In an industry with such narrow profit margins, distributors’ reluctance to quickly adopting new technology is less attitudinal and more bottom line.
But there’s an open field for applying artificial intelligence (AI) to this industry to boost margins; distribution is rife with manual tasks. Robotics process automation (RPA) and other intelligent automation technologies, powered by AI, hold promise for speeding up workflows. McKinsey reports that 48% of companies that adopt these tools experience a revenue increase, and 43% say they’ve cut costs with AI tools that automate manual tasks, lessen errors and speed up processes.
Still, many distributors say they’re unclear on the business use cases for AI in distribution. The technology is so new, and their businesses so complex, where would they even begin?
The best use case for AI in distribution is in the areas of sales and order management.
Here’s how distribution companies can use automation so that these technologies pay for themselves.
Clear These Hurdles with Intelligent Automation
One of the biggest challenges distributors face is with their workforce. According to one source, the average age of sales reps is 47.4 years old. Skilled sales reps are aging out of the business. Every distributor faces a labor shortage. With millions of unfilled industry jobs, how can we attract the next generation? The answer is with new technology – not only to increase the productivity and effectiveness of those who remain, but also to attract new talent.
CIO Dive reported recently reported that Millennials and Gen Z have high expectations for better technology at work, and 91% of IT leaders say “they will need to provide more advanced digital experiences.” Failing to meet these expectations will lead to attrition, the survey said. CFO Magazine went one step further, saying 70% of Gen Z would leave their jobs for better technology. CFO concludes, “Technology is becoming a significant factor in talent acquisition and retention.”
The Business Case for Automation in Distribution
AI-enabled automation supports many areas from sales order to fulfillment:
- Customer insight and prioritization lets you focus on the customers who are more likely to buy instead of wasting time on those who won’t.
- Order optimization maximizes inventory and fulfillment by finding the closest substitute for a stock-out or back-ordered item. These systems can also help you find the best shipping rates. They can look at the past performance of vendors in your supply chain. They can even predict trends in pricing and delivery. These features optimize the speed, accuracy and efficiency of order processing.
- Sales support, so even the most inexperienced CSRs can close orders like pros. This application of AI is essential as we train new sales reps in the coming years. An AI-enabled system prompts end-users on what to sell, making it easier to get new reps up to speed faster. AI is like bottling the performance of your highest-selling rep and sharing that fine beverage with the entire team.
- Increase average order value. Some of these tools can analyze past purchasing behaviors against similarly sized customers and make suggestions for popular products across a segment or sector. AI can also automate order reminders to keep customers fully stocked and always returning for more.
- Search functionality will endear your team to their customers. The customer may not know the SKU but will say, “I need that blue widget I bought last year.” The system can match the client’s request with the right products in seconds, and get smarter with every search. Instead of waiting for the CSR to toggle around systems and fields to try to decipher the customer request, the AI-powered system does the heavy lifting.
- Process automation to create orders from emails, PDFs and Excel without user intervention. A 500-line order may take a CSR hours to manually complete. It may take an AI-enabled system five minutes. How many orders do distributors lose because their turnaround to an email request is slower than the competition? Process customer requests faster; substantially improve your bottom line.
The Benefits of Intelligent Automation
Ultimately, this is technology your teams will thank you for. AI isn’t about knocking people out of their existing jobs. It’s not a threat; it’s a tool. AI allows us to stretch our existing workforce by helping them get up to speed faster, close more sales and widen profit margins.
For employees, AI exposes the human value in the sales process. Instead of focusing on the transactional aspect of completing an order, your CSRs and outside sales reps become trusted consultants solving real customer pain points.
Forbes reports sales teams only spend about one-third of their time actually selling. Administrative tasks such as reporting or hunting for answers to customer questions take much of their time. User-friendly AI tools automate many mundane, repetitious tasks and the “I’m so bored” errors from being just an order processor.
Supply Chain Brain says, “70% of employees reported that the implementation of AI technologies would allow them to dedicate more time to primary responsibilities, and pursue education and professional development opportunities.” They suggest that AI can automate one-quarter of the tasks of your sales teams. How much more could your inside and outside teams close if they were spending more time selling?
Why AI and Why Now? Quantifying the ROI from AI
Distributors need AI to realize the potential of the data they capture; these systems are hungry for good, clean data.
Deloitte also sought to quantify AI’s ROI. They looked at the capabilities of just one type of AI to automate workflows and processes across all industries. They determined:
- Companies reported payback from AI well within the first year.
- Companies reported improved compliance (92%), improved accuracy (90%), improved productivity (86%) and cost reduction (59%).
- Nearly 80% said they expect to “significantly increase investment” in these tools in the next three years.
McKinsey suggests an 80% reduction in the costs associated with human and manual processes when using intelligent automation. They concluded, “IPA (intelligent process automation) can deliver tangible value in weeks rather than years in the form of fewer errors and less ‘busy work’ for back office employees.”
What does this mean for the distribution industry? AI is reliably faster, giving your organization substantial advantages for selling to and supporting customers. Response times are half of even the fastest human CSR. Distribution companies can pick any sales and order management process and optimize it with AI. It’s a critical competitive advantage for an industry that operates on thin margins.
The reality for these companies is that even moving the needle a little can mean a lot. That’s why it makes sense to consider the implementation of intelligent automation right now—before your competitors catch on.