Industrial distribution Q&A: Expert insights on what’s next

by | Sep 19, 2024 | Data Management, Distributors, Inventory Management, Order Fulfillment, Order Management

Industrial distribution is marked by challenges and opportunities as companies adjust to new market realities. In this Q&A, we explore the latest trends, from economic shifts to the tech tools that are making a difference. Drawing from our work with seven of the top 10 industrial distributors, we explore what it takes to stay ahead and keep customers satisfied.

How are macroeconomic factors reshaping industrial distribution?

Macroeconomic factors are reshaping industrial distribution with inflation, interest rates and global trade dynamics at the forefront. A recent survey revealed that over 90% of distributors faced supplier price increases last year due to persistent inflation. Unlike in the recent past, distributors can no longer simply pass rising costs along to customers. End customers are actively seeking to reduce costs, forcing distributors to find new ways to maintain profitability.

At the same time, “higher for longer” interest rates are prompting caution in technology, infrastructure and inventory investments. As a result, distributors are prioritizing projects with clear returns.

Finally, global trade issues are driving distributors to diversify sourcing options. The trend towards nearshoring is gaining traction as companies seek to mitigate risks and reduce dependence on single-source suppliers.

What defines success in today’s competitive environment?

Success in today’s industrial distribution market hinges on differentiation. The competitive landscape has intensified dramatically, with established eCommerce giants expanding into B2B spaces. Top performers are setting themselves apart by blending digital efficiency with the industry expertise and personal touch that have always been crucial in this sector.

In this high-stakes environment, distributors can’t afford complacency. Those pulling ahead are the ones offering value-added services, whether through specialized knowledge, a broader product range or exceptional service.

We’re also seeing more strategic moves, including mergers and acquisitions, as companies strive to expand their capabilities and solidify their market position. The key is to offer something that even the largest online marketplaces can’t easily replicate.

What best practices are emerging to boost supply chain resilience?

Supply chain resilience has become a top priority for industrial distributors. Companies are focusing on getting fast, accurate and consistent data from suppliers to respond quickly to disruptions and keep goods moving quickly through the supply chain.

Innovation in this area can yield significant benefits, as one large distributor discovered. When introducing new electronic trading requirements, they initially faced setbacks. By automating and integrating supplier data, they can now roll out multiple change initiatives each year without causing disruptions, significantly boosting their supply chain resilience.

How are customer expectations evolving, and what does this mean for order fulfillment?

Today’s industrial customers expect the same speed and convenience they experience in their personal lives. They want real-time inventory information, fast delivery and seamless ordering, even for special or custom orders. Customer expectations for speed and convenience continue to push distributors to leverage their unique strengths. Many are focusing on their local presence and strong relationships to offer personalized service that competitors can’t match.

To meet these expectations, distributors are adopting strategies like same-day shipping, real-time order tracking and flexible delivery options. Many are also enhancing their capabilities to handle special orders efficiently, recognizing that the ability to quickly source and deliver non-stock items can be a key differentiator. The goal is to create a frictionless ordering and fulfillment experience.

What characterizes successful distributor-supplier relationships in today’s market?

Collaboration is the cornerstone of successful distributor-supplier relationships. Market volatility and supply chain disruptions have led both parties to recognize the need for greater transparency and information sharing. This includes timely exchange of inventory, order, shipping and sales data.

The industry adage that “a distributor is only as strong as its weakest supplier” remains as relevant as ever. The 80/20 rule often applies here, where 80% of problems stem from 20% of suppliers, highlighting the need for strategic vendor rationalization.

A prime example of this collaborative approach comes from a major distributor struggling with order management across 10+ distribution centers and 1,300 branch locations. By partnering with SPS Commerce to standardize processes with 1,200 suppliers, they significantly reduced backorders and pricing discrepancies while increasing inventory availability. This collaboration improved operational efficiency and enhanced supply chain resilience during a critical time.

What role does technology play in the future of industrial distribution?

Technology is fundamentally reshaping the future of industrial distribution as competitive pressures accelerate the need for digital transformation. This shift enables distributors to enhance customer experiences, improve efficiency and maintain their edge in an increasingly digital marketplace.

A case in point is a major distributor that struggled with a subpar eCommerce experience and siloed operations, largely due to outdated systems. By partnering with SPS Commerce and standardizing processes with 2,000 suppliers, they enabled faster speed-to-market for new items, accelerated inventory turns and increased throughput in their distribution centers.

Sharpen your supply chain strategy

The landscape for industrial distributors continues to evolve. Fueled by close supplier partnerships, top performers are emphasizing standout customer experiences to expand market share and drive growth.

Ready to take your industrial distribution business to the next level? Contact our team for additional insights or explore our solutions for distributors.

Warren Knapp
Latest posts by Warren Knapp (see all)
Industrial Distributor Q&A

RELATED POSTS