Staying Competitive in Industrial Components Wholesale

3 min read

Tags: Blog, Demand forecasting, Industry news, Inventory management, Purchasing & replenishment, Technology

Maggie Bendis   April 6 2017


Industrial Components Wholesale

Index

  1. Competition in Industrial Components Wholesale
  2. A Solution for SMBs

Industrial components wholesale distribution involves supplying to those companies that produce goods for sale to consumers. As such, it is based on derived demand; the requirement for the components used in any industry is driven by the demand for the consumer goods that they eventually produce.

Industrial “components” broadly fall into two categories: industrial equipment/machinery and industrial supplies. Industrial equipment and machinery includes the plant equipment that produces consumer goods, as well as the components, jigs, dies and spares. Industrial supplies is comprised of the materials used in the finished product. For example, industrial components wholesale companies can supply heating, plumbing and construction materials to the building industry, mechanical components for industrial machinery, or fasteners and spare parts for industrial facilities.

Competition in Industrial Components Wholesale

The market landscape for distributors of industrial machinery is very competitive. It is extremely difficult for new players to gain a foothold in the industry; 30 percent of the revenue in the US industry is distributed among the 50 largest firms. For those seeking to grow and gain a larger market share, the aggressive climate of acquisitions and mergers makes independent growth difficult.

Graph showing growthTwo things are necessary for success in this market: a diverse product range and operational efficiency. The diversity of the market means that a broad product range that is relevant to a wide range of industry verticals will attract more revenue. The largest firms use their market dominance and economies of scale to carry a large product range, as they are better placed to absorb the cost of slow-selling stock in the short term, and stock obsolescence is less of a risk owing to their broad customer base. However, for smaller businesses, this can be difficult to replicate – leaving them to fill the gaps with operational efficiency.

Industrial components wholesale distribution has narrow profit margins, and it is not always easy to gauge which products will sell well. For smaller businesses, purchasing slow-selling stock can affect profits in the short term by absorbing working capital. In the long term, slow-selling stock can become obsolete, and having to discount this stock will then damage profits. There is a strong element of trial and error, but SMBs have little leeway.

Therefore, it is essential that businesses breaking into the market are operationally efficient. These organizations must not overstock while building a diverse product range. Equally, they must avoid stock outs in order to build a positive reputation for reliability.

A Solution for SMBs

Stock optimization is the key to operational efficiency. To keep stock at a level where there is enough of each item to satisfy demand, yet there is no overstocking, an overview of warehouse operations is essential. Until recently, the cost of manually monitoring stock used to be the only option for SMBs as specialty inventory optimization software has previously been available only to larger, better established organizations.

Warehouse workers moving productsBut now inventory optimization software such as EazyStock is now available for SMBs. This software monitors stock in real time; it logs items as they arrive in the warehouse, and it informs purchasing decisions to fill orders without overstocking.

This gives SMBs the freedom to experiment with product lines and develop a strong brand identity for their business. By being able to effectively monitor stock, they can diversify into specialist markets, target specific regions and offer special deals on stock without damaging profits. Furthermore, the data generated by the software can help businesses gauge the success of each product. It can also help executives to familiarize themselves with surges in demand and seasonal variations. This will help the business adapt to changes in the market.

From the perspective of defending SMBs from hostile acquisition, being able to operate in niche markets is a strong defense. Larger organizations will be reluctant to take over an organization that sells specialist products or operates in a specific market if they lack the expertise to run operations. Therefore, stock optimization software can give all the advantages of a large organization while allowing the company to operate as a specialist supplier.

 

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