REPORT
2018 State
of Distribution
Turning Challenges
into Opportunities
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Manufacturers and distributors are bracing
themselves for what is ahead for 2018 with
today’s increase in competitive forces and
margin pressure. Some are embracing the
challenges and responding to the current
marketplace by taking advantage of them and
using them as an opportunity for growth. Here
are the biggest trends in 2018 that executive
leadership must develop a plan to address or
miss an opportunity to drive growth.
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Customer
Transaction
Management
Companies must focus on maintaining customer relationship equity, or risk customers switching
and giving their business to a competitor. All aspects of customer transactions must be managed to
the highest level of satisfaction. To do this, distributors and manufacturers must understand their
key customers and how they want to transact. This allows them to meet their needs based on their
preferences and protect the customer relationship.
The changing profile of buyers and buying preferences means that sales team structures need to
be re-examined. Inside sales teams must focus on managing the customer relationship, and the
customer relationship equity in the company the customer is doing business with. Outside sales
should focus on taking advantage of critical selling events that potential customers are experiencing
with competitors. This is an event that occurs after a decision is made to purchase that negatively
impacts the relationship and may lead a customer to switch to a different vendor.
To protect the customer relationship, inside sales teams should be empowered to serve their
customers in the highest capacity. This means alleviating mundane tasks like manual order
processing that offer no incremental value to the customer relationship. Manually keying in purchase
orders arriving from customers lengthens order cycle times and introduces an opportunity for errors.
This creates a scenario that makes customers open to switching due to a poor transaction experience.
By automating purchase order processing, customers get their orders quickly and with complete
accuracy, allowing inside sales reps to focus on meeting the needs of their customers and profit
generating activities.
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The Elephant in the
Room: Amazon
Business
Distributors and suppliers must now compete with organizations that previously were outside of
their geographical footprint. Further, their own customers have elevated expectations due to Amazon
Business “raising the bar” on customer experience. Using automation to reduce order cycle times and
fulfilling orders with 100% accuracy can allow for growth as customers experience a similar fulfillment
experience and have confidence in the company behind the sale—one that they’ve been transacting
with for some time.
Additionally, instead of considering Amazon Business as a threat, distributors can use Amazon as
another sales channel for inventory that doesn’t require a lot of customer service or product support.
This presents the requirement of speedy order fulfillment and transaction processing. To take
advantage of Amazon Business, companies need to adhere to the processing parameters set forth by
the platform. Conexiom Sales Order Automation can process orders coming in from any e-commerce
platform without manual intervention and deliver them into your ERP system in minutes.
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Understanding
Customers with
Unstructured Data
Unstructured data is data that resides in unstructured formats like email. It’s typically not something
that most distributors think about when making operational business decisions based on sales
channel data. Distributors look to typical digital touchpoints like e-commerce for customer behavior
data that informs strategic decision making. However, with up to 80% of orders still being placed via
email, a large portion of insights are missed.
Unstructured email data can be re-organized and analyzed with the right tools to deliver a true view
of customer activity. An enormous amount of transactional data is missed because most orders come
through via email. Re-organized and analyzed with the right tools, it delivers a true view of customer
activity like buying trends, key customers, volume, timing, etc. which can help with forecasting and
inventory management. Conexiom Sales Order Analytics programmatically scans incoming email data
and restructures it into meaningful data points to deliver the missing puzzle pieces of customer order
activity at your company. This analysis provides customer segmentation insights that help companies
understand how their customers process transactions. Conducting a formal assessment of customer
preferences reveals attitudes and preferences that can be used to inform operational decisions that
can deliver optimal efficiencies.
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Re-examining
the Cost to Serve
Customers
Distributors and manufacturers have many expensive sales platforms in place like EDI or web portals
to deliver a seamless and efficient customer transaction experience. Unfortunately, the execution
of these platforms is not as “simple” or seamless as originally thought. Distributors most frequently
view the total sale or gross margin as a success metric. When customer exceptions within these
transactions occur, it can significantly increase cycle times and operational costs to serve. Distributors
must look at the entire transaction from order placement to order fulfillment. Often the realized cost
to serve has an impact on margin that is not obvious to executive leadership. By not examining the
number of “touches” required to process customer orders, companies could be inhibiting their own
growth.
Companies can address this in two ways. The first is to automate all purchase order processing. Where
EDI is too cost prohibitive, solutions that provide a similar efficiency should be examined. Additionally,
a closer inspection of the method of automation needs to be explored. EDI should provide complete
automation, but with exception handling an already costly automation tool may not be as efficient
as originally planned. Understanding the true cost to serve can help reveal where operations are
impacting profitability.
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Addressing the
Impact of Digital
Transformation
A potential downside of digitizing business processes is the possible erosion of customer satisfaction.
Companies often implement transformations with a goal of reducing operational costs and increasing
efficiency without understanding the risk of compromising customer loyalty.
Typically, a company will proceed with a transformation that is purely for cost reduction and long-
term efficiency, without consideration to the end customer. Others may proceed with a transformation
knowing that there is a potential risk to the erosion of the customer relationship and experience, but
not a real grasp of the risk to customer loyalty.
Embarking on a transformation that can negatively impact the customer relationship equity may lead
to a critical selling event making a company vulnerable to competitive threats. Ultimately, customer
satisfaction is a critical factor of growth and success. There are solutions that allow businesses to reap
the benefits of digitization and simultaneously maintain high quality customer service. Conexiom
Sales Order Automation reduces manual processing costs by 80% and decreases order cycle times
while processing orders with complete accuracy. This means customer satisfaction increases, all the
while reducing a company’s cost to serve.
Is your organization ready to take advantage of the challenges ahead in
2018?
Report: 2018 State of Distribution
Manufacturers and distributors are bracing themselves for what is ahead for 2018 with today’s increase in competitive forces and margin pressure. Here are the biggest trends in 2018 that executive leadership must develop a plan to address or miss an opportunity to drive growth.
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