Challenges SMBs face in the wholesale distribution industry

Wholesale distribution is a vital link in the modern supply chain. As of 2016, there were more than 300,000 companies involved in wholesale distribution in the U.S. alone, while worldwide annual sales from wholesale distributors were nearly $7 trillion, according to the consulting firm Allen Austin. While the industry’s size and scope are impressive, today’s distributors face big challenges on both sides of their operations, i.e. from manufacturers and retailers:

  • Many manufacturers feel pressure from rising commodity prices, which in turn spur them to raise prices or seek alternative distribution channels. Wholesale bypass is also an appealing option and has been identified by IBISWorld as a significant threat to wholesalers in every industry from sporting goods to groceries.
  • A lot of retailers have also pursued disintermediation. Big box chains already purchase most products directly from manufacturers, and other dealers have also looked for ways to trim selling costs by doing the same. Retail margins are thin – among the lowest tracked by the S&P 500 – and wholesale is one cost among many.
  • At the same time, firms at all points in the supply chain are consolidating, thereby reducing the relative buying power of distributors. For example, just four firms control 85 percent of the U.S. beef market, while two companies have 90 percent of the country’s non-craft beer sales.

Small and medium-sized distributors in particular have their work cut out for them. In addition to the broad, long-term risks of being perceived as middlemen who don’t add any value, they also have to deal with day-to-day issues such as fluctuating fuel costs, rapid price changes and stock forecasting.

There’s good news, though – most of the biggest hurdles in front of SMB wholesale distributors are solvable with the right technologies. Modern ERP systems, such as NetSuite, in tandem with synergistic solutions for logistics and supply chain management (SCM), give these SMBs much more visibility into their operations, along with the ability to make better decisions. As a result, they can become more agile while avoiding the complex and siloed legacy IT systems common at larger, more established rivals.

Here’s how an integrated approach to technology pays off, in the context of several frequent problems in wholesale distribution:

Demand planning

Staying competitive as a whole distributor requires fulfilling customer orders under many different – and often challenging – circumstances. As more retailers switch to just-in-time inventory and many products become unexpectedly popular thanks to internet marketing campaigns, wholesalers need sufficient demand planning.

A sudden July 2018 spike in demand for physical copies of a particular video game – thought to be less important now that digital distribution is so prominent in that industry – underscored the relevant risks here. Fortunately, ERP systems give you a clearer picture for forecasting demand by integrating historical sales trends, supplier data, seasonal considerations and much more.

Inventory management

Manual spreadsheet-based processes are still common in inventory management. Although doing most of this work within Excel has some advantages in terms of simplicity and control, it also comes with significant inefficiencies. Modifications are time-consuming, human error is inevitable and critical data may not be synced across the organization.

In contrast, automated inventory management via ERP helps you track bin locations, expiration dates, reorder quantities and in-transit orders across multiple warehouses. That puts you in a much better position to deal with both manufacturers and retailers.

Wholesale distributors benefit from the implementation of modern ERPs.Wholesale distributors benefit from the implementation of modern ERPs.

 

Reporting and analysis

Without effective reporting, it’s impossible to know where your operations stand at any given moment in time. Moreover, you’ll likely waste too much time sifting through redundant information spread across multiple silos.

Implementing ERP and SCM tools with the help of an experienced partner such as Inspirage helps you consolidate IT systems and standardize your reporting processes. Accurate reports help you gain more value from business intelligence, comply with industry standards and understand any potential weaknesses within your operations.

Purchase order management

The automation provided by modern ERPs is a major step up from the manual processes that have traditionally underpinned purchase order management. Details about shipment locations and histories are easily accessible for more streamlined decision-making throughout the organization.

Revitalize your wholesale distribution operations with Inspirage’s help

Wholesale distributors have to continually evolve to stay relevant in a rapidly changing industry in which both manufacturers and retailers are rethinking their business relationships. Inspirage is here to help in the search for technical solutions as well as in their implementation, through expert project management and consulting.

Inspirage is a Platinum level member of Oracle PartnerNetwork (OPN) and has over 100 pre-built Oracle solutions. Inspirage has been a go-to partner for customers looking to integrate NetSuite with Oracle products such as Oracle Cloud WMS and PBCS. Connect with our team today to learn more about how we can help you find and implement right solutions for your wholesale business.

Atul Jain

Atul Jain | Key Contributor

Atul Jain is a Senior Practice Director of Consulting at Inspirage where he manages large and mid-size implementation projects and is responsible for solution design and implementation using Oracle and NetSuite products.