The COVID-19 pandemic, among many other things, made radical changes to the way customers shopped, and also altered how businesses distributed their products and approached industrial evolution.
The question now is: How can you get ahead of upcoming trends and prepare yourself for the future of industrial distribution? Read on to learn more about the coming changes you need to know about that will make an impact on your career.
A Chance to Reflect
The e-commerce surge of 2020 and 2021 demonstrated customers’ needs when ordering online. Due to what business analysts like Tony Hymes are calling the “Amazon Effect,” customers have become accustomed to low shipping costs, product availability, fast delivery, and shipping transparency. However, the pandemic proved that not every business can operate at the same rate as Amazon.
As a result, industrial distribution businesses have shifted from traditional to digital management practices. WestMonroe’s 2021 Manufacturing Outlook reports that distribution companies have increased their use of wireless and smart products. The pandemic taught manufacturers the need for an agile management style that can keep up with new industry developments both during a great economy and the once-a-century pandemic.
Customer Expectations and an Increase in Demand
Customer demands are rising on all fronts. From shipping transparency to ethical business practices, the distribution industry must take note.
According to a 2019 McKinsey and Company report, customers are shopping across multiple channels and looking for “24/7 customer service, a complete e-commerce website, order tracking, and real-time inventory management. Customers are expected to make 30% more of their purchases from distributors via online means; those in the electrical segment expect a 50% increase.”
Additionally, there is a growing demand for “green innovation,” according to a 2021 study published in the International Journal of Ethics and Systems. Green innovation comprises any idea, product, or service that reduces the harm done to the environment and leverages natural resources.
The industrial distribution industry is growing in technological innovation and efforts put forth to meet customer demands. The need for innovative professionals in the industry who can move the management needle toward ethical and digital practices is growing.
Here are the trends you should be aware of when entering the industry. Knowing how industrial distribution will change over time could make you a better asset to your employer in the future. Take note and dig in.
Emerging Industrial Distribution Trends
Turning a blind eye to industry trends could result in a supply chain that quickly falls behind competitors. Customer buying habits have changed dramatically in the past several years and that affects how distributors must respond. Knowing what’s already changed and what’s to come will keep a business relevant and prepared to grow for the long term.
An online store (or eBusiness) will take precedence over brick-and-mortar operations. Logistically, distributors need to be keyed into their supply chain inventory, customer expectations, and require greater investment.
There are common necessities, however, when adopting an eBusiness as part of your supply chain, such as:
- Navigating the customer relationship management system
- Content marketing
- Content syndication
- Virtual showrooms, branches, and vignettes
- Local advertising
- Search engine optimization
Distributors need to be tapped into where the shopper experience is moving: Namely, customers are spending more time online and expecting a more streamlined ordering experience.
Streamlined supply chain management (SCM) is key to meeting customer demands. Online wholesalers should be able to obtain more visibility through search engines. The business to business (B2B) customer experience is often more prolonged than that of business to consumer (B2C), but distributors should still be able to connect with retailers to maintain customer retention.
Shoppers are doing more than scrolling through online stores or strolling by storefronts; they are browsing, comparing, and buying across multiple channels.
McKinsey’s 2019 report on industrial distribution found that 57% of customers prefer an omnichannel shopping experience. That means they can find a business’ inventory in person, online, on mobile, and over the phone. Each channel should be connected, and the buying experience should be seamless.
For example, if employees at a business wanted to order new carpeting for their office, they may shop online, take a look at various vendors’ websites and social media pages, and schedule a time to view the product. An omnichannel selling strategy would offer opportunities to purchase the carpets at each stage.
Connectivity through the advancement of the Internet of Things (IoT) is greater now than ever before. IoT Analytics found that the overall enterprise of IoT grew by over 12% in 2020. From this year forward, researchers expect IoT to continue to grow almost 27% annually. Adoption of this technology or that of blockchain is expected for larger companies.
Rise of Order Management Systems
Distribution centers need to invest not only in e-commerce technology but also enhance their SCM with an online system and workflow automation. Order management systems (OMS) track and control inventory processes and can even automate some of the more repetitive tasks. A great OMS is able to connect all of a manufacturer’s channels together so distributors know when and where an order is placed and can communicate how quickly it can ship out — automatically and without much human contribution. This way, there are no errors in how much inventory is available and everyone involved with the shipping process knows which items must be included.
The margin for error during more repetitive tasks could shrink with a robust OMS.
Operating blindly without data-driven goals can take a traditionally successful business and reduce it to a failing company. Understanding metrics such as the typical demographics a business attracts could help it focus marketing efforts and save time and money otherwise spent on guessing who buys its products.
In a 2020 article written for Forbes, Manish Mehndirattam, director of Sage IT Inc., asked: “Why should companies seek to be data-driven? The short answer is to maintain competitiveness in an increasingly competitive global market.”
Organizations must market themselves according to what their customers are looking for.
