world won’t make the gathered information useful for your distributorship.

For example, if you’re measuring organizational productivity and gross margin, and if your goal is to attain 20% gross margin, then you have to take action to make that happen. The same logic applies to expense reduction, logistics, inventory turns, and so forth. “The bottom line is that unless you’re going to do something with the data, and use it to measure against a goal,” says Oldfather, “then people aren’t going to pay much attention to it.”

To overcome this challenge, Oldfather says distributors should take a step back and look at the bigger picture. Figure out why you want to transform data into useful intelligence (e.g., is there some action you want to take that the data can either support or redirect your attention to?) that will help you run your company better in this competitive environment, and then select the key data points that will help you get there. “I work with distributors that are generating 100 different reports every month, but only really looking at two or three of those reports because the rest of it is just data,” says Oldfather. “There’s no action to be taken.”

 

In the second installment of this 3-part article series, we’ll show how distributors can start effectively using their data for good decision-making.

 

Tagged with ,
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.

Comment on the story

Your email address will not be published.