Wholesale distributors have always acted as vital links in the global supply chain. In recent years, this position has magnified due to several key trends that are disrupting market dynamics, such as increased competition, global dynamics impacting supply chains, societal changes, and increasingly complex regulatory requirements.
Each of these industry challenges has a direct impact on B2B commerce activity, requiring distributors to work diligently to maintain, or even improve, customer experience.
Arrow Electronics, a global distributor of electronic components and computer products, presented the topic of e-commerce resiliency during a recent industrial supply webinar alongside John McDonnell, industry executive advisor at SAP.
During this session, Michelle Moore, vice president of Digital Technology at Arrow Electronics, discussed how key industry trends are impacting Arrow Electronics’ commerce strategy and what it is doing from an IT perspective to support evolving business and customer needs.
COVID-19’s Impact on B2B Commerce
High market competition is forcing distributors to get creative and find new revenue sources. To make matters more complex, today’s B2B buyers are taking a note out of the B2C playbook and demanding more products be delivered faster and with more delivery options. This trend was especially prevalent in 2020 as a result of the COVID-19 pandemic and will continue to accelerate.
Over the past year, distributors also saw unprecedented changes in demand – decreases and increases depending on the industry subsegment represented. Distributors have generally determined where their new baseline is, but this unpredictable demand makes forecasts highly uncertain, with more frequent out-of-stock and over-stock situations placing a strain on businesses. These tumultuous times underscored the need for distributors to quickly identify alternative suppliers and strengthen their business network.
Workforce challenges involved keeping workers safe but productive, with many back-office functions working remotely. This change emphasized the importance of employee communication and pulse checks to maintain business continuity and stay in sync with organizational needs. The increase in employees working from home also caused staffing shortages in distribution centers and placed unforeseen stress on IT departments. In addition, workers had many personal challenges during this period, making it a stressful time for both leaders and employees.
Furthermore, the current health, environmental, and trade challenges have caused distributors to move from maintaining continuity towards increasing overall longevity. Technology is acting as the catalyst to bring these new business models to life by supporting distributors’ ambitions to increase the diversity of offerings and customer share of wallet.
Building a Resilient Business Strategy
An effective strategy to overcome the challenges brought on by COVID-19 consists of three phases: respond, recover, and reimagine.
- The response phase is the process of reacting to the pandemic and understanding how it will affect the business.
- Recovery is considered an ongoing phase that allows distributors to move forward from their new baseline.
- Distributors must reimagine business, resulting in the ability to think and act fast, by developing new business models that break traditional rules. This phase may include experimenting with changes distributors were already considering before COVID-19, just at a faster pace.
Forward-thinking distributors aspire to differentiate themselves from the competition and generate greater customer loyalty by providing more value-added services. Technological advancements traditionally used for B2C consumer experience have dramatically changed the B2B buying experience, especially during the last five to 10 years. Customers are also showing the desire to collaborate with distributors to develop complete solutions for specific business needs while simultaneously partnering with fewer suppliers who can still deliver the same great products and services they need.
Distributors are also recognizing the need to better support the business continuity of their customers by implementing flexible buying and delivery options. During the pandemic peak, customers needed to have more patience and change their expectations about when they would get their products and services. Due to unpredictable supply patterns and social distancing measures, technology served the important purpose of enabling greater transparency and supporting e-commerce channels.
Digital Transformation in Action
The pandemic has caused forward-thinking distributors to accelerate digital transformation initiatives as a way to differentiate from competitors.
One solid example of this innovative thinking comes from U.S.-based beverage distributor Southern Glazer’s Wine & Spirits. This company is improving its interaction with customers and suppliers through “Proof,” its new B2B e-commerce platform.
The examples don’t stop there:
- Industrial distributor Grainger added a visual search feature to its mobile app, allowing customers to shop directly from a photo.
- Brakes, a B2B food delivery service, has addressed supply shortages by quickly pivoting to a direct-to-consumer business model in a mere seven days.
- Amazon Business introduced a smart shelf that restocks itself.
- Sigma Healthcare now offers personalized customer experiences on its platform with customer-specific branding and log-ons.
Arrow’s Digital Transformation Journey to Resilient Commerce
Arrow Electronics Inc. is a global distributor of electronic components and computer products that also provides value-added services. The company is based in Colorado and currently generates over US$1 billion in annual revenue across four Web properties. Its sources of revenue include the development of new products and services, the reinvention of existing ones, and acquisitions.
Arrow’s digital transformation began in 2015 when it acquired a B2B marketplace built on old technology that would not adequately scale or support the organization’s high growth ambitions.
Moore shared that “Historically, it [commerce] was more about having a Web presence and getting something up there for people to see you, know you, and use you, across the Internet. That is shifting toward overall automation for customers and simplification – the one-stop-shop mentality.”
From the beginning, Arrow’s commerce strategy has focused on addressing a variety of customer bases and needs, including consumer-based B2B, e-commerce, and marketplace portals. To best meet these needs, Arrow’s primary commerce objectives have been centered around maximizing customer satisfaction while minimizing the cost and complexity of its solutions.
As a part of this transformative initiative, Arrow Electronics adopted SAP Commerce Cloud to help drive costs down while increasing capabilities. The distributor restructured data, people, processes, and technology, which thereby increased the performance and scalability of its operations. It also implemented vital data governance models and moved its commerce platform to the cloud to aid compliance and business agility.
Looking ahead, the distributor will continue working to consolidate commerce operations across its Web properties, standardize site capabilities, and implement modern search capabilities. The distributor will continue to merge key business requirements with relevant technologies, allowing it to simplify and consolidate its business architecture in a way that supports agility.