According to Deloitte’s, the latest series of distribution disruptions created a unique inflection point for organizations.Global distribution disruptions meant that companies had to update their strategies quickly with some better suited to adapt than others.
With the future for many distributors still uncertain, it’s best to build resilience into your business model now if you want to thrive in the new climate. Traditional business models, marketing strategies, and distribution channels that facilitated the transfer of about $6 trillion in goods every year are facing a multitude of challenges. Only the organizations capable of adapting quickly will survive the eroded margins and pricing power facing the industry.
- Distribution strategies should consider the lessons learned from previous major disruptions that rocked the industry
- Accelerating digital adoption initiatives are now an essential part of any resilient business strategy
- Organizations should refocus operations on their core revenue models and look for cost efficiencies in every other supporting business process
- Do not be afraid to experiment with new technologies and check out the latest capabilities available in the digital space
4 Strategies to Help Overcome Distribution Disruption
A big challenge for any organization that depends on upstream supply chain solutions will be reviewing all operating procedures and current business processes. Necessity is the mother of invention, and those who are capable of adapting quickly by implementing robust contingencies, will survive and thrive in this new business climate.
Some organizations needed to improve service levels, accelerate acquisitions of sub-scale players, or broaden their product portfolios. To assist organizations with establishing a resilient operational model with fundamental changes, let’s look at four distribution strategies that can help you overcome the disruptions of today and circumvent the inevitable disruption issues in the future.
1. Learning from Historical Disruptions
During the Great Recession, most of the top-performing distributors had to rebuild their companies entirely to deal with an impossible situation. The same lessons apply to today’s organizations. Changing market climates require an agile response from the executive level that enables an operational pivot to embrace the new business conditions and circumstances shaping the industry.
Some of the distribution strategies that helped in the past include:
- Cutting prices aggressively to maintain market position
- Achieving new cost savings by outsourcing certain functions or leasing expensive equipment
- Building “war chests” of liquid capital to weather unexpected disruptions in the short-term
- Stocking larger inventories of products to create a manageable buffer between supply and demand
The Great Recession may have led to these strategies, but all of them still apply to today’s distributors. Additional considerations may include diversifying revenue streams, reducing administrative overheads, and maintaining cost discipline at every level of the organization.
2. Accelerate the Adoption of Digital Services and Ecommerce Tools
There was a growing trend among distributors and suppliers in recent history to deploy more digital services within their operations. These initiatives are now becoming critical for maintaining market position and providing an end-to-end digital service channel for all customers. Organizations that had already implemented and matured their ecommerce positions are able to navigate distribution disruptions better than those that lagged behind.
Preparing for future disruptions depends on having digital service channels available to all your customers. The information on your site should reflect your current inventories, lead times, and any other pertinent information that a sales agent would usually be able to provide. More end-users are now ordering directly from manufacturers who’ve built ecommerce platforms to supply their products via B2C channels. To ensure you can maintain your sales levels, now is the time to invest in ecommerce and digital service channels.
3. Review Your Entire Distribution Operations Model
Revisiting every portion of your current business model, including your business relationships and supplier capabilities can help you find new efficiencies. You should consider cutting all non-essential business tasks and investigate opportunities to combine certain operations where it could help reduce costs.
Review your business model for the following:
- Processes you use in operations, including breaking bulk, secondary execution, retail credit, customer services, and collections
- Outsourcing certain functions where there are clear cost benefits available to your organization
- Refocusing efforts on core revenue streams and transferring the risk of other functions to a third-party
4. Consider Automation Tools and AI
Artificial intelligence (AI) has come a long way over the last five years. Distributors should now actively investigate the capabilities of these automation tools to improve operational efficiency. AI tools can help provide accurate forecasts, reduce lead times on orders, and monitor trends in your distribution supply chain.
Using this information, you can make intelligent business decisions derived from actionable data that would normally take months to analyze and quantify into an effective strategy. Machine learning (ML) allows organizations to automate certain tasks like placing orders or adjusting inventories in real-time, while continuously training the system to get smarter at the job. Automating certain processes with AI will ensure you can respond to any shifting market forces effectively.
Learn More about Distribution Strategies at International Fastener Expo 2022
Fastening technologies are essential to a host of building, construction, and assembly industries. Any distribution disruption will have a knock-on effect on the larger manufacturing sector. Using the strategies above can help your fastener distribution company to weather any economic storm and overcome the next major challenge that is always just around the bend.
At next year’s International Fastener Expo, you can learn directly from some of the biggest organizations that successfully navigated global disruptions and became more resilient because of the experience. Explore innovative applications and sound business strategies that can ensure growth during the years ahead. Sign up to be notified when registration is open!