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Not all
wholesale distributors think in terms of supply chain optimization—but the smart ones do. Wholesale distributors act as aggregators of demand, buffering manufacturers from small orders and logistics complexity. As consolidators, they represent multiple, sometimes competing suppliers, offering customers one-stop shopping for complimentary products, kits, accessories, and more. The wholesale distributor puts the manufacturer’s inventory closer to consumption for faster delivery, and some provide a local contact for technical product information, repair and customer service.
This ensures that the right products are ready when and where the customer needs them, and at the right price, including complementary items, alternatives, assortments, variations and lots. Delivery and installation services are often included. In markets where technology, regulation, competition, or fashion trends drive rapid product life cycles, the wholesale distributor often manages product succession as well.
So, although a wholesaler’s network may be more regional than global, its inventory predominantly finished goods, and its gross margin a fraction that of a brand manufacturer’s, the wholesaler’s infrastructure is still characteristic of a multi-echelon supply chain, which can be likened to a massive glue trap for working capital. Supply chain optimization techniques such as demand planning, supply planning, replenishment planning, transportation management and inventory optimization can give a wholesale distributor a competitive edge. A winning playbook ought to include four important actions:
- Anticipate and accurately forecast market demand
- Formalize vendor-managed inventory consignment
- Reduce safety stock levels
- Focus on buying inventory when it’s needed