Issue link: https://www.e-digitaleditions.com/i/92325
Industry Insights continued Operating in this new economic envi- ronment requires a new way of think- ing, innovative business models and cre- ative leadership. From the assets they own to the services they offer, and the people they deploy to the capabilities they leverage, wholesaler-distributors are entering an extended period of pro- found transformation. Fundamentally, distributors must now continuously re- evaluate their role in the supply chain, refine their value proposition and inno- vate to remain relevant. Chapter 2 in the book tackles the expanding role of services. Most dis- tributors already offer some form of services as part of their portfolio of offerings. Unfortunately, very few dis- tributors have yet to truly "crack the code" on services. Indeed, capability gaps remain in a number of important areas, including accurately defining the scope of the service, ensuring the serv- ice addresses a specific customer or sup- plier need, and convincing customers of the value being delivered. There also remains a proliferation of definitions for what constitutes a service—not just across the industry but even within many distributor companies. For exam- ple, what the sales function might con- sider a part of the overall bundled value- proposition, the finance function may well want to track and measure as a dis- crete offering. If you were to get five key executives from your company together in a room, would there be consensus on your suite of service offerings and the associated pricing model? In far too many instances, there also remain disconnects between, a) under- standing the costs associated with deliv- ery of the service, b) the customer or supplier's perception of the value deliv- ered, and c) the revenue realized—if any from the services. Furthermore, a common underlying problem is that dis- tributors, themselves, often have a limit- ed understanding of the true costs of providing individual services, let alone their ultimate profitability. Wholesaler-distributors must take decisive action to overcome three cru- cial issues. First of all, they must get clos- er to customers in order to understand their service needs and their processes. This requires a different conversation and level of engagement with cus- tomers, not just more frequent sales calls. Secondly, they must develop an integrated, comprehensive services strategy. Why do I offer these services? How are they positioned? How do they fit with my overall business? Lastly, wholesaler-distributors must shrewdly manage their portfolio of products and services. Which offerings are complimentary? Which services truly pull product revenues? Which services create stickiness? Going for- ward, distributors must not only view services as important, but as the most strategically important component of their value proposition—the one they must master in order to succeed. Breadth and depth of product offering 58 FEDA News & Views