The 2020 Mid-Year Economic Update_long

Commentary: Managing Process and Technology Transitions

The first two articles in this issue are indicators of how this industry is maturing. At the risk of oversimplifying, it wasn't that long ago that success was often defined by getting orders translated accurately into invoices, then into envelopes in a timely fashion. A broken dot-matrix printer impacted cash flow! Pricing policy took shape in sales meetings, phone calls and split-second decisions on a case-by-case basis by each salesperson. When sales go up, get more order takers and processors to handle the increased volume. That model worked pretty well for many distributors until the downturn in the early part of this decade.


Today, more distributors are moving to electronic invoicing and ACH payments. Some dedicated niche applications, such as GPS-based delivery ...

The first two articles in this issue are indicators of how this industry is maturing. At the risk of oversimplifying, it wasn’t that long ago that success was often defined by getting orders translated accurately into invoices, then into envelopes in a timely fashion. A broken dot-matrix printer impacted cash flow! Pricing policy took shape in sales meetings, phone calls and split-second decisions on a case-by-case basis by each salesperson. When sales go up, get more order takers and processors to handle the increased volume. That model worked pretty well for many distributors until the downturn in the early part of this decade.

Today, more distributors are moving to electronic invoicing and ACH payments. Some dedicated niche applications, such as GPS-based delivery routing, didn’t exist a few years ago. And pricing strategy is gaining attention for its potential impact on improving gross margin and sales processes. Pricing is a great example of taking data collection to the next level of information management. It also improves the sales process by using historical data instead of qualitative judgment calls to make pricing decisions.

Successful distribution companies have always pursued how they can reduce costs, improve processes and the quality of their operations by using better tools. These companies have survived and thrived in spite of consolidation and increased competition that characterizes distribution channels of the last ten years.

The same can be said for the more recent consolidation in distribution software and information technology providers. There are better IT tools than a few years ago. I’d argue that distributors have benefited from the increased interest by larger IT companies in distribution sectors in the past few years, in spite of the rapid consolidation and significantly fewer niche wholesale distribution software providers than five years ago. Increased competition has spurred more investment, development and innovation by all providers.

Conclusion: Not only do distributors have better technology tools and options today, they are looking deeper into process improvement opportunities. It’s not just about better software, as the IT outsourcing article notes. It’s how distributors manage technology and make decisions about where they can best focus their internal talent and priorities for improvement. We are seeing a transition to the next generation of process improvement in distribution. The question every distributor needs to ask is whether the next generation of management is in position to drive the next phases of process improvement and stay competitive.
 

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