Market Trends: Interest in Mobility for Wholesale Distribution Leads Other Industries
Regardless of whether wholesale distributors are selling goods, managing them in a warehouse, transporting them or managing their pickup and/or delivery, mobility holds the promise of compressing business processes and squeezing out inefficiencies to increase productivity.
- Wholesale distribution faces a threefold challenge of thinning margins, faster product life cycles and higher customer expectations. Enterprise mobility is being used by IT to improve performance and agility in all three areas while reducing cost.
- Although only 10% of wholesale distributors see themselves as mobility market leaders today, nearly 60% see themselves fitting into that category by 2015.
- In Gartner's 2011 IT Spending Survey, wholesale distributors led all 13 industries in their percentage of IT budget allocated to smartphones and tablets.
- In Gartner's 2012 EXP CIO Survey, mobile technologies in the wholesale distribution industry were ranked as the highest technology priority, ahead of analytics, business intelligence and legacy application modernization.
Technology and service provider (TSP) industry product strategists and marketers:
- Leverage partnerships (mobile device infrastructure, MDM and security providers, established subsector application providers, system integrators, and so forth) to access the most significant industry opportunities. Most providers cannot address the range of requirements needed to be successful on their own.
- Target top industry mobility trends, such as field force enablement, advanced wireless warehouse, optimized transportation and logistics, RFID, and event/alert/response capabilities to drive the most success through 2014.
- Prepare to deliver on opportunities where mobility, the cloud, social media and analytics converge. Don't expect to gain leadership by competing on parity with established providers that already have a head start targeting this industry.
Table of Contents
- Trends in the Market
- Market: Consumerization and Business Pressures Drive Mobility Beyond the Warehouse
- Buyers: The Top Three Mobile Application Trends
- Technology: The Top Three Technology Trends
- Contrarian View
- Vendors to Watch
With the rapid adoption of smartphones and tablets for personal use, many employees are pressuring IT departments across wholesale distribution to integrate mobility into the workplace. The ubiquity, as well as the falling cost of mobile devices, is driving companies in wholesale distribution to consume mobile technology as a way to enable better internal and external connectivity, leading to market opportunities for TSPs.
The significance of this opportunity is underscored by the following findings:
- In Gartner's 2012 EXP CIO Survey, mobile technologies in the wholesale distribution industry were ranked as the highest 2012 CIO technology priority, ahead of analytics and business intelligence, and legacy application modernization, which ranked second and third, respectively.
- In Gartner's 2011 IT Spending Survey, wholesale distributors led all 13 industries in their percentage of IT budget allocated to smartphones and tablets.
- Recent surveys by Modern Distribution Management, a key industry trade journal, determined that mobile technology is the top emerging area that buyers are interested in pursuing.
- According to the National Association of Wholesaler Distributors (NAW), 40% of the businesses in this industry will deploy new technology, including mobility, by 2015.
This analysis will improve mobile strategies and value propositions by identifying dominant market forces, industry data and buying centers before prioritizing the top three buyer and technology trends impacting wholesale distribution over the next 24 months. This research concludes with a contrarian statement that factors in inhibitors and events that might impact the overall optimism portrayed in this report.
Figure 1 shows that the near-term market opportunity for mobility in this industry is dominated by three intersecting buyer and technology trends. These trends are driven by the twin forces of consumerization and technology innovation that lower cost and improve business efficiency.
Source: Gartner (June 2012)
With more than 5 billion cellular phones active around the globe, mobility is changing the business landscape for wholesale distributors. User demand, as much as business strategy, is driving adoption. Digital natives are entering the workforce and bringing their mobile work habits with them. Consumer applications are mostly mobile, and employees expect business apps to follow. They also want to use their personal mobile devices to access business information and execute role-based transactions wherever they are located. This applies particularly to business leaders and other employees in the field, who have begun to exert pressure on industry IT departments to get whatever device they want on corporate networks.
