Top 2018 Trends in Wholesale Distribution
This blog is based on the 2017 Modern Distribution Management Industry Outlook Survey published in December of 2017. Although the article discusses six trends, I believe three of them focus uniquely on the need for digital transformation within the wholesale distribution industry. Below is a summary of those top of mind trends.
- Business encroachment continues to increase as mergers and acquisitions are creating tougher competitors that are growing and moving into niche and multi-industry business models. Distributors continue to stretch into adjacent businesses and grow geographically; they are challenged to efficiently blend new people, inventory and systems.
- The Amazon Effect is accelerating. Web catalog companies are now picking off high volume and margin categories by leveraging new delivery, selection and pricing processes. Effective online marketing capabilities are a priority for new customers, but efficient self-service capabilities are more important for existing ones.
- The talent gap continues to grow. Changing demographics are challenging an industry dominated by older employees and struggling to change work and build bench strength. The industry is aging; the average age of an employee in wholesale distribution is 43. Over 1/3 of the employees are over the age of 55, and 26% of the workforce will be retiring in the next 5 years. Distributors are challenged to attract, develop and retain a younger workforce.
Multi-industry models, e-commerce growth and talent shortages within wholesale distribution all create the threat of traditional distribution displacement. Unlike the disintermediation risk that has never materialized, displacement is beginning to actually happening. The business cases being developed today to embrace digital technology and to remain relevant are substantially different than those built for ERP. ERP project business cases were often based on reductions in expenses and costs. Digital transformation business cases now include new revenue growth and potential sales losses.
It is clear that distributors want to evolve in our digital economy to sustain growth. Distributors in all sub-segments want to invest in digital technology to unite the company over time and move toward a common set of information systems. The SAP product strategy for the wholesale distribution industry allows for digital solutions to be deployed by business model or process, ensuring that distributors can accomplish digital transformation goals in phases. A digital platform, anchored by intelligent ERP, is now a mandate to battle the risks created by 2018 wholesale distribution trends.
[LL1]Should this be “self-service?”