As noted in the 2019 McKinsey report, “new data and advances in computing power, data storage, analytics, and mobile platforms are turning industries as varied as music and health care upside down.”
Predictive analytics is helping companies utilize statistical modeling to set proper pricing, forecast overturn, and optimize operations. These tactics can help leaders understand how much their business will make, so they can more accurately prescribe budgets and workflows. This can even be used for machine maintenance for larger industrial distribution centers, significantly reducing downtime and helping both customers and employees maintain a stable experience.
The shift from static to dynamic pricing and workflows is the theme of every business moving forward.
Optimizing pricing specifically can help maximize revenue. Administrative tasks and overhead functions can easily be robotically automated through artificial intelligence (AI) and free up resources otherwise used for repetitive tasks. When distributors are not spending money on hiring employees for mundane work, this frees up budgets to be invested in other areas such as cloud-based systems and SaaS solutions.
Supply Chain as a Service
If businesses do not have the resources to handle their supply chain management in house, they may outsource certain aspects to compensate. Supply chain as a service (SCaaS) is an option for these businesses to choose which aspects of their SCM they need assistance with. They may outsource manufacturing, inventory management, or logistics.
Supply chain towers are a way to help outsource management. IBM defined a supply chain tower as “a connected, personalized dashboard of data, key business metrics, and events across the supply chain. A supply chain control tower enables organizations to more fully understand, prioritize, and resolve critical issues in real time.”
It is a holistic, end-to-end approach to oversee the entire supply chain. It can see where bottlenecks are happening but also what might happen in the future based on statistical evidence.
As time goes on, businesses will either opt to streamline their SCM in house using an OMS or outsource using a supply chain tower. Either option no longer leaves room for the traditional pen-to-paper or keyboard-to-spreadsheet inputs. Distribution is moving too quickly for these systems to remain efficient, accurate, or optimal.
The need for digital solutions is here, and it will only increase over time.
Industrial Distribution Reaches the Cloud
Dynamic workflows must include cloud distribution software to help lower maintenance costs and deployment. Cloud-based systems offer more flexibility and scalability as the business grows or in the face of unpredictable circumstances.
An OMS is a perfect example of what a cloud-based distribution system can do. Connecting all of the different parts of a business presents opportunities for employees to gain more visibility into how their company is performing. C-suite executives can, at a glance, see where they can make improvements in categories such as customer feedback, SCM, and bottlenecks throughout the business.
Additionally, as distribution channels adopt a more data-driven approach, that information must be stored somewhere in the cloud. Along with the data that set the foundation for the business, customer information must now also be safely stored. This helps analytic specialists compare information year-over-year while making plans to improve.
However, with cloud computing and data storage, there comes the importance of cybersecurity. The last thing a business needs is for its remote sales data to be compromised and lost because of a faulty security system.
The recent COVID-19 lockdowns taught the nation how to operate an agile business remotely. But outside of the safety offered by IT walls, remote workers were, at times, unprepared to secure their data. An article by Steven Richmond, a Forbes council member and founder and CEO of cloud solutions business Projetech, Inc. described five steps to increase cybersecurity:
- Evaluate current security practices: Understand where your security system is strong and where there are weaknesses.
- Develop secure infrastructure for sensitive information: Making copies of information and locking them in cloud locations outside of the current network is a great way to backup information in the case of an attack.
- Upgrade security protocol: Setting disaster plans for developers and implementing multi-factor authentication are just a few ways to be proactive against attacks.
- Set a training course: Inform employees of what to look for in the case of phishing schemes and online safety. This could be set regularly.
- Conduct phishing simulations: Similar to fire drills, employees should be aware of what they should do in the event of a phishing attack and how to flag information.
A cyberattack in any industry could cost the company millions or even billions of dollars. For industrial distribution companies that handle information and inventory for sensitive equipment for organizations such as hospitals and governments, knowing how to handle cyberattacks is vital.
New Competition on the Rise
Another important trend that is putting pressure on companies is the surge of competition from marketplaces, suppliers, and similar, nontraditional industry players. Competitors such as these are pushing the industry to leverage more technology to streamline workflows and capitalize on the evolving B2B market online. Precision Reports found that the B2B e-commerce market is expected to reach $20.9 trillion by 2027.
Convenience and personalization are key traits customers are looking for, and with more competition in the industry, ambitious innovation by the wholesale distribution industry is necessary to stay in the game.
Supply chain technologies that could help keep businesses competitive:
- IoT: Tracking and reporting on everything from warehouse centers to shipping containers, weather, and traffic patterns to accurately predict business ROI.
- Blockchain: Not only used for cryptocurrency, it can also increase SCM visibility because of its record of transactions that cannot be altered or changed.
- AI: Mostly used for data collection and automation on the customer end of SCM.
