Industrial supplies distribution is a
complex industry, subject to the same external influences that govern
the supply chain as a whole. Globalization is driving a preference
for one-stop-shopping, with customers wanting to buy products for
various locations under the same procurement strategy and budget.
Global economic factors have also lead to migration of manufacturers
from long established industrial regions to developing countries,
creating a more globally oriented market. This has created a tough
climate of increased consolidation and collaboration, which inevitably
favours the larger operator, or those who can adapt to survive.
Take the machine tools market, for example.
The Freedonia Group estimates that global demand for machine tools
will grow by 5.2 per cent per year until 2009. In contrast, figures
from "The World Machine Tool Output & Consumption Survey" show that
the UK's market share of tools production declined by a total of
38 per cent between 1997-2003, rising by only 4 per cent in 2004
despite a major global upturn.
Competitive Advantage
This increased global competition for manufacturing also means that
the role effective maintenance management plays in contributing
to overall organisational productivity has received increased attention.
As many companies are seeking ways to gain competitive advantages
with respect to cost, service, quality, and ontime deliveries, opportunities
are opening up for Therefore, a huge part of the industrial supplies
market is about providing spares and maintenance supplies for the
existing industrial and engineering companies.
With manufacturing in decline in the UK,
industrial supplies distributors are forced to compete for fewer
customers, and large scale distributors, able to move products anywhere
in the world and engage in preferential business partnerships, clearly
have the advantage. Smaller scale distributors, such as those which
are locally based, often don't have the capital to compete, being
unable to afford integrated distribution solutions or to upgrade
to modern systems.
Giant Killers
Faced with competition from distribution
giants, many independents are turning to technology to help provide
a 'level playing field'. For example suppliers frequently form consortiums
which use high-end supply chain technology to enable the pooling
of resources and products. At the same time, many are recognising
the need for business tools that will help them find new ways to
sell products and to attract and retain customers. Specifically,
in a complex market such as this, what they are looking for is technology
that analyses data and helps them identify which customers and products
are most profitable for business.
Until recently, people with this type of
business requirement may have looked to customer relationship management
(CRM) or Business Intelligence (BI) technology. However, a new breed
of out-of-the-box sales technology, known as sales intelligence,
has emerged which is designed specially for sales professionals
working in wholesale and distribution. Sales intelligence solutions
are able to take information from existing back office and accounting
systems and deliver insight into customer buying patterns by proactively
keeping the sales team informed of sales opportunities or potential
problems with drifting business.
Sales Intelligence
The leader in this field is VECTA Sales Intelligence,
which also incorporates those elements of CRM that are relevant
to distributors and wholesalers such as contact, diary and activity
management. It automatically delivers critical information about
customer buying patterns that translates into real sales opportunities.
It is able to identify potential up-sell, cross-sell or switch-sell
opportunities, in addition to highlighting customer drift, without
relying on an operator to perform complex data analysis.
The key difference in the VECTA approach
is that it does not require the level of investment, both in terms
of time and money, as that of traditional CRM or BI solutions. VECTA
delivers actionable sales intelligence, out-of-the-box. There is
no need to build data warehouses and dashboards using toolkits like
many BI solutions, and unlike CRM, salespeople don't have to enter
data before they get useful information back, so end user adoption
is almost guaranteed.
One of VECTA's major customers in this area
is WYKO, the UK's largest supplier of industrial goods and services
of its type. Despite its size, the company still recognised the
need to drive profitability from its existing customer base to maintain
its market leading position in a fiercely competitive environment.
The major challenge faced by WYKO's sales
team was the sheer volume of customer transaction data across the
company's huge product portfolio. Management knew that, when dealing
with half a million components divided across 33 main product lines,
its sales team were likely to be missing customer opportunities
due to lack of relevant and timely information.
Hard Facts
"The sales reports were tied to the stock
system and were printed retrospectively," said Ali Stronach, area
sales director. "We knew that sales opportunities were being lost
because with extended product ranges, the emphasis tended to come
from sales engineers' relationships and general knowledge of the
customer. It was difficult for them to go through the data and systematically
ask the right kind of sales questions across entire ranges which
would quickly highlight client needs or pain points and open up
new opportunities."
"VECTA is enabling our sales team to truly
understand customer buying patterns and maximise our share of customer
spend based on analysis of hard facts, not just intuition or gut-feel.
Sales engineers have told me they didn't realise how much they rely
on VECTA - it has already become an essential part of their working
life."
Powerful Effect
Such comment is not uncommon among users
of sales intelligence, who often notice a less tangible, but no
less powerful effect on the sales team's customer approach. Using
VECTA, sales personnel can pick up on client problems, sometimes
before they do themselves, by showing them an overview of their
own buying transactions, providing an invaluable 'value-add' which
enhances customer relationships.
As all businesses continue to cut costs
in the face of increased competition, reducing suppliers in order
to reduce management and procurement overheads, this type of value
added service will prove a critical differentiator for the industrial
supplies distributor. In an increasingly commoditised industry,
those who can't compete on price alone must set themselves apart
by demonstrating true understanding of their customers' business
needs
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| IT decisions are being made in
the boardroom not by IT departments. |
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| ROI justifications are
becoming more sophisticated. |
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| Customers demanding flexible
pricing models. |
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