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It’s no secret that COVID and Brexit brought huge disruptions to the wholesale and distribution sectors. But they only complicated a space that was already challenging. Margins have long been tight, the range of services increasingly broad, with customers wanting ever-higher quality and specialist support across the entire supply chain. And yet they never seem to have the budgets to match!
The result: only the most competitive, well-run and efficient companies are prospering.
Growing expectations
Wholesale, distribution, logistics, 3PL: these have always been hugely competitive, low-margin sectors. For companies operating in wholesale and distribution, customer expectations have never been higher. At the same time, they expect security and business continuity guarantees. And of course regulatory requirements have grown more complex.
New technology enables businesses to meet these demands, but the investment costs are often high. The largest supply chain service providers can implement fully automated warehousing and packing operations and to partner with tier-1 systems providers. Mid-market companies, however, must be smarter. They need technologies that guarantee commercial payback whilst selecting the best and most cost-effective suppliers. They need to negotiate the best possible deals.
We do believe that ambitious smaller and mid-market companies can succeed. (We’ve helped it happen!) But only if they ensure that IT is central to their competitive strategy.
Start by getting the IT basics right
As a CEO, your first priority is getting the basics sorted. If the IT agenda is submerged in day-to-day issues, then there is little time to talk about an ambitious vision! So what do we mean by the ‘basics?’ Getting the basics right is essential for any wholesale and distribution business looking to remain competitive.
Leadership. IT needs a senior leader with both commercial and technical experience: someone who can set strategy, take part in business decision-making, and maintain a coherent vision for the future.
Systems and integration. Non-technical CEOs can start sorting out systems and integration by asking a few direct questions:
• Is your IT infrastructure working reliably?
• Is the configuration sensible and appropriate?
• Do you have suitable suppliers?
• Have you negotiated the right deals and service levels?
• From top to bottom, is connectivity secure and reliable?
• Has your own staff been properly trained?
Note that many of these basic questions include suppliers. Mid-tier 3PLs, for example, typically use transport management, warehouse management and contract packing systems like Sterling, Mandata, Vigo, OBS and Access. Such products can be effective, though the quality of support varies. As does the quality of customisation: such products may struggle to provide bespoke services, which can seriously hamper innovation for your company.
Where there are multiple systems, the challenge is even greater to integrate effectively with minimal manual effort or rekeying, and to ensure data is available for dashboards so managers can run the business hour by hour.
Reporting and data. Think of it as the goal of good integration: accurate weekly and monthly reporting so that Directors understand what’s going on, and, as above, managers are empowered to make reasonable decisions without your day-to-day input. Similarly, data must be available from back-office systems to support website, portals, and third-party projects. This level of visibility is particularly important in wholesale and distribution, where operations move quickly.
Hardware. IT infrastructure of course includes networks, servers and computers. It also includes phones and other mobile devices crucial to wholesale and distribution — cameras, in-vehicle devices and factory-floor devices. Are all these devices working together smoothly? Has your staff been properly trained in their use? Is it easy to collect and organise data from these devices?
Staff. It’s the common thread through all IT issues: changes and improvements will be meaningless if your people can’t master them. So don’t move forward on anything until your Board agrees on policies and standards.
Make sure that staff is both familiar with these standards and properly trained in systems and devices. Monitor the efficiency of their IT use to ensure that you get the most out of your IT investment, and so that managers can quickly identify and eliminate problems. (One major part of getting your IT in order is fixing problems before customers bring them to your attention.) Finally, have skilled technical staff available, so data can be fed in and out seamlessly and small projects can be delivered quickly without a fuss.
Disaster planning. We believe in expecting the best but planning for the worst. No matter how careful you are with connectivity and reliability, you will have unforeseen outages and other unexpected problems. Disaster recovery and business continuity plans must be rehearsed and ready to go at short notice!
At every step, cost-effectiveness is the priority
You may have an individual goal for your own business, whether it is growth, efficiency, increased customer satisfaction, or all of the above. (IT and efficiency typically go hand-in-hand, which is why IT projects are normally focussed on process improvement, standardisation or streamlining.) Whatever the reason for the project, you must fully understand and plan it beforehand. You absolutely must have a focused commercial argument for each and every project before it gets authorised.
With any IT spend, there must be a clear plan identifying cost, benefit, and delivery. The person responsible for delivering this outcome must be clearly identified, and the outcomes must be tracked so benefits are realised.
IT can help with legal and client demands
As we mentioned above, the wholesale and distribution sectors can be enormously complicated when it comes to client and legal demands. We recommend an honest Board-level conversation that names the particular demands on your company and how IT can help manage them. In our experience, the demands common to wholesale and distribution include:
PCI compliance. There are a lot of rules and regulations when it comes to the payment card industry (PCI), including online financial transactions. PCI regulations encompass back-office IT systems and handling of paperwork, but also less obvious areas like phone call recording. The rules are fairly simple. But they are not easy to adhere to, especially where IT is out of date or knotted up by integration workarounds.