- 3D printing: What was once a dream is now an affordable reality for manufacturers looking to personalize their products. The benefits are trifold: Companies can cut logistics costs, lower their carbon footprints, and avoid offshore outsourcing.
Social and environmental trends around the world affect the supply chain industry as well. There are many ways warehouses can increase their sustainability. Green logistics is one way leaders are cutting back on greenhouse gas emissions. Similar to other forms of green innovation, green logistics strives to cut down on activities that have an ecological impact such as electricity and transportation.
Eco-friendly warehousing efforts include monitoring:
- Water use
To address the results of monitoring these efforts, supply chains are opting for electric and solar-powered vehicles and equipment, according to Financesonline. The outlet noted that the push for greener solutions is due not only to the impending global effects but also that “environmental changes brought by climate change affect the availability of materials and resources, posing potential disruptions to supply chains.”
What’s more, manufacturers are trying to refurbish products for as long as possible to create what’s known as a circular supply chain. Industrial distribution industry leaders can look at the benefits and innovative solutions they can gain from a circular system rather than a linear one. Not only can it save money and reduce turnover for new products, but it may also make the business more attractive to retailers looking to close the loop on their own sustainability practices.
Eliminating the Middleman
While mergers and acquisitions are projected to continue to gain popularity, the goal has shifted. Businesses are hoping to connect directly with customers, which will not only cut distribution costs but also make them more competitive against traditional retailers. Some distributors are even avoiding retailers and instead selling directly to customers.
Eliminating the middleman could include even overseas distributors that charge high shipping costs. Manufacturers could instead offer solutions directly to customers to help cut costs even further and offer a better customer experience.
It’s not only customers who are searching for ethical and sustainable companies to buy from — job seekers are also doing the same. Researcher Berthon created the Employer Attractiveness Scale (EAS) to help analysts and companies alike determine how attractive their business is to job seekers. They narrowed the items into five categories: One includes a positive social environment and another includes the ability to demonstrate humanitarian efforts and provide value to the business.
Unfortunately, distributors may be having a hard time attracting job applicants, and it could be that they are viewed as offering less-desirable benefits. To recruit and retain employees, distributors should empower employees to seek high-value positions or pursue higher certifications in the SCM system.
Differentiate Your Brand
As businesses continue to grow and more catch onto these trends, leveraging what makes a brand unique will continue to drive business growth. Zeroing in on customer satisfaction, identifying and eliminating bottlenecks, and streamlining the order management process will help get a brand noticed — but it is the brand itself that must make an impact on the market.
A great way to understand customer needs is by analyzing who your best customers are instead of narrowing to one type of marketing to multiple types of buyers. The industrial distribution industry must participate in inbound marketing just as much as other distributors such as Nike and Wayfair. Sales analytics and marketing automation tools can assist in this effort to provide clear and actionable information. Focus on what customers want, such as sustainability and fast delivery, and adjust your marketing to appease these needs.
Earning Higher Education Degrees
There are plenty of complexities when it comes to SCM. Schools such as the University of Alabama at Birmingham (UAB) are offering online undergraduate degree programs to prepare students for the future in this industry. There are many oncoming trends that will shape the future of distribution, and informed professionals can implement changes that align with these shifts.
Industry leaders are looking for more standardization that will help advance the future of their businesses.
Online Bachelor of Science in Industrial Distribution
With an online bachelor’s degree in industrial distribution, you can have the opportunity to implement real inventory management change and advance the industry. Industry experts in UAB classes can help guide you into a career in manufacturing, purchasing, medical equipment supply, or logistics.
A degree from UAB can offer perspectives on both the business and technical aspects of this field. You can stand out from the competition by demonstrating your commitment to a career in industrial distribution. You’ll have the potential to gain the necessary skills that will prepare you for real-world experiences through this rigorous program.
An online program such as this one allows you to lean into the foundations of a career in distribution while exploring industry-related positions and earning experience as you learn.
With a bachelor’s degree, you’ll be able to apply for positions such as:
- Sales manager: Annual salary $110,660
- Sales engineer: Annual salary $96,340
- Logistician: Annual salary $73,870
- Distribution manager: Annual salary $93,180
- Buyers and purchasing agents: Annual salary $58,520
Average salary information was found in the U.S. Bureau of Labor Statistics 2020 review.
Ready to make long term changes in the industry? An exciting career in industrial distribution is waiting for you with a degree from UAB. Reach out to the admissions office today to get started.
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Tony Hymes, “The Amazon Effect – Defining Customer Expectations in eCommerce”
WestMonroe, “2021 Manufacturing Outlook”
Sonata, “Top 5 Trends of the Wholesale Distribution Industry”
Small Business Trends, “More Consumers Demand Shipping Transparency from Retail Businesses”
Emerald Insight, “Social and ethical practices and firm value: the moderating effect of green innovation: evidence from international ESG data”
McKinsey & Company, “The Coming Shakeout in Industrial Distribution”