Wholesale distributors have long been vital middlemen in a product’s journey from a manufacturer to the final customer. By purchasing goods in bulk and distributing them to retailers, wholesalers ensure stores have goods on the shelf, while simplifying fulfillment operations for manufacturers. Since many wholesale distribution companies specialize in particular industries, they often have long-standing relationships with manufacturers that result in better price negotiations and reliable service.
Wholesale distribution plays a major role in the U.S. economy, accounting for about $9 trillion in annual sales, but the industry is currently experiencing massive disruption. Tariff changes, the growth of e-commerce, unstable transportation costs and increasing demand for direct-to-consumer (D2C) distribution models all contribute to a changing wholesale landscape. More and more, wholesale distribution companies are turning to technology to help them compete and stay relevant in this changing retail market.
This blog digs deeper into the evolution of the wholesale distribution market and the challenges it faces today. It also presents how omnichannel orchestration solutions can revolutionize wholesale distribution strategies through improvements in transportation management, visibility, data analytics and enhanced customer experience.
The Changing Landscape of Wholesale Distribution
In the past, very few manufacturers sold products directly to retailers or consumers, instead relying on wholesale distributors as a liaison between parties. This model was beneficial for the manufacturers, who could focus on designing, producing and marketing products without the hassle of managing smaller retail distribution channels and complicated fulfillment processes. Since wholesale distributors often stock a wide range of goods from multiple manufacturers this model also benefited retailers, who could purchase a variety of products in a single order without the complexity of connecting with individual manufacturers.
Recent years have brought new competition and disruption to the wholesale distribution model, with large online retailers and marketplaces — like Amazon and Alibaba — pushing business-to-business (B2B) and D2C sales. With expansive reach and highly developed platforms, these companies are able to offer low-cost goods, transparent pricing and fast shipping on an international scale. Additionally, manufacturers are increasingly turning to direct sales to increase profit margins and maintain control over the customer experience, further decreasing the wholesale distributor’s role.
To survive this disintermediation and growing competition for market share, wholesale distributors need to address challenges with reliable stock availability, shorter delivery times and flawless order execution.
Current Challenges to Wholesale Distribution
The changing landscape of retail distribution creates a myriad of challenges that wholesale distribution companies must overcome. These challenges impact every level of the supply chain and include:
One of the biggest benefits of the wholesale model is diversity of products, yet this also creates one of the largest challenges in regards to inventory management. With so many products and SKUs to monitor, even slight miscalculations in forecasting and procurement can impact the profitability of a wholesale business.
Effective inventory management seeks to find the balance between supply and demand, walking the fine line that separates inventory shortage and overstocking. An inventory shortage prevents a wholesaler from fulfilling customer demand and puts customer relationships and future revenue at risk. Conversely, overstocking inventory ties up working capital and increases operational and storage costs. Both options hurt the bottom line and impact a wholesale distributor’s profits.
It’s no surprise to industry professionals that cost containment is an ongoing challenge for all supply chain parties, and wholesale distributors are no exception. While the pandemic drove transportation rates and prices on high-demand goods through the roof, wholesale and retail distribution channels alike struggled to control costs and manage daily operations. While the freight market has cooled substantially since its spike in summer 2021, supply chain costs remain unpredictable.
Wholesale distributors are particularly vulnerable to cost variability, as any changes in costs for manufacturing, procurement, transportation or labor impact a wholesaler’s relatively small profit margins. This is more pronounced in unpredictable inflationary markets, where wholesale distribution companies struggle to forecast future demand and price goods, particularly on cheap, low-margin products.
Visibility is another persistent concern for parties throughout the supply chain. Wholesale distributors need visibility to monitor the movements of inbound inventory; manage picking, packing and shipping processes; and track last mile deliveries to customers. Unfortunately, achieving this level of visibility remains a challenge due to the fragmented nature of supplier and transportation networks. Too often, obtaining critical order and shipment updates requires poring over emails, PDFs or various online portals, or calling vendors directly and waiting on hold while they search for the same information. These inefficient processes often mean missing critical exceptions notifications when shipments are delayed, leading to late shipments and dissatisfied customers.
Obstacles to Orchestration
Wholesale distribution companies often rely on a combination of internal fleets and assets and outsourced carrier capacity to deliver goods to their customers. Many of these delivery networks have become more complex as consumer expectations for fast delivery have increased, forcing wholesale distributors to further diversify carrier networks to include expedited and last mile couriers.
