MDM-Podcasts-launch
Need Help? (888) 742-5060

In The News:

The Cost of Not Upgrading Your Technology

The Cost of Not Upgrading Your Technology

July 5, 2018

I recently told a senior distribution executive about a mobile app we are developing that would connect distributors more tightly with their customers. The conversation went something like this:

“Would this functionality be interesting to you?”

“Yes.”

“Would you be willing to implement it right away?”

“Yes.”

“How much would you be willing to pay?”

“A lot.”

“Would you upgrade your ERP to do it?”

“No way.”

In other words, this executive loved the idea, wanted it and was willing to pay for it. He recognized the value it could bring to both customers and company shareholders. But as soon as he realized he’d have to upgrade his core technology to leverage the app, he resisted, despite the app’s potential to help him compete more effectively.

He’s not alone in this. There’s always been real resistance to touching the technology backbone of a distributor’s business for many reasons – perceived cost, security concerns, and not knowing where to start. Frequently, the only reason distributors start to look for alternatives is because they feel forced to – either their vendor is no longer making updates or providing support, or they are afraid that their old system is on the brink of breaking down.

It’s a reactive mindset. Aside from immediate benefits like improved efficiency and visibility, many distributors haven’t considered that if they don’t upgrade, they won’t be able to take advantage of new technology advances. New categories of technology – advanced analytics, machine learning, the Internet of Things, or distributed ledger solutions now possible with blockchain – all have practical and potentially industry-changing applications in industrial markets.

It’s a little like the difference between driving an old car and a new one. When I drive a new car, it automatically connects to my phone, navigation is built-in, I can listen to satellite radio, and I’m protected by safety features that did not exist even a couple of years ago. Buying a new car is not just about better reliability; it’s also about enabling new functionality – something an old car can’t do.

Similarly, when you replace your business platform, you’re not just getting the same technology – only newer. You suddenly have access to new technology that could change the direction of your business. The cloud revolution has been a great enabler for distributors, cost-effectively providing greater computational power.

Why It Matters

Many of us have heard the oft-cited statistic that B2B buyers are up to 70 percent of the way through their buying journey before they even reach out to a sales rep. That number alone has serious implications for the way distributors do business. Customers no longer need a sales rep to research their options, and they no longer need a sales rep to place an order. Amazon has driven much of that change, setting the standard for “ease of buying,” pioneering features like the “one-click” buy and the Amazon Dash button (a well-known Internet of Things case study). As a result, more than 43 percent of all online sales went through Amazon in 2017 alone.

To do this, Amazon is leveraging technology that most distributors haven’t even considered yet, including artificial intelligence tools that predict buyer behavior and provide real-time product recommendations. But smaller and mid-sized distributors also have access to this technology, which is critical to delivering the customer experience B2B buyers now expect. Don’t wait until the technology is table stakes to invest.

Consider Uber. They unseated taxis not because of the technology they brought to bear but because of the customer experience they were able to deliver. Taxi companies could have done the same – first – but they became complacent. They lost their edge. The same opportunities are available to you as to other distributors, but if you stay on the sidelines, you risk falling behind. Distributors need to be able to effectively serve customers in the channel they prefer, by website, phone, mobile app, chat, branch, a digital assistant like Siri, or face-to-face with a salesperson.

The Cost

Here’s a look at the next generation of technology and its potential applications in the distribution industry. They all require modern, cloud-based technology platforms as their foundation:

Chatbots. What if a supervisor could simply pick up the phone and ask a digital voice assistant for the status on their latest shipment? Imagine the loyalty that would inspire from customers, who could quickly get the information needed to decide whether to keep or send home a team of workers, for example. It will save customers significant time and money and, chances are, they’ll move more spend to the distributor that provides this application to them. This technology is driven by chatbots, which use artificial intelligence to interact with a user, whether verbally (through a digital voice assistant) or by text (for example, chat with customer service on a website).

Cross-sell/upsell. It is difficult to set up cross-sell and upsell recommendations on an e-commerce website. It requires data mining, identifying affinities between products (when people buy diapers, they also buy milk), and then manual programming so that when somebody buys diapers, it tells the salesperson to offer them milk, as well. Imagine that for tens of thousands of products – it’s not possible if you’re relying on people to query a database. Machine learning now replaces that work. Machine learning allows your system to learn as it goes, collecting data on which products are most likely to be purchased with which products, for example, and where upsell or cross-sell opportunities exist based on what other customers have purchased. And if customers are not accepting those offers, to stop offering them.

We’ve seen distributors significantly grow both their total basket size and margin using this technology. This is not just about selling online; distributors are using this technology to grow wallet share across their channels. For example, the system will remind an inside salesperson to offer an upsell to a customer on the phone.

Image recognition. An extension of machine learning can recognize what is in a picture and take an action based on that. For example, you could upload a picture of an electric motor to Bing. It would immediately identify what brand and type of motor it is as well as its model number – not by a barcode or other preloaded technology, but just by simply scanning. This intelligent feature has multiple applications for distributors. For example, a customer on the shop floor could hold up a smartphone’s camera to take a picture of a part that needs to be replaced; the app immediately recognizes it and adds it to the order.

Don’t Wait

When people get their car detailed, or their house painted, frequently it’s just because they are ready to sell. I see that approach a lot in the distribution industry. Distributors wait until new technology is “proven” before they invest – which is another word for starting to get old. By taking this approach, independent distributors will never get ahead of the curve and gain any competitive advantage from technology.

A single chatbot or image recognition alone may not be enough to warrant replacing the entire back-end of your technology, but the full suite of new and emerging technology is. And as younger employees are hired into purchasing and procurement roles, they will expect nothing less than a great digital experience with self-service, digital assistant, and live or in-person sales and service options.

Matt Petersen has served in leadership positions in distribution software for more than 15 years. He is currently the Senior Director of Industry Solutions at ENAVATE, which provides consulting and wholesale distribution-focused enterprise software solutions based on Microsoft Dynamics 365, AX and CRM platforms. Reach him at matt.petersen@enavate.com or visit enavate.com.

© 2019 Gale Media, Inc.

Please do not reprint MDM's content on your website without MDM's express permission as it is copyrighted material. To gain permission, email us, or call 1-888-742-5060. For information on PDF or print reprints, visit www.mdm.com/reprints. MDM welcomes inbound links from your site. Please cite Modern Distribution Management.

2018-top-distributors-listThe 2018 Top Distributors List

This free PDF includes lists of top distribution companies across 14 sectors.

You will also receive MDM Update, our daily distribution e-newsletter & other distribution-focused content.

Download the Free PDF now >>


MDM-UpdateMDM Update: Daily Newsletter 

Sign up to read the best source for news & trends in wholesale distribution, MDM Update. Delivered daily to your inbox. 

Sign-up for MDM Update >>

Post a comment to this article

Partner Center