How to navigate The Normal for Distributors is an urgent problem. For many distributors, this means adapting to new work conditions where disruptions to supply and demand are placing increasing pressure on the bottom line.
For many businesses, the current situation will have a tremendous effect on their long-term strategy and business goals. It will also determine how well positioned they are for business recovery.
It is clear that no one has a magic pill to navigate this crisis. However, there are some key trends that we see emerging. Innovation and the ability to adopt new technologies appears key to success under the current conditions. Some businesses are using this as an opportunity to reinvent their processes entirely. Therefore, it seems reasonable that those willing to adopt bold new strategies will be best placed post-COVID.
In this article, we will focus on some practical ways to navigate the current challenges. These include:
- Revenue-related action
- Enhancing supply
- Optimizing inventory
- Social distancing
- Cloud adoption
Top Challenges Distributors Face
Well some businesses are well-placed to come out of the current crisis stronger, others are scrambling for position. Many distributors face similar problems. Here are the three most obvious:
Impact on supply for distributors
The fact that China and the Far East were hit early by the pandemic has severely effected supply. Hrdware in particular has been seriously disrupted. The current dominance of Asia in the production supply chain quickly lead to an inventory imbalance. At the same time, many distributors ordered more than was typical to account for short-term shortages. This compounded the problem as so much stock was bought up. There was also the problem of larger distributors getting preferential allocations for essential items.
Impact on demand for distributors
Local and national lockdowns have had a significant effect on demand. Certain products related to construction, HVAC and electrical equipment have been particularly hard hit. At the same time, channels of demand have shifted dramatically to online. This has led some smaller businesses without an eCommerce strategy to be left behind. This reduction in demand creates inventory imbalances as well as added stress to working capital requirements.
Impact on delivery for distributors
Many distributors who rely on counter sales are now implementing curb side pickups. Most customers have been asking for curb side delivery to prevent outside individuals from entering their premises. With this in mind, distributors have had to put in place new procedures that are compliant with social distancing rules and put people at ease.
Unsurprisingly, these challenges are resulted in negative results on the bottom line. It is now harder than ever to plan inventory or predict what is happening to global supply chains. With that in mind, more flexible processes are needed to keep up. Here are five that we consider most important.
1. Revenue-related actions
There are many changes you can make in relation to revenue that can have a positive effect.
First, you might look at shifting your business focus and resources. Perhaps in the current situation, your best-selling products are facing an inventory shortage. Some suppliers may be able to find alternatives that are equally as profitable. Others may even be able to take a sideways step and find a product that is in high demand because of the current crisis. Viewing the situation as an opportunity rather than a challenge is one positive that you can wring from the current climate. We recommend that you shift focus to products that are in more stable demand. Epicor reporting and analytics is one way of identifying these opportunities.
Ecommerce is another vital channel. This will position you to take advantage of changing customer behaviour.
Being able to dynamically adjust pricing is also important. This will allow you track products that are particularly scarce and adjust price accordingly. One method is to tier price increases based on customer segment. This is one flexible way to change pricing strategy to meet demand.
2. Actions to supply
Changing the mix of suppliers for your biggest products is one way to reduce risk. If you source products from a range of suppliers, try to analyse performance and make a decision on which are the most reliable. On the other hand, if you have a limited range of suppliers, try to broaden this to make your operations more robust.
Also, given limited agreement on what areas are best placed for recovery, you might want to hedge your bets. Try not to overinvest in one product. A big problem in the future could be that businesses have overinvested in stock that they don’t really need. Try not to fall into the trap and remain flexible.
3. Action to inventory
Since business in general has slowed, it could be the right time for optimizing inventory levels. You may want to review your inventory replenishment targets accordingly in line with your current sales. Another option is to return excess inventory to vendors when they’ll take it. Don’t be afraid to explore these options as many businesses are trying to be more flexible.
The way you approach demand planning is also likely to change. Rather than relying on old data, switch focus to data from the last few months. This is a much better metric for evaluating required levels of inventory.
4. Social distancing and deliveries
Customers are increasingly demanding delivery rather than counter sales. Therefore, your delivery volumes are likely to be higher. On the other hand, your warehouse may be short-staffed. This is where Epicor can step in to make your shipping process much more efficient. Of course, at the same time, you’ll want to implement new social distancing measures. We’re slowly getting used to this and you will no doubt have processes in place already.
Mobile access to features like Epicor Prophet 21 will be welcome here. This allows your drivers to receive specific delivery instructions and also capture proof of delivery.
5. Moving to the cloud
With the current restrictions in place, you’ll need to make sure your staff can work from home when possible. This is when cloud technology comes in.
With cloud, you can access the system from outside your corporate network as well as on your mobile device. Your employees can more easily work from home, while your customers can more easily engage with you. In addition, you will be well prepared not only for dealing with The New Normal, but also for future challenges.
There are many opportunities to outsmart competitors while handling danger. With careful planning, the best distributors will often emerge stronger while others might lose out. We hope that the actions discussed above, will help you navigate The New Normal and position you to take advantage of the business recovery that will follow.