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Offsetting increasing distribution costs in a changing digital economy

27 Nov 2017

By Doug Smith, Epicor, product marketing, retail and distribution director

It’s no secret that ecommerce is changing the way business is done, and distributors are no exception.

The new digital economy has created B2B and B2C convergence that puts pressure on distributors to find new ways to offset increasing costs or reinvent themselves in some way.

Simply put - buyers’ behaviours are changing and distributors need to adapt quickly to fulfil these new needs.

A major shift distributors are seeing is that same-day and next day services are becoming the norm due to the popularity of large ecommerce sites.

This change from traditional bulk shipments to unit shipments drives up cost, resulting in lower profitability for the business.

To offset these new requirements, distributors need to improve their efficiency through automation and rethink how they are managing resources.

It’s time for them to start identifying new ways to focus their business, such as utilising relationships with customers, manufacturers and suppliers, to better understand their needs, and investing in new technologies that enable them to deliver efficient and responsive customer solutions.

According to new research conducted by Morar Consulting on behalf of Epicor Software, only 18% of surveyed distributors say they are adapting business models to conform to new business realities brought on by the “we-want-it-yesterday” economy.

The answer to succeeding in this new era lies in reducing the ‘fear of missing out’ (some may have heard it as FOMO for short).

In a more formal sense of the word, it’s a new twist on the old concept of opportunity cost – the cost of foregoing an opportunity to be able to execute another one.

In a world where they are consistently squeezed by industry giants who can afford to take in business at lower margins, or even at a loss, distributors need to adapt their business models to make the most out of opportunities.

Investing in new, innovative technology such as integrated Enterprise Resource Planning (ERP), Customer Relationship Management (CRM) and Warehouse Management Solutions (WMS), is key for distributors to get ahead.

By becoming more automated and integrated into capability and analytical tools, distributors become more customer-focused and operationally ready to provide a unified customer experience.

Improving automation and efficiency also offsets increasing shipping costs.

Many organisations choose not to implement an ERP system because they consider themselves to be too small and have had success operating without this new technology to date.

What they don’t realise is that without investing in new technology, their company is being held back from its full potential.

Continuing to operate with a “business as usual” approach is a mistake distributors cannot afford to make anymore.

In an ever-changing business landscape, wholesalers must adapt to their surroundings or risk getting left behind and so they must learn how to mitigate risk to make the soundest decisions for their business

Integrated ERP, CRM and WMS provide the means by which to identify new opportunities, helping to develop an understanding of the varying needs of the distribution network.

Industry-leading distributors will be those that take advantage of these tools and have the ability to assimilate and synchronise data across business functions and derive actionable business insight, in real-time.

By Doug Smith, Epicor, product marketing, retail and distribution director

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