Getting the basics right on using IT in wholesale and distribution
This is a time of extraordinary change for the British market. Between Brexit and the pandemic, we’ve seen incredible shifts in how we do business.
From what we’ve seen at Freeman Clarke, the changes have been particularly challenging in the wholesale and distribution sectors. There are just so many associated services as logistics, transport, storage and 3PL, each with its own complications and disruptions.
Margins remain tight. Yet the range of services you need to offer is increasingly broad: customers want ever-higher quality and seek specialist support across the entire supply chain.
It is possible to prosper. But only for the most competitive, well-run and efficient companies.
Warehousing and distribution have always been hugely competitive, low-margin sectors. Now the rise of ecommerce has set new standards in B2C parcel delivery standards that we are seeing reflected across the entire market. There are ever-increasing demands in terms of timeliness, reliability, cost and availability of information.
Service level agreements (SLA) also have ever higher demands as B2C ecommerce has redefined market expectations. The challenge with SLAs is partly adherence and partly demonstrating adherence.
At the same time regulatory requirements have grown more complex:
- PCI compliance for carriers dealing with payment card and online financial transactions, strict rules have been in force for some time. But has your IT kept up with the requirements?
- GDPR is more demanding and the penalties are making everyone sit up and take notice! There is every sign that the government has the appetite to drive compliance across all industries and is imposing serious fines for any breach of the new rules.
- ISO27001 corporate clients increasingly insist on certification, as well as fierce confidentiality clauses.
For mid-market businesses, all of these expectations are not matched by generous budgets! New technology can solve the issues, but the investment costs can be high.
Mid-market wholesalers and distributors can absolutely meet or even exceed customer expectations and external requirements. They just have to be incredibly strategic about technology. They need systems that guarantee commercial payback. They must select the best and most cost-effective suppliers, negotiate the best possible deals and ensure their investments deliver real business benefits.
Start by getting the IT basics right
For ambitious mid-market companies, IT is central to surviving and thriving. So then how does a mid-market company on a limited budget use IT to drive growth and customer satisfaction?
The answer is fairly straightforward: get the basics sorted. If the IT agenda is submerged in day-to-day problems, there is little time to talk about vision!
What follows if a brief list of priorities:
- Ownership. IT needs a senior leader who can set strategy, be part of the business decision-making, and maintain a coherent vision for the future. Without clear ownership, expect problems.
- Infrastructure. Identify a sensible and appropriate configuration based on your business needs. Remember that infrastructure includes hardware desktop computers, mobile devices, factory-floor devices, etc. Modern infrastructure is cloud-based, so insist upon reliable connectivity and security.
- Security. Cyber security is a rising problem, and it won’t go away. Make sure that you have right security protocols in place and that your staff has been properly trained. Remember that good habits start at the top: is your CFO scribbling passwords on Post-Its?
- Disaster planning. Disaster recovery and business continuity plans must be rehearsed and ready to go at short notice. Make sure that everybody knows who is in charge of what!
- Reporting. Accurate, timely reporting must be available so that managers and executives can understand what’s going on what’s working and what’s not.
- Suppliers. Go through the entire list and ensure that you are getting the service you paid for and that the pricing still makes sense. Make sure that your staff is properly trained and understands how to tackle problems. Third-party transport management or warehouse management systems can be effective, though the quality of support and customisation varies between suppliers. Are they still worth your time and money?
- Integration. The wholesale and distribution sector typically have multiple internal and external systems. Are all your systems effectively integrated? Meaning, is there minimal manual effort? Is anybody rekeying? Is data available to dashboards so managers can run the business hour by hour?
- Negotiate. When dealing with external suppliers, make sure that at every point you have the right price and service level for your company.
Once again: cost-effectiveness and ownership
Yes, we said that already. But it bears repeating. If you want to use IT to succeed in your sector, you must identify who is responsible for each and every IT project. Be very clear about who is tracking its implementation and outcome so that the benefits are realised.
And at every step you need a focused commercial argument to ensure that every last project is cost-justified before it gets authorised.
The future is more technology
We don’t see warehousing and distribution as getting simpler, in fact, we’re seeing every indication it will become more sophisticated and demanding. We’ll see more AI for route-planning, more chatbots for customer services. Autonomous delivery is coming.
Some of these technologies will be costly, and mergers will likely put a further squeeze on mid-tier players. But the best companies will prosper. In our experience, the best the companies are the ones with their IT clearly wedded to business goals, the ones using IT to reduce costs, improve service and to focus (or create!) their own points-of-difference.