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Why industrial distributors should invest to scale and optimise their product data strategy

We’re living through challenging times. Industrial distribution businesses, small and large alike, are having to adapt their strategies to deal with seismic changes in market conditions and the logistics of getting products to customers. These changes are layered on top of a drive towards digitisation which had already been gathering momentum in the distribution sector. Never has the effective ingestion, governance and overall management of product data been so critical to companies’ success – and we’re talking about now, not only in the medium and long term.

Trends in the industrial distribution market

These are stark in their clarity;

Customer expectations are rising by the month. Not only do they want a seamless customer experience in terms of the end-to-end distribution journey, but they also expect timely and wholly accurate product data to make effective and informed decisions on ordering. The more agile distributors are already onto the fact that customers are demanding greater convenience, added value and price transparency.    

Digitisation of tools used by industrial distributors is encouraging the optimisation of product data to the maximum. The supplier data experience of interacting with the distributor and provisioning data to the distributor makes this digital experience critically important and drives strong satisfaction and repeat business.

The move towards disintermediation represents a major challenge to distributors. Fragmentation of the market and consolidation of big players mean many manufacturers are acting on the leverage gained by robust customer relationship-building by going direct to them, cutting out the distributor entirely.

What does all this mean for Product Data Management?

The burgeoning trends mentioned above pose a direct threat to those more sluggish industrial distributors, who will be condemned to servicing a narrower range of customers or forced to simplify their operating models to basic warehousing, fulfilment, and transportation – areas with notoriously low margins.

Operating at scale – an absolute must

Scalability means managing a growing breadth and depth of product range in a capable, cost-effective way – the 64,000-dollar question is; how well can a product information management system deal with a growing amount of work? The simple answer is by expanding and enhancing its capabilities to not only accommodate but embrace and exploit them. That means having an integrated master data management (MDM) strategy and a solid data governance framework.

As a distributor, you want greater agility and adaptability to the varying needs of your internal or external users. Customers want to order and interact through a diverse range of channels.  Product ranges can be vast and complex, and it is common to identify and deal with specific instances that deviate from the norm. Management by exception becomes much more manageable when product data is at its very core – what you can offer not only justifies but adds value to its pivotal role as a key enabler between manufacturers and customers.

High-quality product information management lets you target and grow your offer by using a variety of tools, such as scaled ranging and NPI (New Product Introduction). As a recent McKinsey¹ white paper noted, those distributors already transforming their operations are ‘building scale where it matters most’ – that value will decide who are the top performers. They are starting to think above and beyond mere product distribution by crafting a suite of monetisable services which genuinely add value.

Gaining scale means those distributors at the head of the pack have the agility to manage rapid and strategic consolidation. Scalability enhances back-office efficiency, provides leverage when negotiating terms with suppliers and helps develop more meaningful supply chain partnerships with their customers.

Product Data Governance – the bigger picture

Governance covers a large range of elements, providing a 360° view of product data to consolidate and display it all into a single record. Just as a country would collapse into anarchy without a government, data governance sets a standard where everyone is playing by the same rules. data becomes trustworthy across a range of parametres as well as working for the organisation as the organisation wishes it to.

With product information management at the centre, this means you can implement lean and efficient processes to support your data asset usage and product data offer to customers. Establishing unified, organisation-wide standards allows for full optimisation of business processes and customer experience.

Of course, technology drives these enhancements. However, don’t put the cart before the horse – first, shape and develop a KPI-driven product data strategy linked to your business objectives. Then you can implement and maintain a PIM system which ensures your data assets are being put to their best and most profitable use.

(1) McKinsey & Company – The coming shakeout in industrial distribution