Distributors play a critical role in the supply chain via  in connecting manufacturers to customers with inventory, logistics, and fulfillment. As tariffs, geopolitical risks, and tax and regulatory changes take place, supply chains will evolve. Forward-thinking distributors are determining how to mitigate risks and take advantage of the opportunities that emerge from these shifts while pursuing artificial intelligence, advanced technologies, and predictive processes to drive superior business performance and bottom-line results.

Trends Impacting Distributors

Reshoring, nearshoring, and domestic manufacturing growth will drive distributors to reevaluate global sourcing strategies to reduce lead times, optimize inventory levels, minimize risk, and improve supply chain resiliency and agility. Similarly, the expansion of energy and changes in the regulatory requirements will ease restrictions and open opportunities to create sustainable, smart supply chains with digitally connected, automated, and intelligence-driven distribution operations. Distributors are leaning on predictive processes like SIOP (sales inventory operations planning) to optimize service levels, cash flow, and operational capacities.  

Artificial intelligence and advanced technologies are powering distribution success. Modern ERP, WMS (warehouse management) and TMS (transportation management) systems are a must, but they are no longer enough. Supply chain visibility tools, demand forecasting, predictive analytics, and inventory optimization capabilities are essential. Automation, robotics, and predictive maintenance systems are also becoming a baseline requirement. These technologies will accelerate as companies want to stay ahead of the curve and can take advantage of tax incentives for capital investment to fund the upgrades.

Advanced Technologies Powering Smart Distribution Centers

Old school distribution centers will not succeed long-term, as forward-thinking companies are upgrading to smart distribution centers. These highly automated, data-driven, and digitally integrated facilities leverage advanced technologies to optimize inventory, speed up order fulfillment, reduce costs, and enhance customer value. For example, Walmart deployed a smart distribution center in Brooksville, Florida, that utilized automated case-handling robots, dynamically optimized storage and picking systems, and digital twins in addition to modern demand planning, WMS and TMS systems. Since the new federal legislation provides additional benefits to expense modernization, improvements and upgrades, successful distributors are taking advantage of the opportunity to fuel success.

Real-time visibility can be a differentiator in fueling distribution efficiencies while maximizing customer success. Inventory, orders, labor, and equipment are tracked in real time with IoT sensors, RFID barcodes, GPS trackers, and connected systems so that you can plan end-to-end supply chain and operations activities effectively and ensure customer satisfaction. Similarly, there are numerous examples of automation and robotics to provide quicker turnaround of customer requests with greater efficiency and productivity. For example, GEODIS, a global third-party logistics provider, used AMRs (autonomous mobile robots) to assist human pickers by autonomously navigating to pick locations and carrying items to pack stations, thereby increasing the number of picks per hour by 2-3 times.

Artificial intelligence and analytics optimize inventory, labor, and picking processes in distribution centers. AI fuels demand-planning engines to better predict demand patterns, peak periods, SKU velocity, and promotional patterns. These demand patterns are integral to optimizing and right-sizing inventory levels with advanced planning strategies as well as optimizing labor and storage space. For example, a mid-market food and beverage distributor rolled out demand-driven picking processes using a combination of SIOP and WMS business system upgrades. They fed weekly forecasts and promotional patterns from their SIOP process into their WMS system to pre-position fast moving SKUs closer to staging locations, adjusted staffing plans two weeks ahead of time based on order mix, adjusted slotting based on forecasted velocity, and used wave planning driven by demand profiles. In addition, they could predict and plan around demand spikes using SIOP windows to adjust shift schedules, supplement with temporary resources, and optimize staffing. Thus, they increased their productivity by 35%, reduced overtime by 50%, and improved labor cost by more than 25% overall.   

The Bottom Line

Automating and digitizing the supply chain is cornerstone to increasing resiliency, responsiveness, and productivity. Successful distributors will take advantage of the opportunities to upgrade and modernize to increase customer value and deliver bottom-line results. As supply chains evolve, these distributors will be able to take advantage of their increased capabilities and capacities to secure additional market share and scale up to meet business growth goals.

For more information, contact the author at landerson@lma-consultinggroup.com or visit www.lma-consultinggroup.com.