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Facing the Forces of Change®

Reimagining distribution in a connected world

Globalization, consolidation, competition and the persistent threat of disintermediation are affecting distributors both large and small, prompting industry leaders to transform their supply chains and business models. In the process, they will need to shift costs, reallocate resources and seek new sources of competitive advantage. Adding to the challenge of navigating this dynamic environment is the complexity, volatility and uncertainty that continue to characterize the business and economic landscape. In this addendum to the Facing the Forces of Change®: Reimagining Distribution in a Connected World research report by the NAW Institute for Distribution Excellence, published in 2013, we examine some of the more recent challenges distributors face in the digital age and offer suggestions for differentiation.

Facing the Forces of Change®, a research study that analyzes the future of wholesale distribution within multiple lines of trade, provides insights about the overall future of wholesale distribution and the role of wholesaler-distributors. First published in 1982, the tenth and current edition of the report — Facing the Forces of Change®: Reimagining Distribution in a Connected World— revealed that while many segments of the wholesale distribution industry were enjoying relatively good times, they continued to be challenged by increasingly complex and disruptive change.

Fast forward to today, and, if anything, the volume and pace of change have accelerated faster than predicted. Rapidly evolving technology, an ever-growing mountain of data and the increasing need for global integration make it difficult for even the most forward-thinking companies to keep up with constant change.

This executive report provides an update to the latest report and presents new ideas that can help organizations meet the continuing challenges of change. Additionally, we will provide updates to some of the trends and statistics presented in Facing the Forces of Change: Reimagining Distribution in a Connected World, as well as a selection of key points worth repeating, a review of action ideas, additional examples of distributors taking action, an update on 3D printing, and a new development — the Internet of Things.

While there is no lack of “forces of change” that will impact distributors over the next few years, there is, as well, no shortage of opportunities for distributors to embrace and leverage these forces to help improve their competitive position.

Reimagining the role of the distributor

If you do not continuously remind customers of the value you are providing, customers can easily start to take it for granted. For example, another provider offering a lower product price can lead to a customer defection, even though, in the end, the customer’s new total acquisition cost might be higher. It’s important to make sure the customer understands this before the decision to switch.

For example, Andrew Berlin, Chairman and CEO, Berlin Packaging, said during the NAW 2014 Executive Summit, that organizations need to continuously remind customers about the value they are providing. He noted that Berlin Packaging is more than just a supplier of packaging. It also acts as an agent to help customers increase sales, reduce expenses and improve productivity — packaging is just the currency used to unlock these benefits. Its inventory-management acumen and 99-plus percent on-time delivery performance are two ways the company provides these benefits. Berlin Packaging quantifies its performance with bi-annual customer reviews. Andrew Berlin notes “over the last three years, our customers have earned $200 million of incremental profit as a unique consequence of working with Berlin Packaging.”

In a recent video by Manufacturing Business Technology titled “How Much Money Is Tied Up In Your Inventory?,” Brian Norris and Kevin Hartler of W.W. Grainger, Inc. reveal that the cost to buy a $10 item actually approaches $75, with the additional expense created by people and time. Additionally, they estimate that about half the items in a customer’s maintenance, repair and operation (MRO) inventory never get used or are inactive, and that 40 percent of resource time is taken up in the “shopping” exercise. They liken the cost of MRO inventory to an iceberg. The price of the item is what you see above water; the cost of acquisition is what is below the waterline.


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Meet the author

Jane Cheung

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, Global Consumer Industry Research Leader, IBM Institute for Business Value

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    Originally published 24 June 2015