Sudden transportation network growth only amplifies visibility and fragmentation challenges, and creates further obstacles to network optimization. Manual processes for routing and tracking simply cannot keep up with the demands of a complex retail distribution network. Technology solutions that can integrate disparate carrier data sources to simplify tracking and optimize wholesale distribution networks are critical to overcoming this challenge.
Modern wholesale distribution is met with numerous challenges, but that doesn’t mean all is lost. Afterall, modern problems require modern solutions. Omnichannel orchestration solutions provide the capabilities wholesale distributors need to remain competitive in a changing market.
Keep Wholesale Distribution Competitive with Omnichannel Orchestration
To regain profitability and deliver on evolving customer expectations, wholesale distributors must innovate to differentiate themselves in the market. Doing this will require adding high-value services, increasing operational efficiencies and providing customer-centric solutions that transform retail distribution channels. Omnichannel orchestration provides innovative solutions that help wholesale distributors stay relevant and competitive in today’s challenging market.
OneRail’s omnichannel orchestration solution is designed to remove the friction in wholesale and retail channel distribution, by bridging communication gaps across supply chain networks and integrating technologies and processes into a single system. In other words, it works as a delivery management platform that brings together forecasting, procurement, transportation and distribution processes to streamline wholesale distribution fulfillment and execution. Let’s take a closer look at how OneRail’s orchestration solution works.
Integrated Operations for Process Optimization
The OneRail orchestration solution integrates data from various disparate systems across the supply chain network to provide an unparalleled level of visibility, creating an opportunity to optimize processes at every level.
- Inventory: Integrations with WMS, TMS and ERP systems pull data on existing inventory and incoming orders to provide wholesale distributors with a high-level view of inventory across the network. This allows them to more accurately plan procurement, warehousing and distribution needs.
- Fulfillment: By integrating data across purchase order systems, the orchestration system ensures that new orders are captured, packed and shipped efficiently to minimize errors and optimize wholesale fulfillment processes.
- Delivery: OneRail’s omnichannel orchestration solution integrates real-time tracking updates from internal assets and external carriers. This allows wholesale distributors to quickly identify shipments at risk of missing delivery targets and initiate exceptions management to address issues before they turn into missed deliveries and dissatisfied customers.
On-Demand Last Mile Capacity
Growing demand for fast, cost-effective delivery means last mile is a critical component of a modern wholesale distribution model. With OneRail’s orchestration technology, wholesalers can access the largest integrated last mile courier network, with over 10 million drivers and over 600 courier entities. Whether a delivery requires courier, parcel or LTL, OneRail’s network can get it there — hotshot, same-day, next-day, expedited or economy.
Automation to Control Costs
Wholesale distribution companies typically rely on a high volume of sales at low margins to retain profitability — every dollar matters. An omnichannel orchestration solution helps control costs through automation technology, eliminating tedious manual tasks and delivering significant savings in real time.
- Advanced automated rate shopping compares prices against every available mode, to ensure the best carrier at the best price for every shipment, without wasting time calling and emailing carriers in every market for quotes.
- Delivery order automation eliminates the need for manual tendering and dispatching, giving wholesale distribution teams time to focus on high-level revenue-generating tasks.
- Automated real-time delivery tracking keeps last mile couriers on track and provides dynamic ETAs, so both wholesalers and their customers stay in-the-know every step of the journey.
OneRail’s Omnichannel Orchestration Solution Gives Wholesale Distributors the Competitive Advantage
With so much change in the retail distribution market, it’s imperative for wholesale distributors to identify opportunities for modernization and optimization in their supply chain and transportation networks. Specifically, wholesalers need a reliable partner to help them implement technology-driven omnichannel orchestration that streamlines fulfillment and last mile processes. OneRail’s solution delivers an enterprise-capable API for integration and a vast, reliable last mile delivery network that is proven to be nearly 99% on-time.
With OneRail, wholesale distributors can overcome the challenges of evolving customer expectations and a highly saturated market and more quickly realize the benefits of network optimization and advanced, data-driven decision-making. Schedule a demo today to see how OneRail can give your wholesale business the competitive advantage in even the most challenging markets.