It is a constant struggle for regional industrial distributors to be top-of-mind with their customers. The competition for mindshare comes from local distributors, the nationals, disruptors like Amazon and Home Depot, and disintermediators (suppliers who sell directly to customers through online marketplaces). Differentiation is difficult as these competitors sell either the same or very similar MRO products as you. Do you know how much spend leakage is occurring with your accounts? How do you keep and grow your share of customer spend? How to you stay top-of-mind for not only replenishment but spot-buys?
The Best Defense is a Good Offense
Savvy distributors offer a broad range of services including Vendor Managed Inventory (VMI), bin stocking, vending, and integrated supply to capture replenishment spend while protecting and enhancing customer relationships. Value-add offerings differentiate a distributor from the pack and help to fend off disintermediators, disruptors and local competition. However, VMI and integrated supply are table stakes for national distributors. Some nationals have expanded these solutions with complementary software that enhances inventory management and other operational processes. What is this software and how does a regional distributor afford and implement this type of solution?
Software’s Role in Value-Add Programs
As outlined in the Distribution Strategy Group’s (DSG) NAW-sponsored report “Forces of Disruption and Strategic Responses," 70 percent of surveyed distributors responded that the competitive advantage from value-added services is either extremely or very important. DSG outlines that distributors can differentiate with logistics and information value-add services which are too complex for the disruptors to implement at present.
Logistics Value-Add: This category includes VMI, customer managed inventory (CMI), consignment and vending programs. Such solutions are standalone, requiring distributor resources to maintain inventory and restock. Software can play a role in these services by simplifying cycle counts, automating replenishment and integrating vending and non-vending stock into a single inventory view for customer (and distributor) ease-of-use. A distributor’s VMI program becomes leaner and more efficient while their customer gains a valuable MRO management tool to help their business operations.
Information Value-Add: Facilitating the two-way flow of information between the distributor and customer drives operational efficiency for both parties. In today’s world, information is usually managed digitally in a software solution. Customers typically need to manage information about MRO inventory, jobs, procurement, and assets.
- Maintenance drives MRO demand: If a customer is frustrated with machine downtime and has difficulty keeping up with repairs, a CMMS can help them with predictive maintenance. Customers improve their asset management by logging maintenance and associated costs against an asset to track Total Cost of Ownership (TCO) as well as predict estimated time to replacement.
- The source of the spend pipeline: Many organizations are implementing tighter control of their procurement practices with selective supplier agreements and purchasing controls. This is an opportunity for a distributor to become an active partner in procurement processes. If a customer already has an e-procurement solution, a distributor can provide a punchout catalog to integrate into the e-procurement software. This allows a distributor to offer a familiar e-commerce shopping experience while dovetailing with a customer’s purchasing environment. To notch it up a level, a distributor can bundle an e-procurement value-add solution with their service offering. This path not only helps the customer rein in maverick spend but embeds a distributor directly in the customer’s buying process, keeping your brand and catalog front and center. If e-procurement is integrated with MRO inventory management, you also empower their operations team to order what they need to optimize equipment availability and repair turnaround.
Isn’t Software Complex?
Software solutions are typically optimized for the end-user: the customer. Keep an eye out for software that also reduces complexity for the distributor.
- A value-add solution must be easy to deploy with minimal IT expertise required of the distributor and the customer. Today’s cloud solutions do not require any installations or upgrades and solutions are accessible from laptops, tablets, and mobile apps. Accessibility means both the distributor and customer have real-time access to the system and data such as inventory levels.
- The features your solution provides should be flexible enough to be applicable to different customer use-cases, such as VMI, consignment, vending, or hybrid environments.
- The solution should offer e-procurement alternatives for a distributor who is not ready for the costs of punchout and e-commerce. Support for static online catalogs offers convenience for the customer and while eliminating the requirement for distributor punchout capability.
- A predictable and stable pricing model helps a distributor more easily determine ROI for any number of implementation scenarios.
- Achieve efficiency and accuracy by integrating your value-add software to your ERP for order automation. Integration requires IT resources but build it once and reuse with each customer deployment.
Build Stickiness
Value-add services that bolster customer operations and revenue render you, the distributor, essential to your customer and strengthens your relationship. Bundling software gives you a unique and flexible offering to help tackle multiple customer requirements and scenarios, whether logistical or informational. CMMS/EAM drives MRO demand which in turn benefits the seller of MRO supplies. Inventory management drives replenishment orders while e-procurement goes beyond replenishment by putting a distributor’s brand and catalog directly in the hands of the MRO consumer. When your value-add service delivers efficiency and revenue to your customer, you become a cornerstone of their success which not only protects your territory but drives growth.
About Tofino Software
For over a decade Tofino has enhanced distributor value-add by putting the distributor at the source of the spend pipeline. Our integrated MRO management and e-procurement solution is deployed in vending, VMI, CMI, e-procurement, and asset tracking programs. As a cloud-based solution, deployment is always easy and includes all features, unlimited users and support. Our distributors’ customers get a leading-edge OOE solution that is accessible from any browser and as an iOS/Android app. Tofino embeds each distributor in the heart of operations to stand out and drive sales. www.tofinosoftware.com