Data security and privacy. The General Data Protection Regulation (GDPR) privacy rules are demanding, and the penalties high enough to make everyone sit up and take notice! There is every sign that the government has the appetite to drive compliance across all industries and will be imposing serious fines for any breaches. In addition, corporate clients increasingly insist on ISO27001, as well as fierce confidentiality clauses. Nevertheless, ISO27001 certification which, after all, is about data security goes a long way towards helping your company with compliance.
Once again, disaster planning. When tendering for business, clients increasingly expect policies covering areas like security and business continuity. They want evidence that your operation is resilient and that you have plans covering a range of disaster scenarios.
Companies like Amazon, Microsoft and Google now offer cloud solutions with far higher levels of management and redundancy than you can achieve on your own. These solutions are highly flexible and require no capital investment, but the long-term cost is high, and even these suppliers have had outages. And, of course, a cloud solution is of no use at all if your site loses connectivity because someone cuts the cable with a pneumatic drill!
Thus solid, clear, and well-rehearsed disaster and business continuity plans not only increase preparedness for your company; they also make you more attractive to clients.
Aim for a simple, seamless, accurate flow of information
Don’t lose sight of the main goal. When it comes to wholesale and distribution, the primary aim of your IT systems is to create a seamless supply chain with real-time monitoring.
We understand that the information sources are varied and multiplied, and the particular sources for your business will depend upon where you are in the supply chain. They may include:
- Container tracking and in-vehicle technology to provide ETAs
- Warehouse management, including space utilisation, picking cycles or rules, and automated label-scanning
- Vehicle operation, including routing, vehicle load and utilisation, and driver management
- In-field PDAs to take electronic signature or other proofs of delivery (PODs)
Every step of the way, you need data that is accurate, up-to-date, and readily available. And your data must be seamlessly available for real-time reporting, to help with informed decision-making.
With good reporting, you can monitor against targets and at the same time allow for process improvement and predictive planning — for example, to gear-up for expected workloads or prepare for unusual client demands.
Seamless external integration: another must-have
In the wholesale and distribution sectors, information must be available to and from external parties through a wide, and ever-increasing, range of channels.
This may include real-time information and forecasts as well as aggregated reporting against targets. Or this may mean full system-level integration so e-commerce clients can pass orders directly to your systems, or freight customers can book jobs into your systems from their own ERP.
Automated integration with courier aggregators can improve your process efficiency whilst providing savings through least-cost routing.
In other cases, you may need to display tracking information through online portals on a range of different devices (e.g. mobile, tablet, laptop). And the requirement still exists for good old-fashioned contact centres able to cope with telephone, web, and email.
The types of communication keep expanding. Consumers now expect support via Twitter and online chat. Some still want to communicate by fax!
Whatever the particular needs of your organisation, successful integration is always the result of four factors:
- Simple, well-structured systems and data
- Modern, open technologies (e.g. data mapping)
- Staff understanding the systems and using them correctly
- Good technical IT people available to make changes and meet client requirements
But have an overarching IT strategy
In our experience, successful players are those who identify how IT locks in with their business strategy specifically, what market position they are aiming at, and how IT should be aligned.
Do you aim to offer best delivery terms? Excellent information? High standards of reliability?
You must design your IT strategy accordingly. If your aim is to distinguish your business through excellent, one-on-one customer care, then IT has a hugely significant role in freeing up your people’s time and giving them the information they need to impress customers.
For some of our clients the aim is simply to offer the lowest possible costs. In this case, the IT strategy will be singularly focused on cost reduction.
But don’t ignore the larger questions. Many companies forget that IT can drive growth. For companies with expansion plans, however near or distant, the systems must be ready for growth, or mergers and acquisitions, if that’s part of your strategy. The aim is a flexible IT environment, so you can react nimbly to opportunities, integrating their systems with yours or vice-versa with a minimum of fuss.
Conversely, if you foresee an exit from your business, it will help your business’s valuation and avoid running aground on due diligence if your IT systems are already in good shape and can be readily absorbed by another party.
Whatever your business strategy, the IT strategy must match.
The future is more tech
IT will become more sophisticated and more pervasive for sectors like wholesale, distribution, logistics, and 3PL. We expect to see more AI for route planning, more chatbots to communicate with customers, and more supply chain automation. Autonomous delivery now seems likely.
There will inevitably be more competition, and some of these technologies will be costly. Mergers and partnerships are likely to squeeze smaller and mid-tier players even further.
For companies operating in wholesale and distribution, effective IT systems are essential to maintaining competitiveness.
However, we strongly believe that the best companies will continue to prosper. In our experience, companies who use IT wisely to reduce costs, improve service, and focus on their own points of difference will be winners in this growing market.