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What 2019 has in Store for the Wholesale Distribution Industry

Kristin Swenson, NetSuite’s Wholesale Distribution Industry Marketing Lead, recently sat down with Michelle Davidson, NetSuite Wholesale Distribution Industry Principal to discuss the major trends and keys to success in the industry in 2019.

Kristin Swenson: What are the keys to success for a wholesale distributor in 2019? 

Michelle Davidson: Based on my research and my work with many different NetSuite wholesale distribution customers, I would say there are four major areas of focus for wholesale distributors to be competitive in 2019:

  1. Leveraging technology throughout the organization
  2. Embracing and expanding international trade and market places
  3. Focusing on efficient warehouse management
  4. Utilizing reporting and analytics to make smart decisions.

Swenson: As an industry historically slow to adopt change, it seems like there has been an increased focus on the importance of technology in wholesale distribution as of late. But you’re saying beyond that, distributors need to focus on leveraging technology across the entire organization to be successful in 2019? 

Davidson: Right. We need to admit that wholesale distribution is not the same industry it once was. Gone are the days where you could run your company on pen and paper. If you still are, ask yourself whether you are in a position to be competitive or to scale. With today’s continuous development of technology and increasing competitive forces from players like Amazon, customers now demand a faster pace and an overall better buying experience. If you do not meet their expectations, your customers will move on. The key to staying competitive in today’s fast-paced world requires organization to think of a technology from the perspective of a company as a whole.

Now this is challenging for wholesale distributors of all maturity levels. A start-up distributor may only see the need for basic accounting functionality in the short term. But I urge people to take a holistic view of their organization. How will you manage your customer data? Your inventory? It is important that you have technology in place to manage the entire product lifecycle. Oftentimes, making that investment early is a deciding factor of the growth and scale of your organization.

For a more established distributor, your technology landscape is likely disjointed, outdated, or both. Again, I would urge them to consider how their systems can manage the entirety of the organization. Rather than focusing on each department or process separately, think about how they function as a whole. Is your customer and inventory data tied to your financial data? It is important to not only invest in technology that drives efficiency within each department, but also that technology delivers your product or service from start to finish.

Swenson: Next you mention the importance of international trade and marketplaces. We've certainly seen a lot of news and uncertainty related to the impact of the Chinese tariffs on wholesale distributors. What kind of impact will international trade and marketplaces have in 2019?

Davidson: With the changing tariffs and trade laws, business is constantly evolving for wholesale distributors. In light of the recent tariff and trade changes, overall drop ships in the industry are decreasing while shipping costs are rising. As a result, organizations should look to developing their supply chains further. This could come in many different forms.

First, while international trade with countries like China may decrease, wholesale distributors should still focus on the importance of international trade. Expanding international trade with less established countries like Vietnam, The Philippines, Taiwan, will likely continue. Additionally, ecommerce is expanding in importance internationally, so distributors should look to reach new international customers online.

I want to point out the technology system implications of both suggestions. Distributors must ensure their technology systems support these international transactions and currencies.

Swenson: Tell us about the importance of warehouse management in 2019. 

Davidson: The need for efficient and automated warehouse management in wholesale distribution has been continually growing in demand. Whether you are an organization that manages inventory through your own warehouses or through 3PLs, there seems to be an outcry for inventory control through automation and barcode scanning. This is due in part to the growth and improvement of smart phone technology, which is more accessible and applicable than ever before. With this, there is a general push to update outdated processes so that several steps occur with a simple point and scan. We will continue to see automation in the warehouse in 2019.

Swenson: Finally, you mention the importance of utilizing reporting and analytics to make smart decisions. What role will this play in the industry in 2019?

Davidson: Historically, distributors – like many other organizations – compensated for the lack of reporting within their existing systems by creating their own outside reports in spreadsheets. However, today there seems to be a general awakening: reporting capabilities exist in ERP systems and should be utilized to make smart business decisions. This could include refining specific processes like the supply chain planning or leveraging cubing tools to see product performance, behavior and planning. Once again, as technology becomes more engrained in everyday life, it is changing the behaviors of organizations. Expect to see more leveraging of report and analytics from technology platforms like ERP to continue in 2019.