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Author's profile photo Werner Baumbach

Post-pandemic Challenges and Opportunities in Wholesale Distribution

After almost two years of the pandemic and its many impacts, sometimes the “old times” seem very distant. Even the Olympic Games have been shifted by a year and are heavily impacted by Covid 19 protocols such masks, social distancing and as a near complete ban of spectators at the events. With all the focus on the virus we often times run the risk of overlooking other trends and challenges that continue to shape the wholesale distribution industry. In some cases, these trends were somewhat hidden in the shadows, and in many other cases enjoyed a boost over the last two years.

Multi-channel and blurring business model lines

Parts of wholesale distribution had been going through a digital transformation phase well before the pandemic hit us. Although value-added services have been part of many B2B businesses for decades, supplementing product business, for wholesale distribution that ratio is continuously shifting. Value-added services have now become the new focus and products just one element in their comprehensive solution offering.

In parallel wholesale distribution business has been shifting towards eCommerce and other low/no-touch models. An industry that was formerly built on personal relations now must find ways how to automate processes, analyze demand and customer behavior, and digitize expertise.

Shift from just-in-time to just-in-case

So, while these fundamental shifts are underway the rules of the game have changed. Global Supply Chains have seen a great deal of pressure and challenges. Of course, Covid 19 played a big part but other factors cause disruption too, for example, a ship “parked illegally” in the Suez Canal, or a run for various in-memory components to mine bitcoins. Suddenly car manufacturers had to delay production due to shortages of electronic parts. Due to the gap in manufacturing and supply chain, distributors have had to evolve their sourcing and forecasting. While the old global economy was tuned for maximum efficiency and just-in-time, it seems that the new paradigm will see the return of safety buffers, a service that wholesalers traditionally offered to value chains.

Geopolitical challenges and new regulations

Unfortunately one of the many sad conclusions of the pandemic is that it did not seem to bring the world together to meet this global challenge – neither at an international level nor at an individual country level. Many international companies are increasingly seeing themselves in the middle between a brewing cold war between the USA and China. Similarly, the trade relations between western economies and Russia are still strained. In an industry that relies on global supply chains and international trade partners this has created significant challenges.

On top of that, new regulations around sustainability (e.g. the European initiative for supply chains aka Lieferkettengesetz) are creating a lot of administrative effort and a risk of significant fines. Some of these requirements and risks are difficult to handle for many companies, which result in free trade obstacles rather than in an improvement global standard, contrary to the initial intent.

Future of work

With two years of lockdowns, restrictions, social distancing, home office requirements as well as no-touch business models, we will likely see an irreversible shift of how we work and maybe more importantly, how we want to work in the future. For instance, one of the hardest hit industries is the hospitality industry. Many of these businesses are having a hard time finding enough employees since many of their former staff had to find alternative employment during the shutdown (and do not want to come back to their former jobs).

In an industry like Wholesale Distribution that had to fight for good talent before the pandemic, they now will have to go the extra mile to find and win the right employees. This will likely get even more complicated – especially for low-skill, low paying jobs. This can be somewhat alleviated by a broader implementation of automation and artificial intelligence. In the case of wholesale distribution, companies will put even more effort into branding and visibility, as well as evolving work models, especially in areas that have been traditionally inflexible and not very innovative.

Enough about challenges, there are still plenty of opportunities

The wholesale distribution industry has been in a period of disruption, transformation, and redefinition for several years now. And from the by no means complete selection of challenges listed here it is not likely that this perfect storm is about to end soon.  That’s why it’s even more important to see the possibilities and opportunities. Wholesale was already well into its transformation journey before the pandemic hit and thus better prepared for the current situation. Most companies in the industry made it through the pandemic remarkably well so far.

In closing the loop to the Olympic Games and the unfavorable framework in which they have had to compete, there were still those beautiful moments – when participants from around the world walked into the Olympic Stadium, creating a colorful, international quilt or when athletes from supposedly hostile nations shook hands. When a 13-year old wins a gold medal for skateboarding or when a couple of impressive mimes go through the Olympic pictograms in a matter of minutes. Don’t lose hope, keep looking for beauty and happy moments, draw energy from these positive emotions and focus on your set of goals be they personal or professional. These Olympic Games’ motto is “Faster, Higher, Stronger – Together”. For wholesale distribution, they can apply too, innovation and business transformation projects are seeing a new wave of energy and clearer direction that will ensure their businesses deliver on their promise.

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