Uncertainty in the Forecast for Distributors

Posted by Ranga Bodla, Industry Lead, Wholesale Distribution, NetSuite

The outlook for distributors in the coming year is both a good-news and a bad-news scenario. On one hand, distributors will benefit from lower energy costs and cheaper capital due to declining interest rates. But on the other hand is a slowing growth rate and declining corporate profits. Consumer spending is up, but commodity prices are declining. As finance consultant James Wager of Sikich LLP said, it's a classic "best of times and worst of times" economic future for the distribution industry.

Wagner was one of the presenters in a webinar headlined Top Distribution Trends for 2016 who gave their crystal ball forecasts for the year ahead. One theme they all agreed on is that rapid changes are occurring in all aspects of the industry—from finance and technology to sales channels and customer expectations—that are causing confusion for many distributors.

Dirk Beveridge, president of 4th Generation System and founder of UnleashWD, calls the current climate a “VUCA” economy. VUCA is an acronym created by the military that stands for Volatility, Uncertainty, Complexity and Ambiguity. It was created to describe the insecurity of the post 9-11 world; but it could also aptly apply to how distributors are feeling about their businesses today.

Compounding the problem is the fact that things are changing so fast we barely have time to understand them before they're changing again.

“Change seems to be coming at us, and coming fast,” remarked Beveridge in the webcast. "It's coming at a velocity we haven't had in the past."

For most distributors, these changes are outside of their control—such as the increasingly younger demographics of customers and employees, or the rise of the "creative economy" in which a single smart teenager with a computer can overturn an industry virtually overnight. They didn't cause those changes. But to survive, distributors need to change internally, and even embrace the chaotic spirit of change in its corporate culture.

"We must think differently, find new value propositions, and new ways for distributors and manufacturing to partner together to be able to compete in this age of disruption," said Beveridge.

How do you create a culture of change? For starters, co-presenter Jennifer Murphy, president of the NetPlus Alliance, said it pays to focus on diversifying and encouraging customers and employees to get comfortable asking questions and looking for potential new ways of doing business—new products, new services, partners and even new buying channels.

She also advised all distributors who haven't yet developed an ecommerce site to get moving. Customers are clearly asking for online options, so it's past the time to start providing them. A distributor can turn to a vendor who provides an out-of-the-box solution capable of getting an ecommerce site up quickly; as well as to their own ERP vendors who may provide add-on products for ecommerce and CRM which are easily and quickly integrated into the distributor's existing systems.

"The important thing is to just get started," she said.

To find out how a unified, cloud-based system like NetSuite’s can run your entire distribution business from end-to-end, check out this free product tour.

 


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