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Competitive, intuitive power - like a genie for your people.
by Kim Phelan
A distributor was under pressure. His top sales reps were eyeing retirement, and his company faced a tough talent market as well as increasing customer expectations. Sound familiar?
About that time, this owner happened to be in a store shopping for cowboy boots and unexpectedly encountered a passionate young salesperson with a great personality. Could this person be a success in my billion-dollar distribution company, he wondered, with zero experience in distribution? Others warned him to give the idea the boot, but his gut told him otherwise, and he gave him a chance. He also gave him an AI-powered mobile app sales tool to help elevate his performance – the new rep was up to speed in a day. Once in the field, with customer information in the palm of his hand, he anticipated customers’ needs and had knowledgeable conversations that converted to sales. His rapid success was made possible with AI technology.
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| Benj Cohen |
In a nutshell, Cohen added, AI makes both new and experienced sales reps more efficient, saving them a lot of time by answering questions like “Who should I call?” or “What products should I recommend?” without digging through data and reports.
Using ChatGPT, which has captured the world’s attention, sales professionals can research prospects and competitors without scrolling through endless entries, says Nelson Valderrama, CEO at Intuilize. “When asked, it will locate manufacturers or distributors for particular products in specific areas. And it helps salespeople write letters, emails, and presentations. A ChatGPT Business is in the works,” he said.
KNOWING WHAT THEY NEED
In fact, AI’s biggest opportunity for industrial distributors may well be in the sales process optimization, customer relationship management, and growth, according to Justin Johnson, CEO at MightyRep. He said that to be competitive and grow, distributors need to be proactive with their sales process and strategy, knowing what products their customers need before they even know it themselves. They need to
predict when a product is going to need replaced, and recommend additional products in their inventory that is going to increase the overall customer spend and help their process.
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| Justin Johnson |
“This is where AI can change the way industrial distributors sell,” Johnson said. “Distributors have a mountain of data on their customers, as well as buying patterns, replenishment rate, and a whole lot more. This data may not be in an organized format, but with AI it doesn’t need to be. Some of the AI technology out there now can analyze customer data and determine which products the customer should have bought and didn’t and when a sales rep should reach out to the customer about replacing an existing product.
“In the end,” Johnson continued, “AI will be able to tell an industrial sales rep the 15 activities that they need to do in their day in order to hit their sales quota and help the company grow. Industrial distributors will be able to look at less skilled salespeople in order to execute their sales plan, because they are just following a prescribed set of activities that AI has generated for them.”
This type of intuitive sales assistance works just as effectively for customer service people, equipping them with information to up-sell and cross-sell, said Cohen, “transforming them from order takers to order-makers without intensive training or protocol changes.”
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| Proton.ai shows the extensive volume of customer buying history and other details available instantly to turn your order-takers into order-makers. |
This type of intuitive sales assistance works just as effectively for customer service people, equipping them with information to up-sell and cross-sell, said Cohen, “transforming them from order takers to order-makers without intensive training or protocol changes.”
BUT WAIT, THERE’S MORE
But AI applications for distributors go much further. AI can facilitate quickly identifying and returning proposals and quotes to prospects or existing customers and helping personnel implement services faster once they land or upsell a customer, says Paul Noble, founder and chief strategy officer at Verusen.
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| Paul Noble |
“With AI fueling the sales engine, the sales team can focus on building relationships and closing the deals that boost distributor margins, growth, and scalability.”
On your website, AI can also make e-commerce recommendations to customers, offering them alternatives and/or additional product categories they are likely buying but maybe not from you, Noble added. Likewise, with its data compiling and analysis at wizard’s pace, AI applications can provide recommendations for services a customer may need such as vendor-managed inventory, smart storage solutions, vending lockers, plant floor automation, and configuration.
Industrial distributors can harness AI for dozens of work flows and applications, Johnson said, including: demand forecasting and inventory management, supply chain optimization, predictive maintenance, customer analytics and personalization and of course autonomous vehicles and robots.
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| Verusen Trusted Supply features a natural language AI model to enable distributors to respond more rapidly and effectively to customer needs. |
Industrial distributors can harness AI for dozens of work flows and applications, Johnson said, including: demand forecasting and inventory management, supply chain optimization, predictive maintenance, customer analytics and personalization and of course autonomous vehicles and robots.
“Industrial suppliers can leverage the power of AI to optimize inventory, boost efficiency, and meet customer demands,” Valderrama interjected.
“AI can predict future product demand and analyze vendor and competitor performance,” he said. “Its machine learning algorithms analyze volumes of sales data, market trends, and external factors, allowing for more efficient updates to ERP replenishment parameters. Distributors can bid farewell to cumbersome spreadsheets, stockouts, and excess inventory and say ‘hello’ to a streamlined supply chain.”
