The Future of Wholesale and Distribution

AN INDUSTRY STRATEGIC FORESIGHT TRENDS REPORT

Analyst Perspective

More than ever, wholesale distribution enterprises feel the effects of external forces. Recognizing and adopting these future trending signals could increase revenue and market share in several ways:

• Enhancing B2B customer personalization
• Enabling data-driven transparency and collaboration
• Automating business processes to drive profitability
• Fast-tracking omnichannel distribution with a smart distribution center
• Sharpening value propositions and business models by rethinking services

Enterprises must understand what core business capabilities and technology enablement are required to contribute to a viable future. IT/operational technology (OT) must provide thought leadership to help organizations toward business resilience in the face of disruptions.

Info-Tech's trends report on the future of wholesale distribution investigates strategic foresight and highlights the relevant trends for business and IT leaders in this sector. We aim to guide you through the transition journey to the future we reimagine together.

Rahul Jaiswal
Principal Research Director,
Retail, Wholesale and Distribution
Info-Tech Research Group

Executive Summary

Your Challenge

• You are overwhelmed with new and increased competition and by the number of unprecedented changes and disruptions.
• Leadership teams often lack insights into new demands for value-added services and critical trends.
• Accelerated digitization creates challenges. There are doubts about transforming the business model to adopt rapidly changing technologies and advanced automation.

Common Obstacles

• Businesses often dismiss the vital role of IT in defining and attaining digital business goals.
• Risk-averse businesses do not recognize the impact of trends or how they intersect with the digital business plan.
• IT leadership might not think that industry trends have a major effect on the IT organization.

Info-Tech's Approach

• Perform a broader scan to highlight the demonstrated and relevant trends in the wholesale and distribution sector.
• Help organizations identify which trends to follow depending on their maturity.
• Highlight the impact of these trends on business and IT leaders.
• Guide organizations on required changes driven by regulators and desired by customers.

Info-Tech Insight

The rapid transformation of the wholesale and distribution industry across the last couple of years has led to expanding business relevance. The wholesaler of the future is not merely a one-stop shop but an end-to-end value-added service provider, a direct-to-consumer (D2C) retailer, and a customer agent. The smart wholesale distribution hub presents an opportunity to drive value sustainably in today's markets.

Wholesale distribution faces unique challenges

Plan for external disruptions and internal challenges, then act on the changes required to adapt to the wholesale distribution of the future

Wholesale Distribution

New competition and value services

• Build a customer-centric model. Double down on e-commerce, improve online search capabilities, and offer high value-added services around products based on customer financial planning needs.

Sustainable wholesale distribution center

• Make aggressive commitments to monetize key insights with data-driven innovative solutions to deepen buyer engagement and optimize floor navigation using AIoT sensor fusion technology to automate the distribution center of the future.

Accelerated digitization

• Upgrade aging infrastructure and use artificial intelligence (AI), machine learning (ML), and other emerging technologies to drive secured visibility of various business processes. Enable advanced ways to automate operations with robotics.

B2B personalization

• Drive for differentiation. Business-to-business (B2B) customers strongly prefer that the company they buy from understand their preferences and needs and provide a seamless experience in the digital age.

Enterprises will focus on omnichannel distribution

Info-Tech Insight

Wholesale distributors must accelerate digitization by leveraging real-time data analytics to replenish demand through sustainable e-commerce platforms. This will advance their global reach and improve the buying experience at lower costs.

• center automation helps respond to customer needs by shortening handling time and significantly improving productivity.
• Leaders will assess and reap the benefit from new digital distribution opportunities, like direct-to-consumer (D2C), vendor-managed inventory as a service, integrated ecosystem models, adopting artificial intelligence (AI), cloud-edge computing, artificial intelligence of things (AIoT), and deploying carbon-offsetting e-commerce platforms.

Optimize operational excellence in order to realize key benefits

• Standardize processes to improve efficiency and enable new services to fulfill last-mile delivery.
• Gather information during the customer journey. The greater the volume of data available internally and externally, the more informative and precise the analyses.
• Use tools focused on enabling one view of inventory, delivery tracking, and customer access.

Opportunity to drive personalization and your value proposition

• Preset entire enterprise planning, the ordering process through order management systems (OMS), and distributed order management (DOM) applications and controls.
• Provide a unique value proposition to inform and access products and services.

