Advanced Order Management: The Key to Wholesale Distribution Success
Recently, Blue Yonder released the findings of its survey of wholesale distribution executives1, which focused on their order management challenges, goals and forward-looking plans. While this blog provides an overview of our key findings, the complete results are summarized in our new e-book, “Distribution Executives Agree: It’s Time to Up the Ante on Order Management.”
Why did we conduct this study? Because we strongly believe that wholesale distributors are at a crossroads. The wholesale distribution business model has always been a challenging one, characterized by large product inventories, multiple trading partners, high transaction volumes, and cost-intensive logistics.
But today’s omni-channel sales environment has created even bigger challenges. Business-to-business (B2B) customers expect the easy, seamless experience they’ve come to expect from their business-to-consumer (B2C) interactions — including real-time visibility across the order management cycle, personalized service, and reliable delivery promises. Customers are also demanding low prices, although the ongoing cost increases associated with labor, inventory and transportation are stretching distributors’ margins thinner than ever. And, like every business, wholesale distributors need to contend with constant surprises and disruptions, from product and labor shortages to blocked shipping lanes.
Blue Yonder has helped many wholesalers address these challenges with advanced order management solutions. But we wondered, what are distributors across the board doing to master these challenges? How mature are they in their adoption of modern order management solutions?
The Top Three Challenges Faced by Wholesale Distributors
Blue Yonder’s survey revealed three pressing concerns for wholesale distribution executives related to their order management capabilities:
- An overreliance on manual handling and interventions. Today’s volatile and disrupted business environment is difficult to navigate using slow-moving, resource-intensive, error-prone manual processes. Because the pace and complexity of decision-making exceeds human cognition, it’s not surprising that over half (53%) of executives report that manual handling of the order management process, and manual interventions when disruptions occur, is a significant problem for their organization.
- An inability to make accurate, real-time promises. While customers are looking for B2C like experiences that include real-time visibility, more than half (51%) of distribution executives say their organization isn’t able to provide it. They need an order management system that’s built for real-time visibility and ease-of-use, as well as transforming huge data volumes — about inventory availability and location, transportation options, and shipping and labor costs — into profitable, reliable customer promises.
- Suboptimal allocation due to disrupted supply and demand. Lacking digital tools and decision automation, it’s no wonder 41% of respondents report their company is making suboptimal allocation choices when faced with disruptions. It’s nearly impossible to re-allocate inventory in the most strategic, profitable way on the fly using manual processes.
These challenges result in high costs, including missed sales opportunities (named by 49% of executives), operational inefficiencies (47%), increased inventory costs (45%), reduced productivity and service (43%), reduced fill rates (43%), and dissatisfied customers (41%).
The Solution? 75% of Wholesalers Are Replacing Legacy Systems
How do wholesale distributors plan to master these challenges? The survey results couldn’t be clearer: Three-quarters of distribution executives report that their organization is actively eliminating or replacing its outdated legacy systems. (One surprising finding of the survey is that 41% of companies are still relying on an in-house, homegrown system for managing orders.)
By investing in a digital transformation of their order management process, distributors are positioning themselves to address the three pressing challenges outlined above. Enabled by artificial intelligence (AI) and machine learning (ML), today’s purpose-built order management solutions allow distributors to monitor conditions across the end-to-end order management cycle in real time. Not only can they identify disruptions and exceptions, but they can share that real-time perspective, including inventory availability and order status, with customers.
As they ingest enormous volumes of real-time data — about demand, supply, inventory, and third-party factors that impact sourcing and fulfillment — advanced order management solutions can make optimal, profitable decisions in microseconds. They can autonomously and intelligently allocate and re-allocate inventory as conditions change, sending products to the right location at the right time and at the right cost.
Are You Prepared for the New Age of Wholesale Distribution?
Given that distributors are actively investing in advanced order management technologies, Blue Yonder asked executives about their top goals for the next 12 to 18 months. Here are their answers, organized by priority:
- Gaining real-time visibility into inventory and order orchestration (named by 49% of executives)
- Improving fill rates and service levels (37%)
- Increasing inventory and product assortments (22%)
- Enabling e-commerce and omni-channel offerings (20%)
- Automating the order allocation process (20%)
- Creating a more consumer-like ordering experience (18%)
It’s clear that the majority of wholesale distributors see advanced order management solutions as the future, and they’re actively investing in digital capabilities: 43% of organizations already have order management transformation efforts under way, and another 41% have technology enhancements on their two-year road map. Only 16% have no specific plans to embrace advanced order management capabilities.
The challenges facing wholesale distributors today are complex. But the industry’s leaders are already adopting the digital capabilities they need to master this complexity, from probabilistic inventory forecasting and dynamic safety stock predictions to time-phased available-to-promise insights. They’re embracing the power of order management optimization engines, enabled by AI and ML, to drive automated order management recommendations that balance profitability, customer service, sustainability, and other outcomes.
Again and again, history has demonstrated that early adopters gain a significant competitive advantage over companies that are slower to embrace technology innovation. As you review our new e-book that highlights Blue Yonder’s survey results, ask yourself, “Where is my organization on the adoption curve?”
The good news is that, whatever your answer, Blue Yonder delivers a full range of Order Management solutions that can take your performance to the next level. Given the distribution industry’s rapid adoption of advanced order management technologies, our only question for you is: What are you waiting for?
1 Blue Yonder collaborated with a third party, Gatepoint Research, on a study called “Commerce and Order Management Strategies.” Between August and October 2023, Gatepoint invited executives from several industries to respond via email, and 51 executives agreed to participate. All respondents play a role in e-commerce or order management decisions, with 79% being influencers and 16% primary decision-makers or owners of the order management process.