How Distributors Can Evolve In A Disrupted World

September 16, 2022

By: Andrew Butt, co-founder and CEO of Enable

When distributors survey today’s economic landscape, they see many sources of anxiety. Supply chain disruptions continue to cause production and delivery delays, the cost of goods and raw materials remains extremely high, and companies face increasingly intense competition. Distributors must be able to expand their margins while simultaneously outmaneuvering their competitors, a task that has become more challenging than ever—especially while shifting market dynamics are fundamentally transforming the way distributors do business. 

There are several core principles that can help distributors navigate this new economic landscape. They must be capable of aligning partners on goals and strategies, which means facilitating data visibility, implementing an effective rebate strategy, and developing an e-commerce platform that provides a seamless customer experience. Digitization should underpin all of these initiatives, as it enables effective communication and collaboration while providing a single source of information for all stakeholders. 

Distributors have never faced more pressure to adapt to rapidly shifting consumer demands, a volatile economic environment, and formidable competition in the supply chain sector. While some distributors will discover that they can’t keep pace with these changes, others will flourish as they develop more flexible operations and improve relationships with their partners. 

Data visibility builds healthier partner relationships

A robust data collection and analysis platform is a must-have for distributors. When distributors have access to real-time data about supply chain operations, they can make informed decisions about everything from market strategies to partner relationships. Data visibility is critical for improving efficiency at every link of the supply chain, as it helps companies identify and address problems, determine how well their relationships are functioning, and develop joint business strategies around financial and operational realities. 

These are several of the reasons why 80 percent of supply chain professionals say they want a real-time visibility solution. It’s impossible for distributors to maintain healthy relationships with manufacturers and other partners if they don’t have access to relevant information about performance, forecasts, and operations. Data visibility is also vital for the creation of mutually beneficial go-to-market strategies — distributors and suppliers won’t be able to agree on business objectives and success metrics if they don’t have access to the same information. 

Trading partners should always be open with one another about their goals and risks — a principle that requires them to establish visibility across the supply chain. By prioritizing data visibility, distributors will ensure that their operations are transparent to the end customer while mitigating risk and protecting margins for their partners. 

Implement an effective rebate strategy

In a period of economic uncertainty and fluctuating consumer demand, distributors have to be more creative with their financial and operational strategies. For example, distributors can build stronger relationships with manufacturers and other partners by establishing more profitable stocking and selling profiles. This means developing and implementing an effective rebate strategy that can account for changing market conditions by quickly adjusting your order volume or sales mix to meet and drive demand. 

When supply chain partners are capable of re-negotiating and aligning their rebate programs as strategies change, they’re much more flexible than companies that only revisit these programs once a year (or even less frequently). Rebates can help companies launch sales programs that go beyond typical promotions like discounts, such as the prioritization of low-volume, high-margin products. Financial rewards like rebates provide incentives to sell particular products, and they can be based on specific performance metrics like sales volume. 

Rebates help companies forge productive long-term relationships by providing mutual financial benefits. Distributors and their partners should implement a rebate platform that can account for changing market conditions and bring business goals into alignment. This won’t just allow distributors to manage risk and create value alongside their business partners — it will also have a direct impact on their relationships with customers by passing along savings and providing transparency across the demand chain.

Why digitization is essential for all the above

The supply chain sector has been slow to digitize, and distributors are no exception. This is especially problematic because digital tools are necessary to work toward urgent priorities like visibility and rebate management. 

For example, of the supply chain leaders who say they’re investing in digitization (overwhelming majorities in every industry McKinsey analyzed), 77 percent are particularly focused on digital tools that facilitate visibility — the largest proportion of any use case. Meanwhile, over one third of companies continue to use manual tools like spreadsheets for rebate management, which leads to mistakes and inefficiencies. 

Digitization isn’t just necessary for visibility and rebate management — it’s also indispensable for attracting and retaining customers. Distributors need to offer omnichannel experiences (which include websites, mobile apps, and in-store engagement), as well as online ordering, tracking, and inventory management. With the efficiency and rapid delivery options offered by large online retailers, it’s increasingly difficult to earn and retain customer loyalty. This is why distributors have to offer personalized services, transparency, and real-time information about products and orders – all of which require a streamlined digital platform. 

Although distributors face one of the most challenging economic and competitive environments in many years, a focus on visibility, rebate management, and digitization will help them maintain strong relationships with their partners and consumers alike.