Episode 24 Feb 25, 2021

Wholesale Distribution Trends with SAP’s Susanne Adam

In this episode, we are pleased to host SAP Principal Solution Manager, IBU Wholesale Distribution Susanne Adam to take the pulse of trends, challenges and opportunities in global distribution businesses.

The threats of the past year and change have been well-documented, and Susanne offers us a front-row seat to a wide range she’s seeing out in the field, including increased eCommerce competition, marketplace strategy, supply chain and governmental restrictions, and the changing role of sales in a digital world.

Each challenge creates an opportunity, and Susanne shares some dynamic outside-the-box use cases wholesale distributors are adopting to drive services value with all-in-one Total Solutions.

You can find the joint Zilliant-SAP whitepaper mentioned in the episode here: Enabling More Profitable Pricing in Wholesale Distribution

Susanne Adam

Susanne Adam

I talked a lot about challenges and reactions to challenges. And I actually thought maybe we can look at this from a different angle, from a different perspective. Because these challenges are also opportunities. And one of them is I think a great opportunity, the area of pricing.
- Suzanne Adam, SAP

Episode Transcript

Susanne Adam: I talked a lot about challenges and reactions to challenges. And I actually thought maybe we can look at this from a different angle, from a different perspective. Because these challenges are also opportunities. And one of them is I think a great opportunity, the area of pricing. And the white paper that you just mentioned is a first starting point, if you have not, maybe, really looked into that before and to read this. And get a good introduction into this whole topic.

Lindsay Duran: Welcome to B2B Reimagined. My name is Lindsay Duran, and I'll be your host for this episode. I'm joined today by Suzanne Adam, Principal Solution expert for wholesale distribution at SAP. Suzanne, thanks for being here.

Susanne Adam: Thanks for having me, Lindsay.

Lindsay Duran: Before we get started. Why don't you tell us a bit more about yourself?

Susanne Adam: Sure. I do have a background actually in SAP consulting for the hotel and for the retail industry. And my main focus all those years was the audit to cash process, and really starting from quotation and order taking, up to billing. And as you might assume, or you can imagine, pricing wasn't always an important topic also for me as a consultant.

And as I mentioned, I have background retailers and wholesalers, where they are really quite some differences in how pricing is done [00:02:00] in those two different industries. For six years now, I am with the SAP industries machine management focusing on wholesale distribution and one of my focus topics here, is also to order to cash process. I have set various tasks.

So, I support, for example, our account teams with insight into the industry, especially on trends, new business models, but also very concrete use cases. And then in addition to what other relevant SAP products that support these individual use cases.

Lindsay Duran: Excellent. We're thrilled to have you on this episode. 2020, I think, presented a whole host of challenges across the business world and in our personal lives, but, in distribution in particular, as well.

Can you talk a little bit about the current challenges that wholesale distributors have faced over the course of the past year and spend a few minutes discussing some of the trends that are emerging as a result? [00:03:00]

Susanne Adam: Absolutely. Yeah. Let's maybe start with, from my point of view, one of the most, and I think as a pressing thing that is going on. Distributors see an increase of competition and new disruptors on the one hand, we see that suppliers sell directly to the customers of the wholesale distribution.

And on the other side, we have B2B marketplaces with the endless assortment. And when the thing in the context of pricing, this means also more price transparency. And then we have, in addition, when the thing on supply chain, you just mentioned, COVID, just think on what's happened this last year. Distributors are actually the first responders in the supply chain.

They play really so important role to enable supply. And when you look back, what happened in the beginning of the pandemic, manufacturers slowed down their production. And we saw that their governments had put restrictions on like export stops or even [00:04:00] closed borders. And this effect that then the transportation of goods that have been distributors were really fast to monitor and actually also to react very quickly to such sourcing risks and to this shifts that we see in this one.

My point of view is that supply chain is to definitely be a focus topic going forward, especially the anticipation of future supply chain disruptions. This would be a big topic for the next years. In addition, maybe also, I would like to mention a thing that is also adding really complexity to business processes as the whole things that this year-round and does this across really all over the world, across many countries - increasing regulatory requirements. And this in different areas.

Just think our customer protection and as just mentioning GDPR as a topic or I think on circular economy trends residing also, acts for waste recycling or reduction of [00:05:00] single-use packages. And I think it's also valuable to mention here is product traceability. Just as an example, in pharmaceutical wholesale distribution, we see a lot of regulations or many countries regulations regarding the possibility or the ability to counterfeit falsified tracks or companies having to comply with specific compliance reporting need to handle this.