ADOPT OR LAG – YOUR CALL
Cohen noted that The McKinsey Institute has created a model that suggests early adopters of AI could expect to increase cash flow by up to 122%, compared to only 10% for followers and a 23% decrease for non-adopters.
Nevertheless, sources agree AI adoption among industrial distributors is still low, which can be attributed to both a lack of knowledge, a feeling of overwhelm, and for some, a tendency toward the status quo. But it’s gaining traction throughout sector – especially among distributors with annual sales exceeding $200 million – as recognition of its potential and benefits expands, says Valderrama, whose firm serves $10 million+ distributors.
“Once they embrace AI, distributors experience a threefold return on investment. The adoption of AI will accelerate in the coming months as more companies realize the advantages, learn from successful implementations, and feel the weight of knowledge transfer due to retiring employees,” he said.
Momentum is building, Cohen agrees, as, “with the emergence of ChatGPT, distributors are starting to understand that AI is not just a buzzword, but a tool that can drastically enhance operations.”
“As we look towards 2024, we expect to see a rising trend of distributors earmarking funds specifically for AI integration in their budget planning,” Cohen added. “As technology continues to evolve and success stories multiply, AI is looking less like an option and more like a vital tool for survival in the competitive world of industrial distribution. Plus, as AI becomes more affordable and easier to implement, even the smaller players can get in on the action.”
And there’s no upside to waiting, Johnson warned.
“There is a risk in losing market share,” he said. “Clients want to work with distributors that are proactive, and understand their needs and their buying patterns. AI can predict what customers need. Also, employee retention is at risk. Employees want to work for companies that give them the tools and technology to do their jobs better, faster. Companies that adopt AI, especially within the sales team, will be able to recruit and retain the best salespeople.”
Noble noted, “Technology is moving very fast, and the longer you wait, the further behind you’ll be, or get left behind entirely.”
He added that adoption will rise, in part, by default when distributors upgrade their ERPs, CRMs and Product Information Systems and refine their e-commerce sites – all of which are expected to come standard with AI technology in the future.
AI’S NEXT BIG THING
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| Nelson Valderrama |
“Even now, users can enter questions on the spot and receive immediate actionable insights,” he said. This increase in organizational agility will foster innovation, strengthen resilience, and drive responsiveness. Industrial distributors who embrace generative language technology will adapt effectively to changing market dynamics, capitalize on opportunities, and maintain a competitive edge in a fast-paced and ever-evolving market.
In addition, he says by utilizing AI, distributors can optimize vendor management, streamline procurement processes, and potentially reduce costs. AI will analyze vendor options, historical data, vendor reliability, and pricing trends to provide valuable insights.
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| Intuilize keeps margins in focus, evaluating price shifts to enhance gross margin performance. |
“These insights will empower distributors to negotiate better prices and maintain stronger vendor relationships,” said Valderrama. “However, it is important for teams to trust the AI insights while also relying on their experience and intuition to achieve meaningful results.
“Bottom line, integrating AI-driven generative language into ERP and CRM systems as well as SaaS applications holds significant potential for industrial distributors. This integration ensures that valuable insights about customers, vendors, trends, and working capital are easily accessible to authorized users, empowering them to make informed decisions and foster business growth. The next frontier will be successfully incorporating and assimilating this technology within organizations, which will require a human touch.”
The future holds more automation, Noble says, replacing the many manual processes associated with RFQ and RFP.
“Industrial distributors are logistical experts who optimize supply from inventory to purchase and get things where they need to be,” Noble said. “With AI and a better understanding of data, you can automate functions further and deploy fewer people – or allow those people to do more highvalue work.”
He says aligning those technologies with (1) What do my customers need? (2) Where do they need it? (3) Where do I have it? And (4) How do I get it to them? will fuel and power the models that understand the data. These will then hand the baton over to robots in the warehouse that will automatically pick those products and make sure the data transfer is happening back to distributors’ suppliers as well.
“We expect much more of this technology to be adopted over the next 12 to 24 months throughout the industrial distribution channel.”
BUILD ON YOUR MOMENTUM
McKinsey offers many helpful reads on artificial intelligence for businesses: Here are two you may find useful.
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| What Every CEO Should Know About Generative AI |
Technology's Generational Moment with Generative AI: A CIO & CTO Guide |
This article originally appeared in the September/October 2023 issue of Industrial Supply magazine. Copyright 2023, Direct Business Media.
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INDUSTRIAL SUPPLY MAGAZINE
The November/December issue of Industrial Supply magazine features an in-depth cover story about Kimball Midwest. Plus, we're featuring articles by contributing writers Dirk Beveridge, Frank Hurtte, and Mike Marks, as well as interviews with numerous product and distribution industry experts.
