Recently Prodware UK attended the FWD Annual Conference, “Winning in Wholesale”, the day was jam-packed with insight from leading professionals within the distribution industry. Here are just some of the key issues which stood out on the day for us…
Distribution key challenges – Economic downturn and the rise in the national living wage
Attendees to the FWD conference were asked to vote on what the biggest challenge is facing the wholesale sector over the next 12 months; choices included Amazon, economic downturn, food price deflation, illicit trade, the rise in the national living wage and sugar tax.
Economic downturn came out the number one challenge facing the distribution industry over the next 12 months- with 41% of the vote. It is not surprising that this issue is at the forefront of distributor’s minds post-Brexit. FWD Chairman Martin Williams, described the current economic and political climate as “the most dynamic, disruptive and transformational time ever seen,” but concluded that this is an environment in which an adaptable supply chain could prosper through close co-operation. The distribution industry still has lots of opportunities to grow outside the EU with the ability to negotiate new trade deals, we discussed some of the opportunities in relation to the manufacturing industry in our previous blog.
This was followed closely by the rise in the national living wage (NLW). The rise to £7.20 is having a knock on effect with narrow margins struggling to absorb the hit, what is the answer? Reduce headcount or pass the costs onto their retailers? Neither of which seem viable answers. The FWD estimate that the Chancellor’s vision of the living wage increasing again to £9.35 by 2020 will add 3.7% to wage costs, costing members £59 million; equating to 2,600 jobs. The possible negative effects may be job losses, recruitment freezes, increase in prices and reduction in service, unless distribution firms take proactive action throughout their organisations. We have recently discussed the effects of the NLW on the hospitality industry.
Other challenges highlighted on the day included sugar tax, increased legislation, food and health, transport and infrastructure, crime and fraud and skills and development.
Distribution sector sees positive growth despite various challenges
However it is not all negative, many distribution industries were highlighted as having shown substantial growth over the past year with grocery and convenience sales up. The average UK spend also highlights some changes in what people consume, with a rise in recreational spend. In the “Fresh Eyes” presentation by Tom Fender, this was highlighted with examples such as 45% growth in festival GDP, a 9% growth in food and drink pop-ups (now over a £2 billion per year industry) and the wellness industry growing to a $500 billion market with 50% growth over the past five years.
What does all this mean? It highlights that both the market conditions and consumer buying patterns are changing over a short period of time, emphasising the need for agile and responsive supply chains. Business management systems for distributors such as Microsoft Dynamics ERP allow distributors to boost productivity and profitability identify cost savings and inefficiencies. Whilst systems such as Microsoft Dynamics CRM help drive distribution’s most important asset, their people, to better serve their customers.
Perhaps the most valuable take-away of the day was that the wholesale distribution industry is seen as a community who are looking to face upcoming challenges together and to support each other; something extremely rare in competitive market places but certainly something worth valuing.
Martin Williams summarised, “We have done a lot together but there is still a lot to do… let’s invest in wholesale, let’s invest in our brands, and let’s invest in our people. If we work together, we can grow together, and the current economic uncertainty can be an opportunity for shared success.”
Our final thought comes from Sony Bihal, Managing Director, Time Wholesale Services, “Everything we do, we have to measure, otherwise what are we doing it for…”. A specific distribution ERP system such as Microsoft Dynamics ERP from Prodware can provide real-time, accurate data to increase productivity and aid decision making. Find out more by contacting Prodware.