And maybe as last mentioned, the thing is also an interesting thing. That is the changing role of sales and eCommerce. We see it, as we talked before in the beginning, there is a general move to eCommerce and to marketplace.

And then we have on the other hand in wholesale distribution, the important role of the sales representatives. And we see now this happens in some companies that sales representatives consider actually the eCommerce channel as a [00:06:00] possible competition. And have resigned to the fact that customers tend to call the sales reps instead of ordering online, because they expect to get an even better price.

This can be really margin destroyer. We see actually the same has happened is that sales representatives agree directly with customers on prices. And what is happening to us that then for example, transfer them to the headquarters. So, a lot of things are going on here due to the fact that we see a shift of the importance in eCommerce.

Lindsay Duran: That is quite a bit of disruption. I'd like to spend a little bit of time talking about the last one. And that’s around the eCommerce piece and vertical marketplaces. I think a lot of wholesale distributors were maybe caught somewhat flat-footed or hadn't quite made as much progress as they would have liked and thought about eCommerce as a bit of a [00:07:00] special project and not necessarily the most important channel given the volume flowing through that channel.

Susan, what's been your experience in working with wholesale distributors and how prepared they were to meet the accelerated trend of eCommerce and vertical marketplaces for that matter?

Susanne Adam: Very good question. And I have to say, and what I do see as a very mixed picture. I see that the distributors had actually started couple of years ago already moving into eCommerce have now very good eCommerce app shops up and running. It was a really extended product information. And now they are improving the customer experience by adding, for example, things like AI supported service functionality or mixing product information and other content.

And bringing this together really trying to actually even [00:08:00] consider or add functionality that we all know as from consumer websites and printing this actually also into their laptops. This is one thing. On the other hand, I still see wholesale distributors that actually have not really started with eCommerce.

Or have a very small web presence. And now, and you see what happens last year, everything and everyone went into the home office, and everything was virtual. That meant also that sales went to lunch. Also that means the web presence in the back shops got much more traction. And if you do not have one, so this means you are not in a really good position.

And so therefore we see there will be definitely for those distributors, not a web presence yet, but definitely will build one in the next coming months I expect. And others will definitely invest more and more spent more efforts to improve the customer experience.

Lindsay Duran: Absolutely. How have [00:09:00] you seen distributors respond to price pressure by doubling down and focusing on value added services?

Susanne Adam: That's a good point. How to react to those challenges that we just discussed. Actually, you have different possibilities. The one that you just mentioned is providing new offerings or new offerings that value added the services, but handling products and services, just as a simple example.

But what could that mean? Let's assume you are in the MRO business, and you are selling, for example, a hydraulic hoses to customers on construction sites. So that means if a customer finds this hydraulic hose, the customer actually buys this needs to add the correct fitting and needs to do various tests.

This is something that you, as a distributor can do and offer as a service. So, you as a customer, the buy this hydraulic hose, and distributors are [00:10:00] adding the correct fitting to all those require tests. And then it's just ready for you to use. Just as a simple example.

Or another, which is, I think is more sophisticated one, I see distributors that offer complete solutions, meaning everything out of one hand. Even adding partners that are delivering those things together with them, such a solution. An example I have here, I found a German food wholesale distributor. They are delivering convenience to us. We in Germany, we have these gas stations that are really small little convenience to us.

And very often people tend to walk in the evening or on Sundays and buy their stuff. So, what the distributor is doing is they're offering as a service or as a complete solution. They offer those gas stations and start a small bakery in the gas station. And this means, including the furniture, the oven, they [00:11:00] train the staff, give you promotional materials and everything. And also deliver the nature on the dough and so on to bake.

This is really actually everything out of one hand. And this is including installation and maintenance of all the things and they don't even delivery often the ingredients to bake to bread.

Lindsay Duran: That's very interesting. And I think that requires companies trying to bring those value-added services or total solutions to the market to think much differently about pricing than they had previously. Why don't we dive in, Suzanne, to some of the pricing challenges that distributors are facing, whether that's a result of the market conditions over the past year, or just as a function of how they've historically done?

Susanne Adam: Yeah. I think maybe let’s start a little bit with what we see today very often. The situation is that in wholesale [00:12:00] distribution that they have just hundreds of thousands, sometimes millions of different products and thousands of customers, and this results then very often to very high number of customer individual prices. And this is one point on the other hand when the prices went up, when they are changed, did it get this information back?

And they needed to maintain this really high number of prices in a very short time, just as one example of what's happening. And this whole topic, I think of price maintenance is absolutely challenging. And price maintenance also has also different perspective because we see the situation that there may be a central pricing team.