Recent Gartner research suggests that as much as 80% of the workforce will use smart mobile devices, particularly media tables, by the end of 2013. In leveraging the possible business use cases this opportunity provides, TSPs must work to make sure mobile business solutions are enterprise class — secure, reliable and maintainable, and are integrated to critical front-office and back-office systems and data as applicable if they hope to be successful.
As business technology is constantly changing, distributors are faced with the challenge of understanding the range of available tools, and more importantly, determining how they can leverage them to help increase operational efficiencies. Once only thought of as an investment in personal productivity, the concept of mobile devices connected to back- and front-office applications is quickly being recognized as an investment in corporate competitiveness.
Wholesale distribution is caught in a profitability squeeze between suppliers (typically manufacturers) and customers, more so than any other industry segment. The industry faces a difficult trifecta of thinning margins, faster product life cycles and higher customer expectations. In the midst of this, the IT organization's mandate is to improve performance and agility in all three areas while reducing cost. Enterprise mobility has begun to play a key role in successfully addressing this challenge. Moving computing power from the desktop to the point of work via mobility has, at reasonable cost, provided workers with much needed tools to shave wasted time and errors out of business processes throughout the distribution supply chain. Whether managing goods in a warehouse, transporting goods or managing the pickup and/or delivery of goods, mobility can help compress business processes and squeeze inefficiencies out to increase productivity. In many cases, it also means fewer errors and access to more real-time information when and where needed to make good decisions and improve customer service.
A recent wholesale distribution association survey of mobility end users highlighted the top three benefits achieved by enterprise mobility solutions:
- Improved real-time decision making leading to improved business responsiveness and customer satisfaction
- Increased mobile worker productivity
- Improved business information accuracy
The terms "mobile application" and "wireless application" are used interchangeably in wholesale distribution. That's because, for a number of years, wireless devices have been used by the industry to electronically collect data on assets and resources moving through the supply chain before uploading them to host systems over wireless networks. These solutions are best-known for boosting, picking, and packing productivity and accuracy in the warehouse or distribution center. By scanning and collecting data via bar codes, paper forms have been eliminated and errors and delays associated with manual operations minimized. Similarly, for a number of years, industry sales representatives have leveraged laptop-based mobile sales applications. Although most of these applications are disconnected, they allowed for a modicum of sale order entry and account management in the field.
Today, the traditional use of mobility within the warehouse continues to expand with an explosion of enhanced business applications used to further optimize operations. For example, Gartner sees the convergence within a single wireless device of multiple data capture technologies from bar code scanning to voice input to RFID. Workers can even leverage multimodal scanning bar codes for receiving goods, use voice for picking and RFID for loading completed pallets onto trucks, all on the same device. In conjunction with RFID tags, wireless devices and mobile handhelds are capable of capturing information such as temperature on perishable items that move in and out of distribution centers. Although areas of mobile opportunity continue to expand within the warehouse, most wholesale distributors have just begun to scratch the surface with respect to using the technology to improve their competitiveness outside of it. Some of the greatest opportunities for TSPs lie beyond serving the warehouse.
The TSP opportunity in wholesale distribution is predicated on:
- Device and OS platform manufacturers seeking to stimulate demand among IT departments and individual users
- Mobile device management (MDM) providers seeking to support, manage and secure multiple operating systems and devices being used by enterprises
- Application providers seeking to address business processing needs
- Service providers seeking to pull all the above together in an integrated fashion and to build applications not served by the commercial market
Wholesale distributors were once deemed enterprise technology laggards, but the rapid acceptance of mobility across the industry is changing this perception. According to Gartner's recent 2012 CIO Survey, while only 10% of wholesale distributors see themselves as a mobility market leader today, nearly 60% of them see themselves as fitting into that category by 2015, second only to the communications and media industry. During the next decade, Gartner expects the mobile market to grow and become a key linchpin upon which this industry relies to ensure that it thrives and provides value-added services.
During the next three years, industry IT resources will begin moving several line-of-business applications to devices where they are either developing or purchasing mobile and tablet versions of enterprise solutions. Based on our inquiries with both end users and providers, one-third of distributors are implementing or expanding their mobile applications, another third are planning for them, while the final third will likely remain late adopters.
