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Pandemic Accelerates the Next Phase of Distribution Analytics

Distributors shift from rear-facing analysis to forward-looking predictive analytics models.
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Analytics advancement in distribution is moving quickly. The events of this year are compounding and accelerating factors that are driving how distributors create competitive advantage today, with analytics among the top items on the list. This year has proven how quickly an organization can pivot to keep customers engaged. In a recent MDM Spotlight, CEO Tom Gale spoke with Taylor Clements, director of implementation services at Enavate, about the importance of speed and the ability to leverage analytics for distributors.

Analytics can serve as a foundational capability to build a more agile distribution organization. In 2015, MDM published The Distributor’s Guide to Analytics, bringing together the best practices from thought leaders across every aspect of distribution analytics: inventory management, pricing, profitability, sales and marketing. In the five years since, digital has become a bigger part of the ways that distributors go to market. “With the explosion in just the past few years of cloud computing, apps and business intelligence tools, distributors really have a much better opportunity today to capture and process that data to really pull out of their ERP system the transactional data, e-commerce and other technology platforms to manage increasingly complex data inputs and extract insights in a much more agile manner,” said Gale.

Also see: “Why a Cloud-Based ERP Has Never Been More Important.”

The importance of critical profit values, KPIs, and a team of people who know what to do with the information are critical. Distributors can now leverage big data using existing AI and machine learning in ERP technologies to predict future trends and better know what areas of their business to monitor. “Most distributors understand that 30% of their products provide a majority of their profits,” said Clements. But product mix changes much more often than it used to, “using these tools to monitor important data like churn ultimately translates to reduce costs, leaner inventory, and even more accurate staffing estimates.”

Real-World Application

Practical applications of AI and machine learning are emerging that demonstrate how distributors are leveraging the technology. For example, financial and forecasting models take historical data gathered over time and then use statistical models to determine whether or not to consider outliers in producing an idea of future purchases to fulfill future sales orders and transport orders, according to Clements.

There’s been a change in mindset over the last couple years as distributors turn their focus away from dashboard-style analytics that look at previous performance and more toward predictive analytics. “The availability of up-to-date information is key to the agility of a modern distributor,” said Clements.

Beyond core capabilities, the successful application of analytics also depends on visibility of the data within the organization. Distributors are pushing analytics forward in today’s environment with a focus on elements that have been unique to the pandemic environment, such as visibility into which substitution products are available to prevent a supply chain interruption when a first-choice product is out of stock or has deliverability issues, Clements pointed out.  “We know that wholesale distributors need more flexibility to address issues like ranking and prioritizing products to be substituted,” He said. “Automating substitutions or incorporating user approvals. And more often, letting customers and customer groups drive the approvals is important.”

Clements recommended distributors ensure their ERP products are also capable of preserving margins during the substitution process in a way that is seamless and automatic.

Bringing together a combination of the technology tools that are right for the unique needs of a distribution company with the talent of its team will be an important task in the next 12-24 months.

To listen to the MDM Spotlight in its entirety, click here

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