The Drivers of Digital Transformation in Distribution? Customers First

You will be left behind if you’re not on the path toward digital transformation. Unfortunately, many distributors think they don’t have the time to implement new tools and processes or are fine doing business as usual. And that’s the type of thinking that will cause them to lose business in the not-too-distant future. 

Who drives digital transformation? 

For distributors, three significant factors are driving the adoption of digital technologies: 

  1. Your customers – They want to conduct more business digitally, from looking up product information and invoices, to entering quotes and expediting POs, to initiating RMAs. They want the ease of doing business – on their time – and immediate access to information. 
  1. Your suppliers – They want to do business more efficiently and accurately with distributors, such as the delivery of ASNs and management of SPAs. 
  1. Your competitors – Successful distributors are meeting customer expectations by investing in technology for greater efficiencies, visibility and sales opportunities. They will get the lion’s share of the business. 

Many distributors are hesitant to invest in new technologies, especially if it may take a significant investment in time and money. However, the real driver of digital transformation, of adopting new capabilities, is to remove friction from business processes and to deliver better customer service.  

We see considerable energy from the supplier community to integrate with distributors. There are opportunities to improve transactions between suppliers and distributors and for distributors with customers. Some distributors still fax orders to suppliers, demonstrating the reluctance to invest in digital capabilities. Manufacturers want to quickly provide and manage Advanced Shipping Notices (ASNs) and Special Pricing Agreements (SPAs) to distributors via technology. And distributors need to invest in the tools to streamline operations. 

We also see a massive disconnect because many distributors don’t know what the competition is doing. As a result, it’s easy to get caught up in day-to-day operations and slowly lose business to competitors offering customers the ability to do business easily on their own terms. 

How to Implement Digital Transformation: Start with the Customer 

What is the solution? We’ve got an outline and resources to help you determine needed technology and to set a roadmap to get there: 

  • Assess your customer’s digital readiness. Are your customers ahead or behind you in their adoption of digital? What are they requesting, and are you able to provide it? 
  • Assess what the digital innovation leaders are doing. What is your competition providing customers that you aren’t? Where are they going to be in the next three to five years? 
  • Assess where you are in terms of digital readiness. Measure your capabilities in relation to your customers, suppliers and competitors, and identify where you can reduce the friction of business processes to improve customer service. 

Once you’ve assessed where your organization lies, develop a plan to address your needs. 

If you’re behind your customers, focus first on catching up to them. 

It isn’t news that customers are setting up supply chains. They may already have software to manage inventory for a manufacturing customer or technology to help customers place and expedite orders electronically. Contractors are adopting technology quickly to run their business ‘from the truck.’  They’d like to build quotes and proposals by relying on the distributor’s website for product information. They’re trying to eliminate all the phone or face-to-face conversations because the sad truth is that 50% of your customers never want to see a sales rep again. You will lose to the competition if you don’t keep up. 

If you’re on par with your customers, look at digital technology to reduce manual labor and inefficient processes. 

There are many tools to address inefficient processes, reduce sales and general administrative expenses, and improve accuracy and productivity. What technology can help youstreamline the quote/order process and the order-to-cash cycle? How can an ecommerce site allow you to serve customers better? Are you using your CRM to its fullest potential to drive sales? Can you improve warehouse practices with new technologies? 

Identify your North Star. 

Your North Star is where you want to be in three to five years. A successful digital transformation plan is best accomplished incrementally, implementing what you need to serve your customers, integrating with suppliers successfully, and beating the competition. 

And this North Star needs to be based on customer insight rather than sales insight. Sales reps are good at listening to respond and then negotiate. They need help truly listening to the client’s process concerns. Only your customers can give you the information (and brutal truths) that can help reduce the friction of business and serve them better. 

Build a digital investment roadmap.  

Build a roadmap and sequence the capabilities so that everything you’re doing is helping you build those capabilities. Once you’ve researched and created your North Star, build a multi-year investment roadmap and aggressively fund the first year. Monitor the results of this launch carefully to learn how to react and respond next year. Learn more about how to map out your digital transformation

Set yourself up for success by avoiding these traps. 

Distributors are busy, and falling into any of these traps will prevent a successful digital transformation: 

  • Underestimating the time and effort to plan and implement digital technologies. 
  • Relying on your IT department to conduct research and implement these technologies. Invest with consultants and other practitioners that do this for a living to help plan your journey.  Grainger engaged McKinsey years ago to help develop their roadmap and they achieved their object of having 50% of their revenue through digital channels. 
  • Choosing the wrong person to lead the project. Hire someone invested in technology and process change. Digital is about changing your processes; it’s not doing the same things better. It’s about working in a new, more efficient way. 

Your customers are driving the need for digital transformation – it’s up to you to join them. By doing so, you’ll keep ahead of the competition by improving customer service, supplier partnerships, and your bottom line.