Analytics tools are playing an increasingly important role in distribution. But many distributors recognize that they lack the capabilities to implement an effective analytic strategy in their businesses.
Distributors recognize that advanced analytics will play a critical role in their future success, according to new research from the National Association of Wholesaler-Distributors. “Analytics is the future of distribution,” says Mark Dancer, author of Becoming a Digital Distributor, a book based on the results of the research around the adoption and use of digital tools by wholesale distributors.
Advanced analytics was identified as one of the top priorities for distributors – and an area where most of them lacked the skills and capabilities to implement an effective plan. Only about a quarter of participants said they were experienced users of analytics tools.
The problem is that there are two other significant barriers to building analytics capabilities, Dancer said in an interview with MDM.
The first barrier is that ERP systems aren’t set up to make information accessible and applicable, he says. A wealth of information is there, but because it is inaccessible, it’s just sitting there. “It needs to be easier to get information out of the ERP system when someone inside the distributor wants it,” Dancer says. Overcoming this barrier may require investment in better tools, whether that is a different ERP system with the capabilities already built in or add-on tools that will mine the data and provide reports.
But once the information is retrieved, it is often in a format that doesn’t make it understandable to someone without advanced analytics experience.
The second barrier is a lack of people with the right skill sets. Distributors need someone in place who can look at that vast amount of data and find patterns or gaps, Dancer says. And they need to be able to apply those patterns and gaps to the things that are important to the distributor’s business model, such as improving margins and profitability.
There are two solutions for overcoming the second barrier, according to Dancer. The first is a long-term approach that involves hiring someone who already has experience with analytics and letting them learn about the business and priorities. “That strategy says, ‘Let’s hire someone, give them our data and see where we can go,” Dancer says.
Bringing a person onto the team can be beneficial because it allows them to gain a better understanding of the specific requirements and priorities of the specific business. It allows for more in-depth discovery work and testing, Dancer says, but it also requires a longer term financial investment.
The other solution is to look to software-as-a-service providers that will overlay an analytics module around identified priorities, such as improving pricing, on the data retrieved from the ERP system. “The advantage here is that distributors can engage these companies by buying their solutions and taking advantage of the training and consulting they may offer,” Dancer says.
Ultimately analytics is about aligning a distributor’s business model with the data. “It’s about leveraging the data that flows through a distributors business and the unique position a distributor has in the middle of the value chain,” Dancer says. “It’s about sharing data, sharing information and offering a proof of value in the long run.”
Advanced analytics allows distributors to create a system for the “full and frank exchange of information” between distributors and their partners to ensure that the value of the relationship is understood by all parties. In the current age of disruptors, it’s more important than ever for distributors to prove their value and show that they’re meeting needs in the most effective way possible.
Order Becoming a Digital Distributor from the National Association of Wholesaler-Distributors at naw.org/digital.