Consumer Packaged Goods

The Changing Face of Industrial Distribution: Trends, Opportunities and Priorities

In today’s competitive industrial distribution industry it is increasingly becoming challenging for distributors to keep pace with technological developments and meet customer expectations while containing costs. This paper analyses some recent trends, challenges and future drivers for the industry. It also discusses key business priorities, which when addressed holistically, will drive growth and enhance customer satisfaction.

Like in any other Industry with the emergence of digital commerce, there is an immediate need to gain an in-depth understanding of the customers' business priorities and effectively integrate existing and emerging channels of distribution, to deliver a seamless customer experience. AmazonSupply, Amazon's B2B distribution initiative, is one such example where an organization has tweaked the traditional cost and service model in-keeping with emerging trends. It is therefore critical for distributors to assess industry trends and to benchmark their processes against, not just direct competition, but across industry sectors as well.

Some of the emerging trends shaping the future of Industrial distributors are:

  • Demand for Inventory Management Services
  • Expansion of Product Portfolios and Geographic Reach
  • Increase in Mergers and Acquisition (M&A) Activity
  • Demand for Value-added Services
  • Growth of E-commerce
  • Growth in Mobile Adoption
  • Need for Analytics

The trends and challenges discussed in this paper play a key role in shaping the future of the distribution industry over the next few years. Distributors should prioritize their business needs while carefully analyzing market trends. They have to take selective risks and turn them into opportunities to improve growth prospects. Further, best-in-class distributors have tried to differentiate themselves from commodity players by creating distinct capabilities around services and availability, such as providing more value-added services and charging a premium for the services.

As the industrial distribution industry settles into a pattern of slow but steady growth, it is prudent for distributors to evaluate their business operations and strategy in terms of the trends, challenges and future prospects delineated in this paper. Based on market indicators, we believe that to succeed in this fast changing environment, distributors must focus on developing broad-line, multi-channel routes supported by efficient logistics. Geographical reach, innovative product offerings, and efficient services will be critical for sustainable growth. Best-in-class distributors have already embarked on this journey by developing technical sales (value-added services) capabilities, a highly trained and knowledgeable sales force (with provision for continuous education), and strong fabrication and assembly capabilities. We also see a clear focus on growing revenue from existing customers, adding new products or product categories, and expanding the sales team to support product expansion and reach new customers.

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