Over the past few years, the world — and the distribution industry that helps it run — has been through a lot: a global pandemic, major international conflicts, labor shortages, an unpredictable supply chain, radically shifting customer expectations and many more events that have made the economy less stable.
Fortunately, there hasn’t been a recession since the pandemic shutdowns of 2020, and the economy has managed to stay on its feet despite recent inflation. According to U.S. News and World Report, growth is slowing down as we enter the final quarter of the year, and while economists generally aren’t expecting it to lead to a recession, the risk is still very much there.
Recessions are hard to forecast and not officially declared or acknowledged until businesses and consumers are hit with the effects. That means that distributors need to prepare by making significant investments in technology, including AI, to improve their productivity, efficiency and resiliency.
Surviving a Recession Requires Investment, Not Withdrawal
When looking at a potential recession, business priorities shift to survival, recovery and disruption preparation. Amid economic stress, continued pressure from competitors and the uncertainty of what lies ahead, your instinct may be to withdraw and tighten purse strings to protect your business. One of the best ways to prepare for future disruption is to strategically invest in technology to thrive after the market bounces back.
According to McKinsey, over these past few years of disruption, roughly one in ten distributors have thrived, improving:
- Revenues by an average of almost 9% CAGR
- Profits by around five percentage points
- EBITDA margins by nearly seven percentage points
One of the main common denominators between these thriving distributors? Bold investment in digital technology.
Tech is More Vital to Recession Survival than Ever Before
When the pandemic hit the U.S. in 2020, many businesses had to scramble to figure out how to get their teams to work remotely. Meanwhile, businesses that had already invested in remote work technology carried on with minimal interruption. The next major disruption — which may very well be a recession — will similarly separate the forward-thinking distributors from those holding back on investing in tech.
In the past, businesses have prepared for downturns by:
- Adding support for better operational or sales systems
- Embracing analytics to enhance their understanding of what’s driving business and doubling down on those drivers
- Providing better-than-ever service to their customers
All of these things are still necessary. Now, in a world that seems to be permanently altered by the pandemic, businesses must also:
- Equip themselves with the tools to provide a constant connection to customers, whether your sales team is in the office or not
- Increase internal remote capabilities
- Remain vigilant with heightened cybersecurity
Then there’s the emergence of AI, which presents major opportunities to distributors who choose to invest — and major opportunity costs for those who don’t.
How Technology Helps Distributors Thrive Despite Uncertainty
New enterprise technology can help distributors attract more customers, strengthen relationships with existing customers and keep a vigilant eye on supplies and production. AI-powered tools are particularly useful for distributors, as they can leverage massive amounts of customer and product data to help drive better decision-making. They’re also ideal for automating tedious manual tasks, which take up a lot of time across functions.
Investing in the right tech solutions can put your company in a position of strength — and strength is what you need in the face of economic uncertainty.
Improving Internal Efficiency
Rather than cutting staff or services, consider how tech could help your current staff become more productive. Ask yourself:
- Could you better serve your customers with virtual agents and enhanced ecommerce offerings?
- Are your sales reps spending too much time on tasks that don’t lead to sales?
- Are there any opportunities to improve your ordering process?
- Can you identify and address inefficiencies by embracing AI-powered tools?
Boosting Sales Team Productivity
Investing in technology can help your sales team find and take full advantage of every chance to sell more products and services to more customers. For example, Microsoft Dynamics 365 Sales can help your reps manage their contact pipelines, understand their customers’ needs and zero in on prime opportunities for cross-selling and upselling.
With a sales platform that sets up your sales reps for success, you can more easily retain your best people and limit turnover, even if the economy slumps. When you combine that platform with Cloud-based ERP software like Microsoft Dynamics 365 Business Central, your reps get more out of the data at their fingertips.
Revisit your goals and processes for internal and field sales reps, learn about their challenges and then provide tech tools to help them overcome those challenges.
Solidifying Customer Relationships
Even if you feel stretched by economic factors, don’t lose focus on your customers. In fact, the best way to withstand that stretching is by cultivating a true customer-centric culture. That means:
- Providing your team with tools that offer actionable insights into customer wants and needs.
- Giving your customers the best possible digital experience.
- Investing in a strong CRM that helps your team nurture existing relationships and generate targeted leads.
Becoming Disruption-Proof
Old, inefficient technology can put your organization at risk of not being able to continue during a significant disruption. If your ERP system is on-premises and you operate a few applications in the Cloud, unexpected events could easily halt operations.
In addition, if you don’t have the means to check the status of every aspect of your supply chain with automatic updates, then you’re already behind.
Severe-risk companies have:
- Mostly old and on-premises technology
- No possibility of remote work
- Completed stalled operations should something happen
- Lacking or nonexistent security policies
- No clear picture of their warehouse inventory or supply chain
At a limited-risk company:
- Cloud solutions and a Cloud infrastructure limit security and business continuity risks
- Applications and data are integrated
- Employees can work from anywhere
- Operations can be running within hours following an issue
- Security is built into the Cloud ERP solution and/or hosting platform
- Supply chain management solutions monitor supplies, production, equipment health and other critical factors for supply chain continuity
If your organization doesn’t operate primarily in the Cloud, now is the time to migrate.
Navigating the Road Ahead
When it comes to economic uncertainty, distributors need to focus on controlling what they can control. What improvements can you make regardless of economic conditions? And what tools will enable you to make those improvements?
An expert tech partner like Enavate can help you assess the risks and benefits of new technology and help you take the right approach for your company, from exploration to implementation to adoption. To learn more, reach out to our team today.