Automation can resolve key distribution center operations issues

Overarching insight: The data reveals that even though the participants tend to have bigger capital expenditure (capex) budgets and a healthy interest in technology, they faced considerable difficulty finding and keeping labor. Many professional respondents faced space capacity issues during peak times. In this environment, greater use of automation would enable reliable throughput and reduce reliance on manual processes.

Sources: Statista, Peerless Research Group, "Major issues for warehouse/DC operations U.S. 2016-2021"; Supply Chain 24/7; 144 professionals in logistics and DC operations management, 2021

Focus on value creation

Current and future areas where wholesale distributors provide most value	Govern the focus more toward regional centers formats in the future
The adoption of distribution center technology is driven by the need to improve productivity, optimize the flow of products, cut labor costs, and obtain the highest levels of utilization within the distribution center. Historically, technological innovation in distribution centers has been prolonged. A significant reason is that long-term investment decisions and other corporate priorities have driven the development and implementation of technology.	In the United States, 53% of supply chain executives are estimated to be working with regional distribution centers by 2030, up from the current 35% reported by respondents. While local distribution centers may slightly decline, local facilities and in-store distribution centers are expected to become more common by 2030.

Sources: Statista "Use of warehousing and distribution centers in U.S. retail in 2020 and expectations for 2030"; CSCMP I McKinsey, "Pricing: Distributors' most powerful value-creation lever"

The Distribution Center Of The Future
Envision the infra-components with cost and competitive advantage creators in unison

The future of wholesale DC: Foundational IT features

the business requires LEADERSHIP from it for the digital transformation to succeed

REAL-TIME DATA, APIs & INTEGRATION
The enablement of real-time data, open application programming interfaces (APIs), and integration is the first step to support a unified experience with accessible data points, greater functionality, and better distribution visibility with the ability to act upon them.

DEMAND PLANNING OPTIMIZATION
Preset the entire demand planning with an order management system, distributed order management applications, predictive analytics, warehouse systems, and end-to-end value chain analytics with ecosystem partners for last-mile delivery.

ARTIFICIAL INTELLIGENCE
AI applications generate and interpret information to identify predictable patterns. The goal is to enable human-like behavior and enhance the speed of processes with data in real time.

AIoT AND ADVANCED WIRELESS
AIoT, Wi-Fi, and NFC/RFID/BLE connect wholesale distribution centers through smart device technologies, breaking down data silos and integration barriers. For example, sensors track assets and optimize efficiencies etc.

INFORMATION SECURITY
A robust information security program covering both the information and operational technology (IT & OT) landscapes is critical to ensure your organization's information and assets are protected against various forms of attack.

HYBRID-SCALABILITY CLOUD EDGE COMPUTING
A wide-ranging multiservice infrastructure network involving cloud and edge computing, software-defined linkages (e.g. LAN), and optimized perimeter security is required for omnichannel delivery fulfillment.

The future of wholesale distribution:
Four transformational trends

Smart Distribution HUB
Accelerating omnichannel delivery momentum
A smart distribution hub monetizes key insights with data-driven innovative solutions to deepen buyer engagement and optimal floor navigation using artificial intelligence of things (AIoT) sensor fusion technology to power the distribution center of the future.

B2B Hyper-Personalization
Right merchandise, right message, right time
With e-commerce, mobile devices, and fast access to data, the contemporary business-to-business (B2B) buyer is hugely different from years past. Yet, they expect the same convenient, fast, and hyper-personalized experiences as in the consumer world.

Autonomous Business
Modernizing the automation revolution
To boost profitability and decrease operational risk, wholesale distributors must be able to extract, transform, and automate data rapidly and precisely with minimal effort.

New Operative Models
Expand reach deploying value-added subscription services
The rise of B2B marketplaces and the growth of direct-to-consumer (D2C) models has spurred new competition with many suppliers driving distributors to offer high-value services like financial planning and infrastructure support services.

"The B2B e-commerce market is expected to reach US$20.9 trillion by 2027." B2B customers are driven by convenience and personalization. They benefit from having all channels to purchase wholesale products distributors offer but with compelling price and delivery options."
Source: Marketing-Interactive, 2021

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