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Cloud Solutions as a Differentiator for Wholesale Distributors

Wholesale distributors face multiple challenges in today’s market. Digital disruption, low margins, competitive environment, and the Amazon effect are threatening the entire industry. To remain relevant and improve market share, wholesalers must determine their strategic path forward. Often, this includes an evaluation of cloud solutions to cut costs or increase capabilities. Business strategy could include introduction of special services, deeper sales and marketing policies, diversification into new areas which may include mergers and acquisitions, or conversely a greater focus on core capability which could mean divestiture of business segments.  All of these options could be supported through cloud solutions, which means a strategic approach to cloud migration is necessary.

We all know that the corporate vision must be enabled by an IT strategy for execution.  But how well is your organization running the evaluation of your capabilities a to assure alignment with the business strategy? This step is critical to the process of determining whether a cloud solution is the way to proceed.

Within wholesale distribution, common areas of core capability or functions which align to the company’s distinct value propositions which would be complex and must be considered when reviewing the capability of a cloud solution would include the following:

Sales and Distribution

Complex pricing routines and unique returns procedures may drive functionality beyond what the cloud solution can supply. Customized pricing routines which account for complex customer relationships are beyond the base capability of a cloud solution. Tax incentives need to be accounted for as well. Returns policies which enable unique credit or reship scenarios requiring customization also are beyond the capabilities of most cloud solutions. State and federal regulatory sales and shipment restrictions must be accounted for in the system capability assessment. The ability to track contacts as part of the order to support segmented marketing and the maintenance of account lifecycles is also critical. These are key consideration when assessing cloud paths, and one to be mindful of the barriers, specifically for wholesalers. If the cloud route affects the existing flexibility of such critical market differentiators, it’s best to stay on-premise; at the same time, if the overall decision is to move to cloud, special attention must be placed in these functions to ensure the bulk of the customization focuses on these critical business functions.

Warehouse and Fulfillment

There are capabilities within the warehouse which will go beyond basic functionality or even extended capabilities. These could include special fulfillment requirements such as break pack, one order / one box delivery requirements, cross docking requirements, and even specialized batch management needs. These necessary functionalities will need to be analyzed and gaps identified when assessing a cloud solution. One option that wholesale distributors should consider is a hybrid approach where core back office functionality moves to the cloud while core warehouse management is well integrated with on-premise mobile options.

E-Commerce

More emphasis is being placed on wholesalers to move into a digital economy. The digital movement must include key capabilities around sales and account services such as order history, invoice viewing, one-click re-order, alignment to the pricing engine, account updates and buying authority restrictions. These basic requirements require greater software maturity to handle personalization, customer-specific catalogues, and punchout capability. There have been significant developments in this functionality within cloud solutions recently and this is now a very viable option for wholesale distributors considering cloud solutions.

As cloud and on-premise solutions evolve, IT leadership is analyzing the tradeoff between functionality, integration, and cost. Thorough assessments must include a step focused on aligning functionality with business strategy. For wholesalers, the call to action is to seek advice from independent industry experts who can help weigh the advantages of different cloud solutions and provide guidance on the shortcomings in the short and long term.

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Coauthor and contributions by Steve Barrett

Tags: SAP, IT Strategy, SAP S/4HANA
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