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From the High Wire to the AI Spire

by: Matthew Hays | November 27, 2019

How Predictive Modeling Brings Balance and Success to Your Supplier

If you've ever been to the circus, then you know the excitement of watching the aerial and high-wire artists performing their death-defying feats. Wholesale distributors perform a similar tightrope act—successfully walking the thin line between buy-side and sell-side partnerships, while converting them to profitable, recurring business relationships.

As a wholesale distributor, you invest immense effort and resources into securing agreements with your manufacturing suppliers and other upstream partners. And each distribution contract represents a significant victory for your business. You also know that gaining an agreement to distribute a manufacturer's goods is only as profitable as the relationships and knowledge you build with your retail partners or end customers downstream allow it to be—hence the balancing act.

Many wholesalers struggle with visibility into pricing and incentives they receive from upstream vendors and those that they offer to downstream retail partners. Balancing earned income and razor-thin markups against unreimbursed promotional program costs and operational expenses is an immense challenge even with just a few suppliers. Many wholesalers manage hundreds of suppliers with potentially thousands of eligible programs.

Beyond the requirements of negotiating your acquisition costs, planning your sales costs, and forecasting customer demand, your distributorship should depend on fact-based, KPI-driven alerts to make informed forecasts and decisions. Real-time visibility and insights into earned income, performance achievement, unclaimed MDFs, existing inventory, and sales demands provide proof into what is working to your advantage and what is not. Artificial Intelligence solutions such as predictive modeling can identify volume and price changes that likely lead to improved profitability, enabling you to reallocate funds to another program that reliably works, or, consolidating suppliers for better performance. If something can’t be reworked internally, then proposing revised terms or new programs to your suppliers is key, and having fact-based evidence and scenario projections to prove your point in negotiations increases your power.

In short, visibility means profitability. AI-driven business intelligence will help you see the forest and the trees. AI helps you play out what-if scenarios with changing variables and factors that can improve your results. AI will predict those results to help you make more informed decisions.

To capitalize on your performance incentives and turn new or existing partnerships into lasting relationships, ask these important questions:

  1. Can you forecast your earned income from suppliers while prices and market conditions change? Are you able to re-evaluate models with timely data as fast as variables occur?
  2. Are you able to re-prioritize preferred suppliers to maximize performance where it matters most to your bottomline? Can you constantly watch your performance against all supplier programs and see real-time trending towards each program’s goals—and compare them to see the best possible scenario?
  3. When negotiating with suppliers, do you let them dictate pricing while you negotiate minor terms, or do you take the driver’s seat by proactively approaching those suppliers with untapped potential and suggesting optimal terms with a solidly-built business case?

Distributors armed with intelligent technologies can get greater value from larger and more complex data sets—and possibly from new sources—then analyze how customers purchased certain products to predict future sales, and unlock opportunities for increasing sales. More competitive or profitable pricing, bundled products with value-pricing, and targeted advertising or promotion are all possibilities when customer behavior is better understood. According to a Digitalist Magazine post from March 2019, distributors that have integrated intelligent technologies realize 18% higher revenue growth thanks to new customer growth.

Predictive modeling software has ushered in an era where wholesale distributors are empowered with unprecedented visibility and business intelligence. Using fact-based intelligent insights to plan promotional programs and negotiate equitable purchases, your partnerships (both upstream and downstream) become more balanced, manageable, and grounded in real-time data. No more high-wire acts for you. You’re scaling the AI spire and ultimate visibility through intelligent predictability is most certainly within sight.

For more insights into how wholesale distributors will survive and thrive in the new economy, download our ebook Walking the Value Chain Tightrope: How Wholesale Distributors Will Survive and Thrive.