The Biggest Cost and Trends in Distribution Industry
May 24, 2022
the INFT team
Consumers know that there are many things going on behind the scenes to get everyday items to the shelves they find so easily in their favourite store. How did they get there? How much did it cost? Who is involved?
Most consumers have a general but also quite incomplete idea.
The main purpose of an efficient Supply Chain Management (SCM) system is to ensure that the distribution of raw materials through different channels to the consumers is cost-effective, fast, and efficient.
The role of distributors in the SCM is crucial because it helps manufacturers reach markets that they would otherwise have to access themselves.
Businesses appoint distributors because of their ability to maintain, reach, and expand their network of customers, contacts, and relationships with local businesses. Distributors play a double-role of being both a customer and business partner.
The biggest distributors in the world rely on the fact that they know the local business culture and practises better than manufacturers. It then becomes the direct point of contact between the manufacturers, wholesalers, and their target markets.
To digitise parts of the entire SCM network involves flexible supply chain financing.
The Biggest Cost to Distributors
The unique thing about the distributor role is that it is a liaison between manufacturers, wholesalers, and the general public. The relationship does not end when the products or services reach its intended audience because distributors also help maintain and upkeep equipment, deal with warranty issues, and offer support to customers when the need arises.
They, indeed, wear many hats.
With that said, there are costs associated with playing so many roles.
One of the latest challenges for distributors and wholesalers is meeting consumer demands faster. The market is customer-driven, and everyone in the supply chain needs to adjust their businesses accordingly.
This could mean tapping into local services, local inventory, and maintaining a line-up of local sales people.
Yes, that spells out to mean extra cost to the distributors. Distributors have been on the lookout for reliable and affordable supply chain financing for a good couple of years.
The primary cost to a distributor lies in the margin - the difference between the cost of production and the selling price. Let's not forget about overhead costs, shipping, storage, supply chain financing, and marketing.
The cost of being a distributor increases, of course, if you’re in the import-export business because specialised requirements and external parties may be involved.
How Have It Changed The Distribution Business
Without a doubt, the COVID-19 pandemic has disrupted the inner workings of supply chain networks worldwide. But it has also highlighted some key necessities that supply chains need the most, not just during the pandemic, but any time.
Despite being challenged, the global supply chain management managed to keep essential medical supplies, food and other essential items flowing through the logistics network with as little disruption as possible, working through hiccups and hurdles.
It tested the resilience and flexibility of each company’s ability to react and leaders’ business model. In many ways, the industry emerged into a very different world today, thanks to the severe impact of the pandemic. They’re faster, safer, and more secure than ever.
During the critical period, leaders have learned how to accelerate the adoption of flexible ways to work things through every component in the SCM, transforming it, maybe forever.
But by doing so, wholesalers, manufacturers, distributors, and retailers have a deeper insight into how to rapidly navigate their way to the system to address the needs of their customers and suppliers. They are, we can safely say, in a better position to handle massive complexities and disruptions in the supply chain.
Trends In The Distribution Industry
1 - Transportation and Delivery
Transportation, the drivers who actually move goods from one place to another, has become the focus for almost everyone in the supply chain management grid. Without them, goods and raw materials cannot enter the inventory conveyor belt.
Supply chain financing into digitising the process of finding and hiring, incentivising, and rewarding them would have to be one of the top priorities.
2 - Addressing Localised Suppliers
We all know that consumers are now more demanding when it comes to not just getting emergency supplies. Every order is now expected to reach its destination at a faster pace.
During the peak of the pandemic, companies faced extreme difficulties in delivering on their next-day-delivery promise.
So, the trend is now to focus on the quick commerce market.
Due to the highly competitive market, same-day delivery is no longer just an option, it is expected. To oil up the supply chain mechanism, the trend is to establish a closer relationship with local manufacturers and suppliers.
3 - Improved Agility With SCM Technology
The supply chain landscape needs to accelerate the capacity by adopting automation and improving its ability to tap into integrated systems, data, and resources when the need arises. It can no longer be on a crisis-based system.
Leaders have become increasingly flexible in their innovation strategies, workers may have better access to new resources, and managers have better visibility.
At the point of publication, only 15% of companies have either an automated reporting or conveyance process. 46% plan to automate the reporting process in the near future.
A simple example of digitising the supply chain system would be to create automated alerts for delivery of products, confirmation and push notifications which will enhance the entire process. Optimising communication across the whole supply chain network creates clear visibility and enhances companies’ ability to solve problems quickly and efficiently.
It is a fact that flexible supply chain financing can be the muscle behind this move.
4 - Storage, Fleet Management And Automation Tops Priorities List
Distributors around the world are starting to rely more on cost-saving fleet management software to manage drivers, fleet managers, dispatchers, and vehicles. On top of increasing efficiency, it saves costs and helps meet the increasing demand for fast delivery of goods.
The structure and system are more diversified by using varying means, depending on the hour of the day and season. Multiple fleets with a combination of in-house dispatchers and third-party providers come in handy, while during peak periods, dedicated per-location options are optimal for lowering cost and increasing speed.
5 - Returns Supply Chain Management
More online orders would mean more returns as well. It’s a natural order of things. Companies within the supply chain network need to tighten up their returns management.
For distributors, it makes sense to help their customers return wrong or damaged products because it is a part of the relationship-building process. Customers want a simple, fuss-free, reliable, and accountable way to return products. The problem is a large part of this process is manual because it deals with inventory management and restocking. Tallying up logistics costs for returns is not an easy task.
But that is when tech comes in, allowing for automated and highly transparent tracking. Digitising this part of the SCM process, reverse logistics operations, has been welcomed. Automation helps oil the supply chain management engine and is a part of the cost-savings process.
Whether you’re a manufacturer, wholesaler, distributor, retailer, or a platform, INFT has developed flexible supply chain financing that can help ease the movement of money throughout the supply chain web.
Knowing you have the funds to clear potential financial obstacles like price wars, rising transportation costs, storage, logistics, and new investments in technologies, INFT will help you focus on what's important for your business.
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