Study says, Millenials, e-commerce altering supply chain

E-marketplaces and other nontraditional shopping channels, combined with shifting demographics, are upending industrial distributors’ inventory-heavy model more rapidly than previously thought.

As a result, distributors must quickly adapt and address threats with everything from sharper mobile offerings to upgraded customer service, said the “UPS Industrial Buying Dynamics Study: Buyers Raise the Bar for Suppliers.”

The study said the biggest shift comes from millennials (defined for this study as those currently ages 21-34) who grew up in a digital era and are bringing their tech-savvy and nontraditional purchasing habits—for example, bypassing the middle man and working directly with the manufacturer—with them into the workplace.

“The impact on the future of industrial products purchasing may be among the most profound of any modern generation of buyers and provide a glimpse of the future,” said the report.

The paper, the third such study compiled since 2013, captures a sector undergoing demand changes and channel shifts at a startling speed: 81% of buyers have purchased directly from manufacturers, up from 64% in 2015.

Meanwhile, 75% of buyers surveyed have shopped at an e-marketplace, soaring from just 20% in 2013. What’s more, 80% of buyers are likely to shift to suppliers with a more user-friendly web presence, up from 72% two years ago.

“With e-commerce, industrial buyers can choose from numerous suppliers with the click of a button, leaving the traditional business-to-business distributor model threatened,” said Matthew Guffey, vice president of UPS segment marketing. “Maintaining the status quo, even just for now, is not an effective solution. Distributors have to up their game.”

The paper identifies four main ways for distributors—including those with smaller ambitions or limited funds—to remain competitive and offers solutions to reach these young corporate buyers where and how they want to interact.

One of these is recognizing the rise of e-markets and considering investments that can improve competitiveness. The paper found that “more than half of respondents working primarily with distributors intend to increase e-marketplace spending, representing a looming risk to distributors,” said the study.

Another is going digital: Online channels are a necessity for distributors to strengthen e-commerce capabilities, particularly for mobile ordering.

Distributors also have to address buyers’ needs by product. “Look into purchasing insurance on products and shipments to mitigate risk and to help protect and improve cash flow; leverage a logistics provider’s global network to ramp up service more quickly and reach more pockets of growth.”

Finally companies are urged to go beyond the sale (i.e. post-sales support), as half of respondents have stated they would switch to a supplier offering assistance with returns, training, and on-site maintenance or repairs.

The UPS survey polled 1,500 buyers of industrial products aged 21 to 70 in the United States. Respondents purchased industrial parts, products, or supplies in five product categories: equipment sold in a business-to-business transaction; final assembly OEM parts; MRO parts; consumables/raw materials used in manufacturing; and janitorial and sanitation.