The SMB market, comprising the majority of wholesale distribution business entities, still remains untapped from the standpoint of mobility penetration breadth and depth. Although most large distributors are or plan to use mobility in business processes that span beyond the warehouse, SMBs remain further behind, using mobility primarily for basic data collection and inventory management. For the midsize business particularly, where employees often wear multiple functional hats and may spend considerable time moving between multiple locations, mobile connectivity offers substantial potential for TSPs and can be extremely transformative in delivered value.
The myriad of mobile devices gaining favor in the distribution supply chain are all about helping companies in their never-ending quest to get the right product to the right place at the right time. Smartphones provide good functionality for distribution (particularly for employees in the field), but typically have not been rugged enough to stand up to the rigors of the warehouse environment. New ruggedized smartphones have now become available that are built to withstand tougher physical conditions, such as elevated drops to concrete and extreme temperatures, which makes them more versatile than traditional smartphones. This evolution paves the way for new levels of flexibility and efficiency, as well as cost-effectiveness, which will broaden the technology's market appeal.
Table 1 identifies Gartner's current wholesale distribution vertical industry IT spending forecast in the areas of mobile devices, mobile network services, and consulting and other application software, which is inclusive of categories such as MDM.
Source: Gartner (July 2012)
Newcomers must plan to compete in a highly competitive market and pick opportunities where they can to add additional value beyond the status quo or chart new areas entirely. Providers seeking to leverage wholesale distribution industry mobile opportunities will likely require multiple partnerships (mobile devices and infrastructure, as well as established subsector application providers, mobile security providers, and so forth) to secure access to the most significant market opportunities. The most obvious opportunities have become well-recognized in the last 12 months, with many providers already supplying basic capabilities and planning future enhancements. TSPs should also keep in mind that those not supporting basic data collection in the warehouse or in transportation may be limited to fewer opportunities, such as field force enablement or mobile-based executive dashboards. Current providers known to the industry already have an advantage over new competition when addressing emerging requirements in specialized areas such as RFID. Strategists seeking to establish themselves in the industry for the first time should keep in mind the belief: "If you can't beat them, join them" when finding themselves in these situations. On the upside, there are many new dimensions to the mobile opportunity, especially with respect to the convergence of cloud, mobility, social and analytics. The nexus of these technologies will offer providers the ability to display innovation in totally new ways, such as enabling mobile alert/response options to supply chain events based on heuristics, business rules and patterns, or leveraging the cloud to enrich mobile collaboration with supply chain partners.
The three mobile application market trends offering the greatest opportunities based on high levels of buyer interests are discussed in the following sections.
Through 2013, the fastest-growing mobility trend in wholesale distribution is field force enablement of sales employees and other off-premises personnel. The primary objective here is to improve productivity and revenue by enabling employees to remotely accomplish tasks such as updating contact information, checking inventory, and submitting orders in real time. There is a clear appreciation in this industry for the returns that can be gained by enabling field personnel to spend most of their time in the field rather than back at the office. Mobile field force enablement puts the most up-to-date information into the hands of those who can do the most with it, whether that means improving interactions with customers, partners and suppliers, or refining the processes that make data consistent across all levels of the organization.
The wholesale distribution industry usually has about 30% to 40% of their employees in the sales and service. Although the main objective of the sales force should be business development, most have become the primary point of contact for all types of customer needs. Whether it is a simple query like the status of an order or some questions on an invoice, the customer will invariably call the salesperson to get his/her question answered. This being the case, mobility enables a quick response and greater productivity. Overall, the benefits derived include higher customer retention, loyalty and improved revenue and profitability.
These solutions require several types of synchronization; downloads to get current balance, pricing, and availability, and uploads to publish recent sales orders to back-office transaction systems. Media tablets are the most requested medium for this type of usage, followed by smartphones, with many employees seeking to use their own devices wherever possible.
Table 2 identifies the opportunities TSPs have to harness the mobile field force trend, the business drivers behind them and the benefits users derive.
