Many industries at the moment are undergoing a period of disruptive change. New, hybrid business models are emerging and rapid advances in technology are effecting digital transformation.
These same drivers and influences are at play in the distribution sector too. And it’s the companies that embrace these changes that will best placed to shape the future of their businesses.
Here are 5 trends to look out for in the distribution industry in 2017.
Greater demand for drop shipping
Supplier drop ship is on the rise. It’s an attractive fulfilment method for retailers. They benefit from the revenue earned but don’t handle the warehousing, picking, packing and delivery of the goods.
As more retailers and marketplace owners look for drop ship suppliers to fulfil orders for them, the landscape of the distribution market will gradually shift. There will be fewer retailers wanting to handle warehousing, so those distributors that are ahead of the game will be the ones that benefit from increased business.
For distributors, drop shipping brings an increased number of orders – often a greater volume of smaller orders – and therefore a greater demand for carrier integration. To successfully adopt drop shipping, distributors will need their systems to integrate with those of the different logistics and courier suppliers it uses. They will also need to enhance warehouse efficiency and customer service and check that their business processes flow well for this supply model.
Reducing costs through process automation
Although Brexit has not (yet) even begun to happen, many distributors are already feeling pressure on costs. In the early weeks after the Brexit referendum in June 2016, the pound slumped. For one of our customers, this forced them to raise their prices by 25%. Another customer has seen its costs rise by 40% since the Brexit referendum. This effectively wiped £2m off their bottom line, and has left them desperate to reduce costs.
These scenarios are being repeated across the supply chain. Of course, one way to recoup costs is to reduce headcount. But with the UK employment rate at a record high despite the vote to leave the European Union, it doesn’t seem to be the case. In fact, greater numbers of staff are being required in distribution to meet the requirements of increased orders.
So to help reduce costs, many companies are looking to improve business automation.
One way to do this is through Electronic Data Interchange (EDI). It brings about faster and more accurate trading with partners. This not only helps with reducing costs, but also benefits the drop ship suppliers. EDI facilitates the secure and seamless exchange of business documents, so drop ship requests can come straight into the distributor’s ERP system as warehouse pick requests.
Growth in reverse logistics and returns
As online shopping continues to be easier and less expensive, and customers – both consumers and B2B buyers – become more comfortable with it as a sales channel, it will only continue to grow during 2017.
But without the ability to test out, try on and or physically see a product, a higher proportion of goods get returned with online orders than they do with physical retail stores. And where there’s no bricks and mortar store to return goods to, more and more transactions will involve reverse logistics and returns.
Aside from the business process issues of handling return shipping, warehouse storage, goods inspection, and processing refunds, the technology side of things is vital. Distributors need to have streamlined ecommerce systems that offer integration into their ERP and warehouse management systems so that returns management is simple and seamless. Self-service returns, where customers can create return requests online can help, as can full visibility of the return status in their online accounts.
Rise in exports
Another trend during 2017 is increasing globalisation of the supply chain. We can expect to see companies taking advantage of access to new customers across the globe.
This is especially so with the Brexit process. Where trading agreements with Europe may be uncertain for the coming months or even years, UK businesses may look further afield for custom.
Distributors will need to have an understanding of the markets they operate in, the potential business partners they deal with and the diverse local regulations with which they will need to comply.
Complex export documentation is required when trading abroad, and the amount needed multiplies at the same pace as the greater volumes of exports.
To meet the needs of effective and profitable global supply, distributors will need technologies and systems that will give them the same kind of control and visibility over their operations as if all the components of their supply chain were in the same building.
Customers want a unified experience. Many companies simply bolt a commerce engine onto the front of their online operations to deliver another way of doing business. But to do it right, it needs to be a seamless experience for the customer. Customers want the same experience as they would get in a store, along with exceptional customer service. Co-ordinating the entire ecommerce experience is vital this level of parity is achieved.
And in the B2B world, this means giving clients the exclusive experience that they would have when dealing with a sales rep. B2B capabilities must be added into the ecommerce system in order to give customers a unified buying experience. They will want to see the same pricing and have the same negotiation ability online as if they were dealing with a sales team.
Multi-channel purchasing requires careful planning and thought so that online B2B ecommerce sites provide sufficient support, and online account capabilities to ensure that the relationship is maintained.
What do these trends mean for distributors?
Most of the anticipated trends in distribution call for greater efficiency in the warehouse and in the supply chain. The companies that will succeed at this are the ones that employ the technology that is available to help them. With the best, most advanced and most flexible ERP, EDI, ecommerce and warehouse management tools, the technology-enabled distributors will be the likely winners in 2017 and beyond.
If you’d like a review of your ecommerce, EDI capabilities or your ERP system, please call us for more information on 020 8819 9071 or contact us using the website form.
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