Wholesale Distributors Identify Operational Productivity as Most Significant Challenge

Process integration and rationalization of operations and IT infrastructure top list of priorities to become more efficient, according to survey

Process integration and rationalization of operations and IT infrastructure top list of priorities to become more efficient, according to survey

Chicago — May 24, 2004 — Operational productivity is the most significant challenge facing wholesale distributors, and these organizations are investing in improving process integration and rationalizing operations, facilities and information technology infrastructure, according to a new survey.

The survey of 70 wholesale distributors with annual revenues greater than $200 million, conducted by retail and distribution solutions specialist Yantra, revealed that more than three-quarters of respondents rated maximizing operational productivity as moderately to highly difficult, while improving process integration ranked as the second greatest challenge.

"The challenges associated with operational productivity and business process integration are related," said Jim Caudill, vice president of distribution at Yantra. "Systems that are not integrated force employees to enter the same data multiple times into different systems. Additionally, a lack of integration makes it difficult to obtain a complete picture of inventory across warehouses and branch facilities, forcing organizations to fall back on manual intervention to get information crucial to business operations."

With operational efficiency as their watchword, distributors outlined a clear picture of top priorities for the year. Leading the list is process integration, which was a moderate or high priority for 79 percent of respondents. Rationalization of facilities and IT infrastructure placed second, with 70 percent of the participants rating it a moderate or high priority. The primary driver for rationalization is merger and acquisition activity, and nearly half of the participants expected to be involved in a merger or acquisition in the coming year,

Supplier-facing and network-wide visibility also ranked high on the list of challenges and priorities, with 67 percent of distributors expected to invest in increasing supplier-facing visibility. Additionally, 39 percent of respondents reported a high level of difficulty in gaining network-wide visibility, with another 25 percent labeling it moderately difficult.

Driven by customer needs, 59 percent of participants described moderate or high demand for integrated supply. While the majority of companies in this study offer some level of this today, most plan to invest further. Sources were also pointed to the importance of IT systems in delivering a winning integrated supply offering, with 69 percent calling IT "critical," or "most critical" to success.

Elsewhere, despite recent media coverage of the Sarbanes-Oxley Act and globalization, most distributors indicated these were not major challenges. In fact, 64 percent of participants said achieving Sarbanes-Oxley compliance was not proving difficult. Similarly, although much focus has been placed on creating a global presence, distributors that participated in this survey are not overly concerned, with 64 percent indicating global presence was a low priority for their customers.

Perhaps the most attention has been paid to radio frequency identification, or RFID. While the adoption of RFID was relatively low, with only 15 percent of participants expecting to have the technology in place by the end of 2004, more than one-third of the distributors interviewed plan on conducting either pilots or beginning rollouts this year.

For the survey, Yantra interviewed 70 wholesale distributors with annual revenues of greater than $200 million, many with annual revenues exceeding $1 billion, between December 2003 and February 2004.