Source: Gartner (June 2012)
From 2012 through 2013, we expect mobility to be used more extensively in transporting goods to facilitate tracking, communication, and process execution. Mobile devices and onboard or in-cab computers are rapidly becoming common inside trucks, enabling urgent dispatches and ongoing communication, such as receiving new or updated delivery stops in real time wherever they are, within seconds. Additionally, mobile data collection at load, upon delivery and customer return, enables up-to-the-minute delivery status and detailed visibility into the supply chain that can be used by other administrative personnel to improve overall business efficiency. Transportation is a highly mobile function — drivers are out on the road and moving nearly 100% of the time, making tight management of vehicles a challenge. In addition, this function is burdened with the need to collect a lot of data to meet government regulations, translating into large volumes of forms and other paperwork.
Table 3 identifies the opportunities TSPs have to harness mobility trends in transportation and logistics among wholesale distributors, along with business drivers and the benefits users derive.
Source: Gartner (June 2012)
The mobility trend in distribution warehousing began with the use of handheld, ruggedized mobile computers and has since achieved widespread adoption. Today multipurpose mobile devices work well in distribution warehousing environments because they enable workers to be agile and productive, accomplishing various tasks and processes without being tied to a specific station or area. Opportunities still exist to leverage mobility even further to optimize operations. Many SMBs, comprising 80% of all wholesale distributors, have yet to move beyond basic wireless data collection. Additionally, wholesale distributors are enhancing their use of the technology and are taking advantage of new advances in devices that are now being offered. For example, wholesale distributors are combining mobile computers and scanners with mobile printers; or pairing voice solutions with mobile printing; or using mobile computers with voice capabilities instead of separately dedicated voice devices. Likewise, the newest ruggedized, handheld mobile computers boast an array of functionalities for improved warehouse productivity and flexibility: 1D and 2D bar-code scanning at both close and long ranges; built-in cameras; RFID capabilities; and voice-enabled functionality.
Table 4 identifies the opportunities that TSPs have to harness the trend toward enhanced mobility in the warehouse, the business drivers behind them and the benefits users derive.
Source: Gartner (June 2012)
When critical business events occur, decision makers need access to timely and accurate information so that they can respond accordingly. By 2014, Gartner expects that mobility will deliver metrics at your fingertips, enabling performance exceptions to not only be flagged but acted also on in real time. Industry surveys conducted by the National Association of Wholesaler Distributors (NAW) have determined that best-in-class wholesale distributors are typically 50% more likely than others to notify decision makers immediately when exceptions in business processes occur, regardless of time or location. Although various event management and alert notification solutions have been around for a decade or more, Gartner estimates that less than 30% of wholesale distributors use them. Despite this, time is ripe for businesses in this industry seeking leadership to automatically deliver role-based process and key performance indicator exception alerts and notifications in real time to their key decision makers, eventually also adding options for taking appropriate response.
Many businesses have just begun to use email alerts from back- and front-office systems to drive awareness of exceptions, key performance indicator, and events to decision makers. However, mobile workers may lose track of important emails with critical events or urgent client requests that require a prompt reaction. Their responses could take hours or days, and arrive too late. TSPs need to help wholesale distributors move beyond email alerts and give business users the ability to enable business process alerts on the mobile device of their choice with response capabilities so they can immediately address workflow approvals, reviews and other decision points. In doing so, they will help businesses significantly improve customer response times and overall business productivity.
Opportunities will vary broadly from delivering role-based landing pages and dashboards that offer all the needed information someone needs to do his or her job (such as in finance, procurement, warehouse management, sales, and transportation), to sending alerts when customers cancel a big order or exceed their credit limit. Newer solutions can alert personnel of shipments in danger of late delivery, so that they can then act to avoid the delay, or alert customers on their mobile phones of the issue and the action taken, protecting important service and satisfaction levels. Finally, one of the more interesting applications of event alerting is where an exception service uses fleet-defined rules to alert transportation managers if drivers leave defined areas, remain inactive for a period of time, or repeatedly return to a work site.
