Challenges in Wholesale Distribution

challenges in wholesale distribution

The wholesale distribution industry faces many difficult challenges and disruptive forces. In facing and overcoming them, it is technology and that is proving the critical factor. Rapid digital transformation has the power to streamline the industry’s ecosystem to quickly create significant economic value.

 

Political Challenges

Political factors have put pressure on wholesale distributors. Brexit has brought border problems for distributors involved in import and export. The flow of goods into and out of the UK has been disrupted, often simply due to admin problems with customs declarations. The extra cost and admin required to land goods in the UK has also deterred many EU businesses from trading with UK customers.

The China-US trade war has damaged economies, with negative effects due to the fallout of the tariff and trade disputes between the two countries.

Global Incidents

The blockage of the Suez Canal for six days earlier in 2021 caused logistical problems. The vessel blocking one of the world’s busiest trade routes resulted in significant impacts to trade. It’s estimated that, with hundreds of ships waiting to pass through the canal, around $9.6 billion worth of trade was prevented.

Most notably of course, the COVID-19 pandemic has had huge global consequences. The lockdowns in response to the virus have caused some markets, like hospitality and leisure, to remain closed for much of the past year. Supply chains have faced major disruption and most retail – with only a few exceptions – experiencing lessened demand. On top of this, a great deal of purchasing has shifted online, and this rise in ecommerce has increased the pressure on warehousing operations and logistics.

Market Challenges

International shipping still sees cargo being damaged or destroyed due to container stack collapses and breakages. The financial risk of losing stock can be mitigated with insurance, but not being able to distribute goods that are lost can seriously affect trading and prospects.

Then there are the rising shipping costs. Figures show that “the average cost of shipping a 40-foot container rose as much as 380 per cent between last October and mid-February.” British importers rushed to get goods into the UK ahead of Brexit and were then met by a shortage of container availability due to rises in demand for PPE and other products as a result of the pandemic.

One trend that was only exacerbated by the pandemic was the increase in manufacturers, suppliers and retailers bypassing the wholesale distribution channel completely, preferring to do business directly with each other and with end-consumers. This direct- to-consumer (D2C) business model is gaining traction and is predicted to see a huge growth of 19.2% just in 2021.

In other market developments, we’ve seen technology-driven new entrants such as Amazon Business and eBay disrupting the status quo in wholesale distribution. This has markedly accelerated the intensity of competition in the market.

Customer Challenges

Another common challenge is in meeting ever-increasing customer expectations. These see customers demanding end-to-end supply chain visibility, omnichannel fulfilment, 24/7 customer service, order tracking, and real-time stock management.

Wholesalers can become caught between the retailers and manufacturers. The retailers want to pay less, while receiving more, in order to meet the ever-increasing demands of their customers. And the manufacturers want to increase prices because the costs of commodities and their overheads are continuing to rise.

Technology to Meet the Challenges in Wholesale Distribution

All these challenges are increasing the pressure on wholesale distribution. As the global marketplace becomes more competitive, retailers and wholesalers are struggling to adapt to new situations and ever-evolving omni-channel markets.

Business-to-business buyers expect seamless omnichannel experiences across in-store, online and mobile shopping and want easy access to product information, online ordering, order tracking, and inventory management.

To be successful in an omnichannel world, wholesale distribution businesses must integrate all their core business systems. For clearer oversight of their operations, they need to connect their supply chain, CRM, retail channels, demand planning, stock management and other business processes. They need a single system that operates the whole business, plus of course the financial control, business intelligence and consolidation.

This is precisely where NetSuite excels. It can help with data-driven decision-making and delivers more agile stock and supply chain management and improved overall visibility. It differentiates those that use it in terms of delivering great customer experience, raising them up to the same level and compete with the digital market leaders.

As the ‘big-box retailers’ and supermarkets have expanded their offerings, they have simultaneously tightened delivery deadlines and imposed stiffer penalties on distributors for late shipments. Wholesalers may also be fined for providing inaccurate product information. NetSuite meets the stringent new standards these retailers set, ensuring wholesale distributors remain compliant.

Wholesalers in the UK and Europe are mainly dependent on road transportation of goods. Fuel prices play an important role in a company’s overall profitability and diesel costs can make up a significant portion of total wholesale operating costs. Rapid changes in costs leave distributors vulnerable to changing prices and therefore fluctuating stock values. Although distributors will attempt to limit their cost exposure by pricing products according to a percentage markup on costs, competition may make it impossible to mark up expensive inventory when prices are falling. NetSuite can calculate and apply landed costs. This allows retailers to mark up their prices more accurately, meaning they are less likely to make an undesirable loss.

Nowadays, large retail chains tend to do all their purchasing centrally, instead of letting stores by on a local or regional basis. Buying through headquarters enables gives them greater leverage with suppliers and helps them to streamline their delivery process. This tends to eliminate regional distributors in favour of large distributors that can deal in high volumes and accept lower prices. NetSuite can assist here. It has demand planning and can allocate the right stock to the right channel and manage allocation to be moved between channels.

In general, NetSuite can also accelerate sales growth, expand customer reach and improve customer retention. It also provides wholesalers with the ability to offer services that a manufacturer simply wouldn’t be able to, such as vendor managed inventory (VMI) tools, which automate elements of distribution. This includes automation of the order lifecycle itself, wherein the retailer just has to specify reorder points in advance and the distributor delivers the order as requested.

Digital Transformation Brings Systems Improvements

If you are facing some of these challenges, and your company cannot overcome them via your existing systems, then a strategy of digital transformation can reform your organisation and solve your issues. Challenges with customs from Brexit or achieving a successful go-to market strategy through ecommerce can be met with technology.

Your information will no longer be disparate and siloed and your integration won’t result in duplicate entries and errors. You can manage multiple warehouses, across different countries, handling multiple currencies and can consolidate and reconcile your data and transactions, while attaining better customer visibility and improved customer service.

Digital transformation brings agility in the supply chain and shifts your focus. Instead of dedicating 80% of your time and resources in preparing reports and gaining only 20% in insight, your workload becomes 20% preparation with a resulting 80% analytical output. So, if you are responsible for designing the future strategy of the company or are looking to align business areas to strategy whilst minimising risk, then implementing NetSuite is a perfect option. It is a true cloud digital platform that connects people, products and data to support your growth, visibility and agility.

If you are actively involved in the digital transformation of your business, you will be looking for a system improvement that can cope with the challenges of wholesale distribution.  NetSuite can help by:

  • Improving operational efficiency;
  • Improving controls and accuracy;
  • Increasing your speed to market;
  • Reducing your costs to serve;
  • Increasing profit margins;
  • Improving customer service;
  • Improving global insights; and
  • Informing decision-making with access to real-time data.

 

For more information, book an appointment now or contact us today.

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