How distribution organizations can satisfy evolving customer demands and stay ahead of the competition

For distribution organizations, meeting fast-evolving customer expectations can be difficult amid other industry challenges. Building a customer-centric business model can help distributors make the most of artificial intelligence (AI) and digital automation to manage complexity and improve satisfaction.

As customer expectations in the distribution sector evolve, their needs are becoming increasingly difficult to address. Not only do they expect personalized products and services, but they also want them delivered faster, through their preferred channels, with visibility at every step—which drives up costs for distributors.

Ensuring these demands are met is now mission-critical, as keeping customers front and center in business operations contributes to increasing the coveted customer lifetime value (LTV). After all, building sustainable, profitable customer relationships lies at the crux of long-term organizational success.

This McKinsey article outlines that “a customer-centric business model can help companies achieve profitable growth by reimagining business processes end to end with the aid of digital technologies.” It stresses the importance of crafting a customer-back business model (CBM)—in other words, generating new ways to create customer value based on the capabilities of all functional areas in an organization.

Yet this raises questions about whether distributors are equipped to keep pace. With evolving customer needs and industry hurdles, navigating this complex landscape remains challenging.

Managing complexity at every turn

While customer expectations continue to evolve at breakneck speed, industry challenges hold distributors back, hampering their ability to respond effectively.

Like every industry, distribution is facing the fallout of ongoing economic uncertainty. If fuel, labor, and material costs force distributors to raise prices, customers may turn to alternative suppliers—weakening efforts to strengthen LTV and putting a considerable dent in profit margins.

On top of this, the increase in disintermediation means manufacturers are selling directly to customers, removing distributors from the supply chain entirely. This eats into company revenues and limits their ability to strengthen customer relationships. Plus, supply chain disruptions, such as global incidents or transportation bottlenecks, can lead to reduced stock levels, increasing the risk of stockouts and extended wait times for customers.

Meeting evolving customer needs affordably can be complex—especially when many distributors manage a large and sometimes diverse inventory for customers with varying requirements. Operational models need to be flexible enough to address these demands in a sustainable way that not only enables distributors to meet customer expectations but also stay ahead.

Building a customer-centric business model

In our latest global research report, 81% of distribution organizations agree that success in their industry will depend on the use of new technologies. However, much hinges on how that technology is applied. While there is a wealth of digital solutions available for distributors, many are unsure of the best approach to drive value and secure a competitive edge.

The key lies in implementing specific, targeted solutions that complement each other, drive incremental value, and provide distributors with a blueprint for strengthening LTV.

• Digital automation can eliminate time-consuming manual processes that slow down operations, helping distributors increase efficiency and worker productivity to meet customer demands better—while unlocking new revenue streams with value-added services. By freeing up valuable time, distributors can focus more on revenue-generating initiatives or strategies that help them gain a competitive edge, whether by fostering existing customer relationships or attracting new ones.
• Integrated AI solutions that deliver predictive and prescriptive insights enable distributors to better understand customer behavior and ensure that their products and processes meet evolving expectations to maintain lifetime value (LTV). Advanced automation technologies such as generative AI (GenAI), robotic process automation (RPA), and machine learning (ML) can streamline task execution, recommend next steps, and anticipate and respond to potential issues—while ensuring pricing is optimized to maximize margins.
• An industry-specific ERP offers capabilities tailored to distributors at the micro-vertical level. These solutions provide the most updated, relevant functionality—improving order promising accuracy, enhancing supply chain efficiency, and supporting better decision-making through business intelligence. This boosts customer loyalty, retention, and value through reliable service.

These solutions work best when unified within a centralized modern cloud platform, where distributors gain real-time visibility into accurate, connected data. Combined with the latest AI and digital automation technologies, processes, communications, and ultimately deliveries become more consistent and efficient. Together with prebuilt, advanced, industry-specific functionality and configurable capabilities, organizations can adapt, innovate, and differentiate to stay ahead of competitors.

Making possible happen

The stakes are high: Distributors risk losing customers to competitors if they fail to develop an effective digital transformation strategy. Yet the opportunities to drive success are boundless—and those who jump on board sooner rather than later will be better positioned to establish themselves as industry frontrunners.

We conducted global research with 900 distribution decision-makers to explore this idea further. The results revealed four Vectors to Value, providing a blueprint for how the most productive distribution organizations worldwide are using the technology advantage to unlock new value streams.

Download our report today to understand how your organization can secure its place as an industry leader.