Unless you happen to be one of the nearly 6 million people employed in the Wholesale Distribution Industry the impact and value of wholesale distribution goes mostly unnoticed by the average consumer. The fact is, the Wholesale Distribution Industry accounts for more than $5.5 trillion in global trade. In the United States alone, wholesale/distributor sales equal approximately $3.2 trillion, which also accounts for roughly 7% of private industry GDP since 1987. With that kind of contribution to the global economy, one would expect the industry would have a higher profile with consumers. However, in wholesale trade, goods are purchased and stored in large quantities and sold in batches of a designated quantity to resellers, professional users, or groups, not to the general public.
Whether supplying a range of goods, or focusing on specialty products or add-on services, wholesale distributors act as aggregators of demand, buffering manufacturers from small orders and logistics complexity while placing inventory closer to consumers for faster delivery. Efficient inventory management and fulfillment operations are essential for success, and leading wholesaling companies have long recognized that optimizing their supply chain operations is a key component to gaining a competitive edge—or to hold ground against the competition.
Canitz Says... |
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| Efficient inventory management and fulfillment operations are essential for success, and leading wholesaling companies have long recognized that optimizing their supply chain operations is a key component to gaining a competitive edge. |
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Wholesale distributors are faced with growing costs, shrinking margins, new competitors and demanding customers. Effective supply chain management is what often separates successful wholesale distributors from those that struggle. Recently, we took a look at six key actions to drive success in the white paper Six Supply Chain Actions that Drive Wholesale Distribution Success.
- Advanced modeling capabilities create a valid, forward-looking demand plan by product, customer, channel and geography, with more accurate forecasts throughout the product life cycle.
- Inventory optimization examines the stock positions in each DC as well as modeling interrelationships between DCs to reduce overall inventory levels without harming customer service performance.
- Synchronized buying and stocking policies help maximize gross margins while understanding supply-side constraints and minimizing replenishment costs over time.
- Optimizing transportation enables cost savings in the areas of route optimization, load consolidation, zone skipping and automated freight bill matching while providing opportunities to enhance customer service.
- Moving to a fact-based operating culture enables higher level supply chain capabilities like “what-if” scenario analysis, multi-echelon inventory optimization, risk management and activity based costing.
- Enhancing long-range planning capabilities enable more accurate predictions of market changes; the ability to identify and mitigate potential risks; and a more predictable and repeatable integrated planning process.
Wholesale distributors who move beyond a focus on low price, today’s orders and rule-of-thumb inventory management can reap significant competitive advantages, rewarding operating efficiencies, extra working capital, and higher customer service levels. A key component of this is moving beyond spreadsheets to more effectively model complex supplier constraints, uncertain demand patterns, and multi-location inventory networks.
If your wholesale distribution playbook has not been updated to include these supply-chain enabling capabilities, it’s time to make them a top priority.
About the Author
Henry Canitz is The Product Marketing & Business Development Director at Logility. To read more of Henry’s insights visit www.logility.com/blog.
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