How to Build a Distribution Management Strategy

Growing a business in times of inflation and increasing supply chain disruptions has never been more challenging. When it comes to building your distribution management strategy, measuring its health and assessing growth opportunities, business owners must never lose sight of the four Ps — people, process, product and planet.

How to Build Your Distribution Management Strategy

1. People

Your distribution management strategy will not run itself. Finding and retaining talent requires equitable compensation. How can your businesses compete with the perks and benefits offered by larger companies? The answer is simple – purpose. A well-defined business plan will energize your workforce. Purpose-driven employees know their work truly matters and how it impacts the company, their colleagues and the outside world.

As the number of employees increases, so does the challenge of communicating both your business plan and your company values. It will be important to reserve time to campaign these to a larger group of people. Business leaders agree that purpose is one of the strongest motivators in today’s modern workforce.

2. Process

Continuous process improvement must be built into your business plan. A business can be defined as the sum of its processes. Think of a process as the actions taken to perform a specific business function. Understanding and documenting a business process will ultimately reveal inefficiencies and improve compliance. It’s a critical step in building your distribution management strategy. This effort is never ending, but so worth it.

Prior to documenting a process, it is imperative to take a step back and identify the use case that triggers the process. Imagine investing into a process that supports a use case that should be eliminated altogether — what a waste!

Define the actors involved in each process. Warning: an actor is not necessarily a person. In fact, most business functions involve a technology actor. For example, an actor can be a device that reads barcodes or a business system. Technology has transformed the supply chain from top to bottom. Successful distributors have embraced technology to help execute their distribution management strategy — and so must you. You will find that most, if not all, of your business functions can be improved with the use of technology.

Focus first on the ‘happy path’ and then look for and define the exceptions. A process with known input and output that is executed without exceptions or errors is a happy path process. Professional project managers understand that a causal factor in project failure is too much emphasis on low-risk scenarios. This is especially true with projects involving the implementation of information technologies.

3. Product

When thinking about your distribution management strategy, you must think about the value of your product. What value are you bringing to your customers? While it is essential to provide competitively priced, quality products, you might find most customers focus on the full experience of doing business with you. Competing on price alone is never going to lead to success.

Most distributors sell to a diverse base of customers with varying expectations. Some customers may put an emphasis on personalized service while other customers expect a fully automated, digital customer experience. The cost and manner of doing business impact both parties: the seller and the buyer.

The end game for a distribution management strategy is to engage in profitable relationships. Classify your customers into groups based on various factors, such as profitability, revenue, loyalty and cost-to-serve. The stratification process will help you determine which customers matter most to your business long term and, furthermore, will assist you with developing successful product pricing strategies.

4. Planet

The distributor’s mantra of providing the right product, at the right time and the right price will never lose relevance. Now businesses are asked to seek a balance between the social, environmental and economic aspects of doing so. As a result, one could add a fourth “P” for planet.

Providing product in a sustainable manner benefits everyone. How can your distribution management strategy make a positive impact to our planet? First, by striving to eliminate all forms of waste. For example, the amount of waste generated from product obsolescence is staggering. Planned obsolescence in technology products is a great contributor to waste; this we can leave in the hands of manufacturers. Distributors, however, can greatly reduce waste by adopting proven supply chain planning strategies to better balance supply with demand. With careful planning and equipped with the right tools, distributors have the power to significantly reduce waste of all kinds.

How to Measure Your Distribution Management Strategy

As your business grows, it must inevitably transform itself. Stocking, procurement and service strategies must evolve to create profitable and long-lasting relationships with new trading partners both up and down the supply chain. Not every endeavor leads to a positive impact. Keep an eye on the health of your distribution management strategy by tracking key performance indicators in all areas. Share the results with your employees and encourage their participation. Information is power and fact-based decision-making is key to monitoring your business plan.

Plan to Invest in Your Distribution Management Strategy

Even with the best intentions and the most talented employees, your distribution management strategy will not succeed without the right tools. For distributors, information technology is probably the most powerful tool in the box. The right technology empowers people and reduces repetitive tasks, thereby, creating opportunities for a more creative and rewarding work environment.

Warehouse management and warehouse automation increase productivity while decreasing errors. An order management system improves the order-to-cash cycle. Inventory planning software optimizes inventory investments. Financial and business intelligence tools allow you to monitor your business performance. When these systems are fully integrated on a cloud-based platform, your business will be better equipped to compete on all fronts.