More than half (56 percent) of respondents to the latest MDM-Baird Distribution Survey plan to increase overall investment levels in analytic capabilities, which doesn’t mean just an investment in technology platforms. It requires investment of time and people to effectively utilize the amount of data available, regardless of the level of maturity.
More distributors are employing analytics in their businesses – and the types of analytics being deployed has matured over the last year, as well, according to the latest MDM-Baird Distribution Survey. While simple reporting tools, such as spreadsheets, still play a significant role in distributor analytics, nearly half of the survey respondents (44 percent) indicated they had moved up to dashboards and scorecards, which allow for some limited predictive capability. (See Figure 1.)
The survey polled 500 respondents from companies that account for roughly $100 billion in annual revenues.
Technology investment plays a central role in this growth. As new tools become available and more affordable, distributors have looked for ways to more effectively use the data they have. More than half of respondents (56 percent) plan to increase their overall investment levels, with an additional 35 percent holding them flat. Only 9 percent said they had decreased their investment levels for the year.
Based on responses to the survey, much of that investment will be directed at upgrading existing ERP systems. One respondent noted that the biggest challenge his company faced with regard to analytics was “Our ERP system – old technology and lots of workarounds.”
The Investment Challenge
That increased investment, however, is not solely focused on technology even if there is recognition of a need for investment in that area. As one respondent noted: “We need a new system, but our year-over-year growth is forcing us to focus on feeding our customers’ needs for product. Which means we spent money on production space, instead of information systems.”
There is still a lot of pent-up need for investment across all parts of an organization; and historically, technology has often taken a back seat when it comes to prioritizing limited dollars for investment. Existing systems still work, even if they are no longer the optimal route.
And investing in analytic capabilities isn’t just an investment in technology platforms. It requires investment of time and people to effectively utilize the amount of data available, regardless of the level of maturity. One respondent noted that the biggest challenge around data and analytics in his company is “employees that are flexible to adapt and utilize new software and methods.”
Another noted that the “skill to understand data is limited.”
Companies need to invest in the platforms and the people – whether that means training existing employees or finding new people with the needed skillset – to tackle analytics effectively.
By far, the biggest challenge for implementing an analytics strategy is around data quality, consistency, aggregation and standardization.
“The challenge with big data is that a lot of the data out there is dirty,” says Jim Barnes, ISM Services managing partner. If the data is dirty, incorrect or incomplete, the results will be inaccurate and won’t be able to return the desired results.
In addition, even if the data is accurate, many distributors rely on
numerous sources to supply the data. The likelihood of that data being in a single, standard format is relatively low, which translates to more work to make it usable.
Distributors need “one version of the truth,” a respondent wrote. “As a multichannel distributor, we have numerous sources of data to compile.”
There’s no easy solution for most distributors who simply don’t have enough buying capacity to demand standardized data in a preferred format. Getting clean, usable data still requires an investment in time and people to do the “in-the-trenches” foundational work.
Analytics can be used in every aspect of a business, but when it comes to application, distributors have clear priorities. Nearly one-quarter of respondents say sales is the top priority, with inventory management and profitability close behind (see Figure 2).
Market intelligence is a key differentiator today; companies with better visibility into their markets gain critical perspective that allows them to be proactive, rather than reactive, to competitive threats such as price wars, digital marketing channels or other forces outside their control.
Instead, a focus on their core differentiating products and service portfolio allows them to maintain sustainable margins and deepen their value to customers. They intentionally target the heart of the markets that yield the highest return on their invested resources.
The strategic use of analytics is expanding, and it will continue to be a competitive advantage for those who invest in it and move it forward internally.