How distributors handle COVID-19 disruptions now will have a long-term impact, especially for those who are well-positioned to take advantage of business recovery as the economy opens up. Uncertainties remain around the timetable for changes in patterns of supply, demand, delivery and sales. But despite the challenges, there are opportunities and lessons around key actions proactive distributors are taking now.
In a recent MDM webcast, “Navigating the New Now as a Distributor,” Epicor’s Emma Vas and Mark Jensen discussed key trends that are emerging to help distribution companies thrive.
“We believe strongly that those who take this opportunity to reposition themselves are going to be the leaders in the space,” said Vas, director of product marketing.
Vas and Jensen, senior director of product marketing, outlined several areas of action that are making a difference for proactive distributors, including:
- Revenue boosters
- Handling suppliers
- Optimizing inventory
- Best practices for social distancing and remote work
In brainstorming what revenue-enhancing changes are possible, distributors are looking at challenges such as significant inventory shortages for best-selling products. Vas recommended having a conversation with suppliers about carrying alternative products that can still meet revenue and margin needs to be valid substitutes for some high-demand products.
“In these difficult times, we are seeing a change in the product mix,” Vas said. “We recommend distributors explore shifting their business focus and resources to product categories that have more availability, that are a little more predictable.”
To address spiking demand or even hoarding behavior from some customers, distributors are looking for ways to disperse products to a broader customer base, using their ERP to manage the process and monitor product mix in order to maintain a higher level of service to more customers.
Some distributors Epicor works with, who have never explored e-commerce before, are looking for solutions to create a simple portal online for customers who can no longer do counter pickups to log into and place an order. “Rather than engaging in a full-blown e-commerce deployment, it can start there,” said Vas.
There is also an opportunity to examine product mix, tier price increases by customer segment and dynamically adjust prices to align with availability and relieve revenue pressures.
Also see: “Agile Price Management in the COVID-19 Era.”
Jensen recommended distributors conduct a supplier mix analysis: Determine where you source your best products today and, if you had to make changes, where could you source them from in the future? Also look at the breakdown of where you source your products from, considering factors such as the quantities that you purchase, the replenishment lead time, the product quality, manufacturer incentives.
Don’t be afraid to change sources based on supplier performance, Jensen said. Also examine if you are sourcing internationally. Examine whether some of those items could be found closer to home, or at least explore sourcing from various suppliers to overcome any risks or delays.
In the area of vendor sales incentives, Jensen recommended re-evaluating existing thresholds based upon today’s realities. “At a minimum, refresh the minimum thresholds to be able to retain the vendor investment as a percentage of your sales,” he said.
To optimize inventory, Jensen recommended distributors review current inventory levels as well as your existing approach to demand planning. What products are struggling to turn over versus those that have spiked due to the pandemic? Review recent demand data from customers and consider implementing an approval process for replenishment rules if you do not already have one in place. Work closely with both the sales team and customers to understand what they are going to plan to buy and sell over the next few months, and then update your inventory targets.
Look at opportunities to negotiate the return of excess inventory to vendors or take advantage of a vendor inventory consignment program, he added. “A lot of times, we find that [distributors] have been using the same target levels and triggering levels for the last five to 10 years,” Jensen said. “Now’s the time to take a look at those levels.”
Social Distancing and Remote Work
Many customers have implemented required social distancing and policies restricting personnel in their warehouses. As a result, a lot of distributors are seeing higher delivery volumes as a percentage of sales, with a correlating decrease in folks showing up to pick up an order. To compensate, distributors are integrating express shipping solutions into their ERP systems, Vas said, to create quicker, more efficient shipments. She knows distributors who are implementing locker systems for touchless pickup.
Distributors are also finding ways to make truck deliveries much more efficient through mobile ERP access that provides delivery instructions to drivers, captures proof of delivery information and delivery notes.
For employees working from home, a lot of distributors are looking to the cloud to enable secure remote access to the corporate network. Super-user employees are then training co-workers who are not well versed in the remote functionality, Vas reported.
For more on navigating the new now as a distributor, listen to the webcast recording here.