During a recent online event, Distribution Strategy Group’s Founder and Senior Partner Ian Heller exposed five major sources of disruption for this vital industry:

1. Workforce: The youngest generations (Generation Y and Generation Z) now make up approximately 70% of the total workforce. These generations are the most technically affluent, which means they expect to be connected on any device, anytime, anywhere, with easy-to-use applications.
2. E-Commerce: E-commerce is no longer just about having a slick website. Today, distributors must have a strong technology foundation to deliver an easy-to-use, personalized, B2C-like purchasing experience for customers.
3. Cybersecurity: The COVID-19 pandemic has underlined cybersecurity as a prevalent concern as new vulnerabilities arose due to employees working from home. Phishing and ransomware attacks have virtually exploded across every industry in the past few years.
4. Cloud: To stay competitive, many distributors are moving their technology stack to the cloud to lower capital expenditures and enjoy a better margin advantage.
5. Marketplaces: B2B buyers are turning to marketplaces for a one-stop shopping experience. Distributors that can successfully adopt a marketplace model will stand to deepen customer relationships and drive growth.

Heller shared that as an industry, distributors are still working out solutions to these challenges as they continue to adjust to the ever-evolving market challenges. Digital transformation continues to be an enabler of business models, allowing distributors to go from reactive, reporting on things that are happening, to proactive, anticipating the future and mitigating risks.

Magnus Meier, vice president and global head of the Wholesale Distribution Business Unit at Â鶹ԭ´´, went on to share that high-tech distributors have started to market themselves as solution aggregators to underline how committed they are to long-term customer relationships, taking care of the product and customer life cycle. In addition, digital transformation continues to play a significant role during the pandemic, specifically in operations. “Distributors that have a modern ERP system have data on hand, which gives them a significant advantage over their competitors,” says Meier.

Using Services as a Differentiator

For distributors to successfully implement everything from business strategy to operations to customer experience, they first need to determine what is most important to their business. Competitive differentiators come in all shapes and sizes for wholesale distributors, be it a great service like replenishment of bins near the production line, dedicated jobs like delivery of materials, on-site safety training, or even simply having the most responsive, proactive salespeople. Aligning business priorities with competitive differentiators allows distributors to position their business model as not just indispensable to customers, but profitable.

The big players, by and large, are not great at services. Services almost always represent the introduction of variable costs into a business model. Traditionally, distributors have rolled the costs of services into the gross margin of products, but they have not monetized them or charged the cost back to customers. “If distributors put a general manager in charge of services, one must treat it the way that a manufacturer treats new product development. Figure out how to monetize it with a P&L to build a business that’s much different and adds value for their customers,” says Heller.

The technology that enables distributors to have the right level of visibility into their business starts with an enterprise resource planning (ERP) system, which is critical to transformation. Having the right processing system enables order-to-cash (O2C) and procure-to-pay (P2P) business processes, which are critical to operations. For many distributors, more than 50% of orders come through as e-mailed PDF or Excel files, creating a manual process for customer sales representatives to then enter the orders into proprietary systems.

Counterintuitive to what distributors assume, the number of manual orders received is increasing, not decreasing. To enable efficiency and resiliency, distributors must find a way to automate manual and redundant tasks and redirect that energy towards value-added efforts. “Conexiom can help process those orders with the same customer service expectations that a buyer experiences when placing an e-commerce order, a marketplace order, or any other type of digital order,” says Erik Severinghaus, executive vice president of Business Development at Conexiom.

Preempting Issues within the Supply Chain

Whether it’s due to trade agreements, politics, or biological threats like pandemics, these is less predictability in the supply chain. A good example is what happened at the Suez Canal. The only way distributors can anticipate these issues is to have complete transparency and visibility across the supply chain, all the way through to the demand side. They need to leverage technology to gain the transparency to track which boxes are in which containers and on which ships. And if one of those ships goes astray, they need to be able to understand the implications and trigger follow-up processes to minimize disruption.

“Distributors are operating at greater scale than ever before and it is essential that distributors overcome silos, talk to sellers to overcome those challenges, understand how their customers will be affected, and take mitigating action,” says Meier.

Navigating the Talent Shortage

Every business is grappling with the talent shortage today. To attract the right talent, distributors need to invest in modern technology to bolster employee experience in the workplace. Distributors need to leverage intelligent technologies to automate routine tasks so employees can focus on more complex customer requirements. They need to provide collaboration tools between different teams to drive ongoing business alignment, openness for change, business agility, and improved collaboration between sales, marketing, and demand-planning teams. The distribution industry as a whole must challenge the way it has traditionally handled work-from-home policies, salaries, long-term incentives, and other benefits to make employees want to stay in this lesser-known B2B industry. “Distributors need to offer a competitive workplace environment, not just against other distributors, but against other industries,” says Severinghaus.

