Many distributors have struggled with growth in recent years, as the industrial recovery lagged behind the rest of the economy. But there's also a good chance that there's significant stranded value in their operations that could provide a boost, according to Guy Blissett and Sanjay Agarwal in Wholesale Distribution Disrupted, Part 3: Building a Distributor of the Future.
That stranded value may be preventing distributors from fully capitalizing on the distribution value chain, they say.
But companies can't simply think about the money that's being wasted on poor rebate management or lack of network optimization. Distributors that want to be successful for the long term need to create a plan for how recapturing that value can be used to invest in new capabilities to meet the new demands of a changing market.
"Explicitly linking the initiatives at inception helps build organizational excitement and maintain focus on long-term value creation," Blissett and Agarwal say.
For example, traditional thinking maintains that distributors must manage a direct relationship between service levels and inventory levels. In other words, if you want to have higher service levels, you need higher inventory levels to meet the demand. But ask yourself if the services you're offering are actually helping your customer in the first place.
Do your customers really want you to fulfill multiple orders each week, or is that actually driving more cost into your business and theirs with no real benefit? Would a single bundled delivery on a set day of the week be more efficient and effective for both of you?
If the answer is yes, where will you invest that cost savings? Sensors and tags embedded in equipment can help you even better manage your inventory levels to meet customer needs they may not even know they have – and in turn, further embed you with them. Why not invest in research on how to incorporate innovations like IoT into your operations?
In order to truly execute the value chain from end-to-end, you have to view it from end-to-end, understanding how an action at point A will impact decisions or options at points B, C and so on.
Read more about how to better execute the distribution value chain and energize your business in Wholesale Distribution Disrupted, Part 3: Building a Distributor of the Future.