Consultants and Vendors
Wholesale & Distribution
Get it Right the First time!
Keep Ahead and Out of Trouble
The Right Technology Choices
Industry Digital Progress
Of all the industry sectors Wholesale and Distribution are probably the most threatened by ecommerce. Manufacturers are beginning to sell directly to consumers or sell through mass market platforms such as Amazon or directly to retailers. The geographical territory of the wholesaler or distributor is increasingly becoming less relevant and the realm of the commission salesperson, the so called “middleman”, except for some specialized industries such as pharmaceuticals, is threatened to its very core. Although the jury is still out, the change to ecommerce is seen by some to be both a threat and an opportunity. Enter Digital Transformation.
For the Wholesale and Distribution industry, the digital transformative emphasis seems to have been, and so promoted by vendors in some cases, on technology and operational matters with too little a focus on commercial strategy and the needed digital reinvention of customer engagement. In the meanwhile, according to Forrester, a market research company, almost 40% of B2B buyers are now finishing their purchases on Amazon. The percentage of B2B buyers finishing their purchases on distributor sites has fallen from 30% in 2015 to 16% in 2017. Buyers prefer sites like Amazon that are easy to use, fast, with broad selection, limited login requirements, and built-in trust. Amazon is part-platform, part-marketplace, and part-reseller. By various estimates, Amazon currently sells one-third via digital e-commerce sales, one-third via reselling/white labeling, and one-third via third-party resellers.
That the B2B wholesalers and distributors are under threat is not in doubt. For example. In wiring connectors, Amazon Business has 77,764 listings compared to a Big-4 distributor’s 2,855. Amazon has products listed from 106 of the 120 manufacturers offered by a Big- 4 distributor. Even worse for distributors, 96 of these 120 distributors, or 80%, already sell directly on Amazon and prices on Amazon are often 25 to 30% less. Between Alibaba and Amazon Business there seems to remain very little space for survival. Compared to this existential threat and in spite of Covid-19, the degree and pace of any appropriate or commensurate digital response (Resilience), being mounted by the Wholesale & Disgtribution industry, can only be assessed to be on the low side and of the order of 20-25%.
Industry News & Views
Kroger migrates its customer facing search engine/App to Google Cloud
April 15, 2019 - It was mainly three way match between AWS, Microsoft Azure and Google Cloud Platform. AWS was seen as a competitor so that did not work for Kroger. Search and AI capabilities were seen to be the clincher for GCP when it came to Azure. A Blue Green approach was used in going from base metal to cloud. Kroger is the biggest US supermarket with 2800 stores and $121 billion in revenues.
Take a look what we are offering to you
Digital Transformation in Wholesale & Distribution - CASE STUDIES
OCADO - The Online Supermarket - Fully Robotized
Established in 1987, Infomedia serves 170,000 users representing 39 global automaker brands in 186 countries around the world with software for spare parts catalogs, parts and service sales, and lubricant point of sale solutions for oil companies. Infomedia provides about 200 discrete applications that help dealers service their customers while maximizing profitability. With dealers depending on the Infomedia’s software, performance and reliability become critical.
With innovation being Infomedia’s key competitive strategy, the company was one of the first software vendors to use Amazon Web Services (AWS) in 2012 in Australia. The key challenge was to preserve Infomedia’s level of service and performance as it transitioned to the cloud and Infomedia did this, in part, by liberal provisioning of infrastructure. But it found itself unable to track actual customer experience as well as the causes of any performance issues which it addressed by adding more infrastructure capacity in the form of cloud resources. It could not accurately distinguish between capacity constraints and suboptimal software resource consumption. As a result not only did costs face potential escalation but application performance was also at risk.
Infomedia chose New Relic, a pioneer in modern application performance management in the cloud, to help increase their operational visibility in the cloud. New Relic allowed them to better observe their application performance as well as consumption of cloud instances needed to provide the level of performance for the customer experience that they needed to maintain.
They used the New Relic APM to monitor application performance, New Relic Infrastructure to track the use of the underlying infrastructure to deliver that performance and the Health Map visualize the overall inter-relationship of application performance and infrastructure. They could be running 50 or more Amazon EC2 resources per application with 10 or more versions running at the same time and it was only with New Relic that they could accurately visualize and distinguish between application and infrastructure performance.