Meier, Severinghaus, and Heller have a lot of commendable and proven advice on these topics. In this , these speakers discuss the challenges facing distributors today and provide tangible guidance on how to prepare and respond to market disruptions.

Sam Nohava is global industry marketing lead at Â鶹ԭ´´.

Those in supply chain and logistics have made significant adjustments to help ensure that every segment — including healthcare — has continued to move forward as efficiently and effectively as possible.

AmerisourceBergen, a wholesale distributor of pharmaceutical products to nearly 100% of hospitals in the U.S., recently joined Cloud Wars Host and Creator Bob Evans and Magnus Meier, global head and vice president of Wholesale Distribution at Â鶹ԭ´´, for a to discuss these fundamental changes.

During the session, Jeff Denton, vice president of Global Secure Supply Chain at AmerisourceBergen, discussed the vital role healthcare distributors play to get life-saving drugs to those who need them most and how the company has managed to ethically balance supplier and customer needs.

New Normal: Customer-Centric, Patient-Focused Business

Wholesale distributors across all sub-segments have managed to keep the supply chain moving forward despite numerous hurdles on a global scale. However, distributors of today can no longer simply focus on moving products through the supply chain. The entire industry has shifted to take on new responsibilities that address the latest regulatory requirements and heightened customer expectations.

To address these growing concerns, wholesale distributors — especially those in the healthcare distribution segment — are now focused on “doing business with a purpose,” as Meier perfectly described it. By operating with a purpose, this helps ensure the supply chain is safe and secure. It also protects the integrity of the products and provides peace of mind to hospitals, pharmacies, and patients.

In the , Denton describes how creating healthier futures starts with protecting the health of people and our planet.  As a purpose-driven industry leader with a global footprint, AmerisourceBergen has an obligation to champion global sustainability and corporate responsibility. This includes processing more than $2.5 billion in saleable product returns annually, allowing products that would otherwise have been removed and destroyed to be reintroduced into the supply chain. This is good for AmerisourceBergen along with its customers, patients, and manufacturers across the entire supply chain.

To Thrive, Distributors Require Collaboration and Innovation

To address the new concerns and increased responsibility of the distribution industry, AmerisourceBergen approached Â鶹ԭ´´ to co-innovate and create a cross-industry solution centered around meeting the latest regulatory requirements. The result was a new and innovative solution that allows products to be tracked and traced across the entire supply chain:

The collaboration also allowed AmerisourceBergen and other industry leaders to streamline communication across the entire supply chain, from suppliers through to the pharmacies and hospitals. This supports business continuity through not only an individual enterprise but the entire business network.  With this technology, the AmerisourceBergen team can “seamlessly match digital data to physical data,” which aids in counterfeit prevention and sustainability efforts.

Data and Purpose Will Drive the Industry Forward

AmerisourceBergen is focused on what the future holds, shifting focus beyond simply reacting to regulatory requirements to understanding the use cases for all of the new data obtained through track and trace technology.

Without the consortium brought about by AmerisourceBergen and Â鶹ԭ´´, these industry-specific outcomes and supply chain alignment may not have been possible. Moving forward, collaboration and innovation will be key aspects of the industry and areas in which distributors can add immense value to the supply chain.

New advancements, technology, and cross-industry collaborations must continue to drive solutions that keep up with the latest regulatory requirements and consumer needs.

Each of these industry challenges has a direct impact on B2B commerce activity, requiring distributors to work diligently to maintain, or even improve, customer experience.

Arrow Electronics, a global distributor of electronic components and computer products, presented the topic of e-commerce resiliency during a recent industrial supply webinar alongside John McDonnell, industry executive advisor at Â鶹ԭ´´.

During this session, Michelle Moore, vice president of Digital Technology at Arrow Electronics, discussed how key industry trends are impacting Arrow Electronics’ commerce strategy and what it is doing from an IT perspective to .

COVID-19’s Impact on B2B Commerce

High market competition is forcing distributors to get creative and find new revenue sources. To make matters more complex, today’s B2B buyers are taking a note out of the B2C playbook and demanding more products be delivered faster and with more delivery options. This trend was especially prevalent in 2020 as a result of the COVID-19 pandemic and will continue to accelerate.

Over the past year, distributors also saw unprecedented changes in demand – decreases and increases depending on the industry subsegment represented. Distributors have generally determined where their new baseline is, but this unpredictable demand makes forecasts highly uncertain, with more frequent out-of-stock and over-stock situations placing a strain on businesses. These tumultuous times underscored the need for distributors to quickly and strengthen their business network.

