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Speaking Out: Distribution's Digital Divide

May 17, 2017
Epicor's Doug Smith says a “business as usual” IT strategy won’t cut it in today’s digital economy.

It’s no secret e-commerce is changing the way we all do business. Electrical distributors are no exception. The new digital economy has created  a B2B and B2C convergence that puts tremendous pressure on distributors to either find new ways to offset increasing costs or reinvent themselves. Simply put, buyers’ behaviors are changing and distributors need to adapt quickly to fulfil these new needs.

A major shift distributors now see is that due to the popularity of large e-commerce sites, same-day and next-day services are becoming the norm. This change from traditional bulk shipments to unit shipments drives up cost and drives down profits for the business.

To offset these new requirements, distributors need to improve their efficiency through automation and rethink how they manage resources. They must focus their business on the needs of customers, manufacturers and suppliers and invest in the technologies that enable them to deliver fast, efficient and responsive customer solutions.

Can distributors get ahead by rethinking the supply chain? Many are not. According to new research conducted by Morar Consulting for Epicor, only 18% of distributor respondents are adapting business models to conform to new business realities brought on by the “we-want-it-yesterday” economy.  But an “x-factor” exists with all of this that they can leverage to maximize ever-tightening margins — the fear of missing out (FOMO for short).

FOMO – The Fear of Missing Out. The answer to succeeding in this new paradigm lies in reducing FOMO. 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.

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

Investing in new technology such as Integrated Enterprise Resource Planning (ERP), Customer Relationship Management (CRM) and Warehouse Management Solutions (WMS) has never been more important. These systems automate tasks and allow distributors to manage their resources more efficiently while reducing uncertainty from known variables. By becoming more automated and integrating their capabilities  and analytical tools, distributors become more customer-focused and operationally ready to provide a seamless, connected and unified customer experience. Improving automation and efficiency also offsets the increasing shipping costs mentioned earlier.

Many organizations choose not to implement an ERP system because they consider themselves to be too small and have had success operating without this technology to date. And therein lies the rub of opportunity costs — what they don’t realize is that without investing in new technology, their company is being held back from its full potential and will not grow in the future. Doing nothing avoids costs in the short term, but it’s not worth it in the long run. Continuing to operate with a “business as usual” approach is a mistake distributors cannot afford to make anymore. They must learn how to use this new technology to mitigate risk and make sound decisions for their business.

In an ever-changing business landscape, wholesalers must adapt to their surroundings or risk getting left behind. Industry-leading distributors are taking advantage of integrated ERP, CRM and WMS systems to identify new business opportunities and to assimilate and synchronize data across business functions and derive actionable business insight in real-time.

Doug Smith is Epicor’s director of product marketing, retail and distribution. He has been involved with Epicor as a customer, salesperson and product and marketing manager for more than 25 years. Smith also owned and managed a home center/industrial distribution business in Oregon for nearly 10 years and served in the United States Air Force as a Judge Advocate General. You can contact him at [email protected].