This new ability to disaggregate application performance and infrastructure consumption allowed them to address the two issues separately to optimize application performance while also improving infrastructure utilization through the insights they obtained on each aspect. For example, one application alone was found to be using 49 large instances, indicating that the problem was more likely to be in deployment. This helped them reduce cloud spend by over 40%, and improved their decision making on provisioning for other applications. In another example, an application was found to be memory intensive rather than CPU intensive as was previously envisaged. In this case the savings were almost 90%. This also helped them to further improve customer experience.
In addition to resource optimization and application performance improvements, the insights provided by New Relic helped improve another key aspect of Digital Transformation – namely company culture. The causal transparency has helped to reduce “finger Pointing” and also improved the level of trust between executive and operational personnel.
Sources: New Relic
- Michelin¹ is a global player in mobility and one of the leading tyre manufacturers across the globe.
- Michelin has 107,000 employees and achieved revenues of €21 billion for period ending TTM 6/15 and an EBITDA of €3.4 billion; margins have increased from 13.8% in 2011 to 16.6% TTM 6/15.
- EFFIFUEL™ by Michelin Solutions was the first innovation in the market targeting increased efficiency in fleet fuel consumption.
- Michelin Solutions makes a contractual agreement to meet pre-defined targets, or otherwise provides a refund in proportion to expenses incurred.
- EFFIFUEL™ is a comprehensive ecosystem that includes sophisticated telematics, training in eco-driving techniques and the EFFITIRES™ optimized tyre management system.
- EFFIFUEL™ provides a “satisfaction or your money back guarantee” by providing the fuel efficiency service risk-free to truckers.
- EFFIFUEL™ encourages careful handling of the truck equipment, leading to extra savings for companies and a potential doubling of pervehicle profits.
- A reduction in fuel consumption of 2.5 litres per 100km represents annual savings of €3,200 for long-haul transport (at least 2.1% reduction in total cost of ownership and 8 tonnes in CO2 emissions).
- Business model shift from selling tyre as a product to a service guaranteeing performance, has helped Michelin achieve higher customer satisfaction, increased loyalty and raised EBITDA margins.
- Michelin initiated the digital transformation internally, but they soon realized that in some critical areas, such as big data analytics or infrastructure they needed to partner with external experts.
- Cultural change was another prerequisite to successfully manage the digital transformation journey.
- The risk of changing the business model was mitigated since Michelin Solutions was created as a standalone entity and the company decided to test the solution by launching several pilots.
Sources: Michelin, WEF/Accenture Analysis
- The LEGO Group¹ engages in the development, production, marketing and sale of play materials. It provides toys as well as experiences and teaching materials for children in approximately 130 countries.
- Founded by Ole Kirk Christiansen in 1932, LEGO is based in Billund, Denmark. It is a subsidiary of KIRKBI and is currently privately held.
- In 2014, LEGO earned €3.8 billion in revenues and €1.4 billion EBITDA, with a margin of 37.1%. It currently employs approximately 13,000 people.
- After a period of expansion (1970-1991) LEGO suffered a steady decline (1992-2004) and by 2004 LEGO was close to bankruptcy.
- Reaching a tipping point, LEGO started restructuring and a digital transformation programme focused on new revenue sources coming from movies, mobile games and mobile applications.
- LEGO’s design capabilities have been increasingly handed over to their fans e.g. through the Digital Designer (a web-based 3D design tool to create own designs). It’s USP towards learning and development differentiates it from competitors and convinces parents from millennial generation about the usefulness.
- LEGO achieved an EBITDA margin of 37.1% in 2014, an increase of 15% since 2007.
- Revenues for LEGO have grown at a CAGR of 20% from €1.6 billion in 2009 to €3.8 billion in 2014.
- In 2014, the first LEGO movie achieved revenues of approximately $468 million with a production budget of only $60 million.
- LEGO has recovered steadily post 2005 and it is now seen as “the Apple of toys”.
- LEGO’s new business group has become the incubator of the company, an open platform that allows fans and partners to experiment with “micro businesses”.
- LEGO was able to transform itself by launching new digital based businesses such as movies, LEGO Mindstorms, video games and applications, connected to their block systems that are more appealing to digitally savvy customer groups.
Sources: Lego Corporate Information, FT, LA Times, Global Toy News, WEF/Accenture Analysis
Have a Burning Question?
Chances are someone has the answer! We invite you to post your question in our Q&A forum, where you can Categorize your question and tag it to one or more of the Digital Transformation related topics and apps.While we do not guarantee that another member will answer it in time for you, chances are good that one or more of us will.