Workforce challenges involved keeping workers safe but productive, with many back-office functions working remotely. This change emphasized the importance of employee communication and pulse checks to maintain business continuity and stay in sync with organizational needs. The increase in employees working from home also caused staffing shortages in distribution centers and placed unforeseen stress on IT departments. In addition, workers had many personal challenges during this period, making it a stressful time for both leaders and employees.

Furthermore, the current health, environmental, and trade challenges have caused distributors to move from maintaining continuity towards increasing overall longevity. Technology is acting as the catalyst to bring these new business models to life by supporting distributors’ ambitions to increase the diversity of offerings and customer share of wallet.

Building a Resilient Business Strategy

An effective strategy to overcome the challenges brought on by COVID-19 consists of three phases: respond, recover, and reimagine.

• The response phase is the process of reacting to the pandemic and understanding how it will affect the business.
• Recovery is considered an ongoing phase that allows distributors to move forward from their new baseline.
• Distributors must reimagine business, resulting in the ability to think and act fast, by developing new business models that break traditional rules. This phase may include experimenting with changes distributors were already considering before COVID-19, just at a faster pace.

Forward-thinking distributors aspire to differentiate themselves from the competition and generate greater customer loyalty by providing more value-added services. Technological advancements traditionally used for B2C consumer experience have dramatically changed the B2B buying experience, especially during the last five to 10 years. Customers are also showing the desire to collaborate with distributors to develop complete solutions for specific business needs while simultaneously partnering with fewer suppliers who can still deliver the same great products and services they need.

Distributors are also recognizing the need to better support the business continuity of their customers by implementing flexible buying and delivery options. During the pandemic peak, customers needed to have more patience and change their expectations about when they would get their products and services. Due to unpredictable supply patterns and social distancing measures, technology served the important purpose of enabling greater transparency and supporting e-commerce channels.

Digital Transformation in Action

The pandemic has caused forward-thinking distributors to accelerate initiatives as a way to differentiate from competitors.

One solid example of this innovative thinking comes from U.S.-based beverage distributor . This company is improving its interaction with customers and suppliers through “Proof,” its new B2B e-commerce platform.

The examples don’t stop there:

• Industrial distributor Grainger added a visual search feature to its mobile app, allowing customers to shop directly from a photo.
• Brakes, a B2B food delivery service, has addressed supply shortages by quickly pivoting to a direct-to-consumer business model in a mere seven days.
• Amazon Business introduced a smart shelf that restocks itself.
• Sigma Healthcare now offers personalized customer experiences on its platform with customer-specific branding and log-ons.

Arrow’s Digital Transformation Journey to Resilient Commerce

Arrow Electronics Inc. is a global distributor of electronic components and computer products that also provides value-added services. The company is based in Colorado and currently generates over US$1 billion in annual revenue across four Web properties. Its sources of revenue include the development of new products and services, the reinvention of existing ones, and acquisitions.

Arrow’s digital transformation began in 2015 when it acquired a B2B marketplace built on old technology that would not adequately scale or support the organization’s high growth ambitions.

Moore shared that “Historically, it [commerce] was more about having a Web presence and getting something up there for people to see you, know you, and use you, across the Internet.  That is shifting toward overall automation for customers and simplification – the one-stop-shop mentality.”

From the beginning, Arrow’s commerce strategy has focused on addressing a variety of customer bases and needs, including consumer-based B2B, e-commerce, and marketplace portals. To best meet these needs, Arrow’s primary commerce objectives have been centered around maximizing customer satisfaction while minimizing the cost and complexity of its solutions.

As a part of this transformative initiative, Arrow Electronics adopted Â鶹ԭ´´ Commerce Cloud to help drive costs down while increasing capabilities. The distributor restructured data, people, processes, and technology, which thereby increased the performance and scalability of its operations. It also implemented vital data governance models and moved its commerce platform to the cloud to aid compliance and business agility.

Looking ahead, the distributor will continue working to consolidate commerce operations across its Web properties, standardize site capabilities, and implement modern search capabilities. The distributor will continue to merge key business requirements with relevant technologies, allowing it to simplify and consolidate its business architecture in a way that supports agility.

Missed the “Building a Resilient E-Commerce Business with Arrow Electronics” webinar? .

“Tłó±đ COVID-19 pandemic has accelerated the use of technology within the wholesale distribution industry,” shared Magnus Meier, global head of Wholesale Distribution at Â鶹ԭ´´. “This year more than ever, distributors are prime to showcase their successes and innovation leadership as a valued member of the supply chain.”