We live in a world focused on "acting now," and the inability to swiftly respond to marketplace opportunities can result in lost business and reduced competitiveness for wholesale distributors. This technology provides a range of new possibilities. Mobile access and integration to process workflows that deliver event notification and alerts, exceptions and reliable key performance indicators, along with the ability to act on fact-based data, will remain a key technology trend through 2015.
Rapid adoption by consumers of new technologies such as mobility and social media will soon be paralleled by applications in the business world. The convergence of these new technologies offers TSPs fresh opportunities to drive innovation in wholesale distribution. Although cloud and mobility are front and center in terms of current activity and engagement levels, analytics (including big data) and social media are not far behind. As they converge, new use cases will emerge to unleash higher levels of provider participation and potentially disruptive forces that could rock the traditional competitive landscape.
Cloud and mobility offer midsize distributors, in particular, the chance to catch up with competitors having larger IT budgets. Social media is providing new ways for those in this industry to sense and respond to the needs of their constituents — whether they are employees, suppliers or customers — much more quickly than ever before. A handful of innovative wholesale distributors are delivering things such as advanced shipping notices via Facebook and other social media sites, which in turn are monitored using mobile devices.
Meanwhile, analytics are helping wholesale distributors address critical issues such as customer segmentation and pricing and profitability analysis. One specialized consulting firm that advises this industry analyzes millions of invoice line items and generates tens of thousands of price recommendations for its clients. This firm can even calculate the line-by-line item profitability for hundreds of thousands of customer-item pairs. Big data, while not well understood by the industry, provides TSPs with the opportunity to offer similar insights to distributors with massive, complex SKU portfolios and the need to keep track of thousands of interactions with customers. Finally, integrators will also be needed to leverage these technologies and meld them into new solutions, capturing the strengths of each, from sentiment analysis and business insight to cloud-based collaboration and real-time, right-place mobile delivery of actionable information.
RFID has been a trend in supply chain industries for more than a decade, but its use compared with its potential remains largely untapped. The technology is being leveraged in various ways by larger wholesale distributors, but over time we expect that it will be used by all sizes of enterprise as the technology itself, and the ability to harness the velocity and amount of data associated with it, becomes more cost-effective.
The greatest opportunity with RFID enables distributors to track goods in stock, as well as through transit, to ensure delivery. RFID infrastructure solutions include fixed, handheld and mobile readers, antennas and RFID tags, and combine with distribution applications to deliver operational benefits.
The eventual technology scenario for RFID will culminate when distributors are able to replace point-and-read, labor-intensive operations with RFID systems that track RFID-tagged pallets, cases, cartons and individual items anywhere, anytime to significantly cut supply chain costs (tracking of assets is enabled without any staffing) and drive new revenue opportunities. From a distribution standpoint, just with respect to shipping and receiving, many industry insiders believe RFID could eventually offer the potential of a 60% to 80% reduction in labor alone.
RFID should ultimately provide the opportunity for enhanced tracking information. Today, online portals for package tracking contain information on package location, but at best, the accuracy is only as good as the last update, or the last manual scan/touch. With RFID, tagged shipments can identify their location, even when a worker is not able to physically scan or locate the package. The increased usage of RFID should provide plenty of new TSP opportunities in the years to come.
The use of mobility in the wholesale distribution industry presents challenges. The biggest concern is the security of information, such as customer data, as it flows beyond the four walls of the enterprise. As employees start demanding the ability to use personal mobile devices for employee tasks, the equation becomes even more complex. In a recent Gartner survey, among 520 CIOs polled, 77% said they worry that further consumerization of IT will lead to greatly increased business risks. This is especially true in this industry, where few wholesale distribution IT departments are familiar with or have visibility into how services outside the corporate firewall perform.
Many providers offer MDM solutions that address risk mitigation issues associated with mobility. If a major security breach or material event associated with the misuse or loss of company or customer data were to take place across any of the 20 or so subsectors associated with the wholesale distribution industry (from medical devices, to pharmaceuticals, to industrial and consumer goods), its impact could lead to a slowdown in the uptake of mobile solutions, particularly those associated with applications outside of the warehouse.