Let’s take a walk down memory lane to celebrate the innovation leadership of wholesale distributors from around the globe. Then, I will share information about the and how companies can get involved.

Wholesale Distributors Win at the 2020 Â鶹ԭ´´ Innovation Awards

We celebrated a record number of submissions for the 2020 Â鶹ԭ´´ Innovation Award program. Among them, three wholesale distributors shined by showcasing their use of intelligent technologies to expand beyond traditional industry boundaries and become proactive, insights-driven distributors.

Applied Industrial Technologies is a $3.5 billion leading value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, and automation technologies. Harnessing an intelligent data flow for performance and human capital is critical to the future of the industrial Internet of Things (IoT). For Applied, acquisition plays an important role in the growth strategy.

Applied Industrial Technologies was nominated for the 2020 Â鶹ԭ´´ Innovation Awards based on its use of intelligent data to empower human capital and transform customer profitability. As the company moves deeper into the automation and robotics markets, data will travel among machines, people, and performance. Applied’s success is linked to understanding and managing these critical data streams internally and for customers.

Benefits of Applied Industrial Technology’s innovation initiative include 122-basis point increase in pricing for trained associates versus peers; 49 percent of staff utilize Â鶹ԭ´´ Jam social learning tool per month; and 800 managers trained and empowered across five regions.

Cardinal Health, Inc. is a $145 billion healthcare services company that helps pharmacies, hospitals, ambulatory surgery centers, clinical laboratories, and physician offices focus on patient care while reducing costs, enhancing efficiency, and improving quality. The company is one of the largest healthcare supply chain in North America that consolidates pharmaceuticals from hundreds of manufacturers into site-specific deliveries. It is also a leading manufacturer of medical and surgical products, including gloves, surgical apparel, and fluid management products and runs the world’s largest network of nuclear pharmacies.

Cardinal Health’s innovation story showcases how the distributor partnered with Tata Consulting Services to empower digital transformation through the modernization of its pharmaceutical division. Pharma Modernization (PMOD) is a company transformation program intended to invest in the future, aligning people, process, and technology to be a leader in healthcare.

Benefits of Cardinal Health’s Pharma Modernization initiative include 300 percent easier, simpler, and faster reporting and decision-making process; more than $20 million saved over five years; and a 30 percent increase in productivity.

Sigma is a leading Australian full line wholesale and distribution business to pharmacy and has the largest pharmacy-led network in Australia, with more than 1,200 branded and independent pharmacies in network, including some of Australia’s best-known pharmacy retail brands in Amcal, Guardian, Chemist King, Discount Drug Stores, and PharmaSave.

Sigma Healthcare, needed to modernize its aging systems to provide an intuitive and seamless ordering experience for customers. Its 2021 Â鶹ԭ´´ Innovation Award nomination was entered to celebrate its ability to combine experience and operational insights to exceed customers’ expectations. By combining Â鶹ԭ´´ Commerce Cloud with continuous measurement of its customers’ experience through Â鶹ԭ´´ Qualtrics CX, Sigma Healthcare can proactively identify and deliver on what customers want, driving unprecedented business outcomes.

Benefits of Sigma Healthcare’s innovation initiative include a 25 percent increase in average order value; a 300 percent increase in monthly revenue on the platform; and a 40 point increase in the monthly NPS.

A Year to Remember

As COVID-19 hit, leading distributors pivoted to transform their business models and accommodate the shift in customer behavior, address supply chain disruptions, and manage workforce constraints.

This year, distributors were challenged to help ensure operations were safely continuing with a safeguarded and digitally equipped workforce to continue delivering on their core function in the supply chain. Geographic dependency, regulatory restrictions, and manufacturer slowdowns forced wholesale distributors to quickly monitor and respond to sourcing risks while balancing a shift in the demand pattern.

Wholesale distributors have proven to be the unsung heroes of COVID-19, facilitating a nearly seamless distribution of essential goods around the world to keep the supply chain moving. Based on this year, there is no better time to have their innovation story heard around the world.

Share Your Innovation Story

This year’s aim to honor and celebrate the achievements of forward-thinking companies that have harnessed the power of Â鶹ԭ´´ technology to become an intelligent enterprise, thrive in new business realities, and create positive economic, environmental, and social impact to help the world run better.

Â鶹ԭ´´ is thrilled to showcase these inspirational customer and partner stories that involve using Â鶹ԭ´´ solutions and technology to differentiate themselves, achieve tremendous results, and adapt to dynamic customer needs.

More information on the . For details on the judging criteria and category definitions, visit the . The submission period is open now and all entries are due by February 1, 2021.  and join the conversation online using the hashtag #Â鶹ԭ´´Innovation.

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