AFS Technologies is an example of a specialty software provider that offers a comprehensive suite of business automation solutions for wholesale distributors within the food and beverage industry. It also offers a range of mobility solutions such as OMS Mobile, which enables delivery staff and sales staff to access order status, available inventory, current pricing and other information contained within any ERP system or AFS's OMS Server (which, interestingly, can add access to things like advanced pricing and margin calculations). AFS also supplies a Mobile Delivery Automation solution that enables route accounting, route planning and management, paperless delivery, mobile order management, on-site returns processing and electronic signature capture.
Epicor continues to enhance its mobile capabilities in support of the wholesale distribution industry. Its Wireless Mobility Application supports inventory look-ups, order entry, field service and other CRM functions from mobile devices and, together with GDC Web Connect for Prophet 21 (its flagship wholesale distribution ERP system), provides sales representatives and administrators with built-in tools for viewing, creating and editing their opportunities and tasks. In addition to supporting many of the wireless warehouse capabilities, Epicor's wireless workbench has the ability to balance warehouse transactions between and across staff, assign specific tasks to employees and view "who is doing what?" Epicor also recently released a new Proof of Delivery application for the Activant Eclipse, Prophet 21 and Prelude distribution industry platforms supporting iOS (for Apple mobile devices) and Google Android operating systems. It provides special features to assist distributors in confirming and coordinating deliveries, such as viewing location maps and accessing driving directions, the ability to access special notes or comments associated with an order or delivery stop, mobile notification in advance of cash-on-delivery orders and the proper collection amounts, capturing of signatures, taking pictures and attaching them to an order, and handling return material authorizations. Epicor's capability also provides Clock-In/Clock-Out functions for drivers when arriving at a delivery site, to identify how long they are at a stop.
Infor provides business software for midmarket customers and has a dedicated business unit that supports the wholesale distribution industry. Infor Advanced Mobile is available as a preintegrated module for Infor's distribution-centric ERP SX.enterprise 5.1 and higher versions, and enables distributors to create sales orders and manage customer-owned and consignment inventory directly at the customer's location from any Microsoft Windows-based mobile device. Warehouse, shipping and delivery associates can record all data related to product deliveries in the field, obtain signature capture for proof of delivery and gain integrated mobile camera functionality for complementary proof of transfer or product condition. Also, office managers or IT staff can seamlessly manage mobile devices, gaining visibility into battery life, required software updates, and all software applications on the mobile device.
SAP is positioned as a Leader in Gartner's "Magic Quadrant for Mobile Application Development Platforms" and is rapidly pursuing the application of the technology among wholesale distributors, especially in the development of mobile analytics. It recently announced partnerships with three leading mobility development tools providers: PhoneGap (recently acquired by Adobe), Appcelerator, and Sencha to enable developers that are working with tools they are already familiar with, to build applications using a new OData connector to integrate with SAP's back-end systems. Representative areas within the industry where SAP is delivering or plans to deliver mobile capability near-term include: mobilizing and packaging limited product catalogs based on history and combining them with customer information, historical orders and available promotions; enabling sales to more effectively suggest and take orders in the field and contextually push data such as sales promotions, product recall, customer credit status to them right place and right time; enabling customers to execute and track orders on mobile devices; and enhancing mobile delivery and payment, including cash-on-delivery.
Most roles within a wholesale distributor — whether administration and finance, supply chain or customer-facing sales and support — will be mobile-enabled by 2015. Many Gartner and independent surveys are consistently pointing to mobility as a major driver for helping the industry find quicker and more cost-effective routes to operational efficiencies and value-added services.
TSPs seeking mobile opportunities in this industry will find a highly competitive environment that requires creative partnerships and solutions that can deliver valuable capabilities beyond the status quo. Fortunately, significant demands exist and mobile technology continues to evolve and converge with cloud, social media and analytics, creating new areas for both opportunity and innovation.