But in addition, down other departments that also have the possibility to add certain discounts. Because they are responsible for a certain customer group, or they are they are representing a specific region. [00:13:00] And you also see that pricing even happens in an outlet or a sales representative that negotiates directly with the customer, prices maybe for a specific quote product group or for specific product.

And all of this needs to be handled. And you need to be aware of the central team needs to be aware often. This is really challenging. This is definitely, I think, a tough situation wholesale distribution side. And just to keeping the overview. Yeah? That just thinking, there are several company levels are allowed to maintain prices and discounts and just know what's going on everywhere.

I think an interesting perspective is also because of the different people maintaining prices and the challenges and the vast number of price conditions. It's also difficult to understand where actually margin destroyers. This can really be difficult to find this out just because there's so [00:14:00] various different components that are used and let's say needs to be taken to consideration for price calculation.

I think an important thing also to mention in all of this is that it’s sales representatives, I mentioned this before, are often allowed not only to maintain price it or to change prices or to assign a customer to another price list. Also, in a specific sales transaction actually are also allowed to give discounts or override a specific price. And this can really be, if they are not guided in this situation, like really having a kind of guard rail in between, they can act. And very often in the situation have said they did not have this. But even sometimes they do not really even see that they're actually, maybe even below a purchase price.

Lindsay Duran: Absolutely. I think what you're speaking to is just the sheer complexity of the number of ways in which prices are set in wholesale distribution. [00:15:00]

That margin leakage can be happening at every level, especially when you don't have tight controls. And we see the most common ones that you listed there at the end that sales reps are able to reassign customers to the best price. Every customer ends up getting the price that only your largest customer should likely get. Or they create a proliferation of special price exceptions that are ‘set and forget,’ if you will. And those can be very difficult to update over time. And certainly, we still see that the cost-plus model is still widely prevalent and that presents quite a few issues when it comes to trying to move a portion of your business into the eCommerce channel. Can you talk more about that, Susanne?

Susanne Adam: Yeah. Absolutely. Because the cost-plus model is, as you mentioned, is absolutely very common. And you just think you [00:16:00] take into consideration what that you say, what does it really cost? What are maybe the additional discounts? Or that I got data on from my window and taking all of this into consideration and adding the margin. And then you're adding the margin, but I do see sometimes that margin is added, and sometimes deliberately, quite high. Yeah? To give a sales representative later on the possibility to negotiate with the customer. Now let's assume you have another situation with when we have an eCommerce channel in addition to that means the higher price is then shown potentially to the customer.

So, this whole topic of omni-channel makes this, let's say, just classical, maybe I can say, classical pricing approach. Maybe not adequate anymore, if I can say it like this. Yeah? So that means you need to be aware that your price is not only something that is negotiated by just a sales representative, but also is shown in the back shop. And also important is, [00:17:00] and this is what customers want to see, they want to see their customer individual price in the back shop. And so, it must be clear. And it must be definitely an absolute guidance. And also, strict price maintenance and discount structure and discount policy actually must be in place to enable actually that you can really be omni-channel and sell to the same price be it in the outlet, be it on the back shop. Or if a sales rep is visiting you.

I think this is just apparent from my point of view challenge. And in addition, that comes, you mentioned this task, that our B2B marketplace is and we have this call and the digital savvy buyer, this younger generation is absolutely used to buying via the internet and they are just ever just to check everywhere and look for good prices. So that means that just as if you just are right now in this situation, that their prices are compared with [00:18:00] that of many other possible vendors.

Lindsay Duran: Absolutely. I think that omni-channel consistency for the customer experience is really key. And it's no longer acceptable for a customer to see a different price on a web channel than when they call in and speak to a sales rep.

And that's really, I think, a driving force for why we see a lot of companies wanting to tackle pricing and structures and strategies and get better in that area. Suzanne, can you talk about how companies should be approaching crisis?

Susanne Adam: It's not something that maybe starting in the IT department, or maybe even if there's a central pricing team that can start a pricing project or think on what's a good way to think on pricing because pricing has so many aspects, as we just said, It’s the price maintenance, data ingestion from vendor prices. It's the whole topic of price calculation. And then the price optimization. [00:19:00] And so that means in our experience as a pricing or a pricing project, means that you need to identify who are the stakeholders in your company that you need to involve in such a project?

Yeah? So did you have really everyone sitting at the table who has something to say and start this down from here and really built. And I think this is an important thing, what I saw, what customers are doing: building the quality of business road map. We did identify the current pain points that you have, and then decide on a strategy.

Where I want to be in the next couple of years? What do I want to address? And what are actually my sales channels? How will the importance of the sales channels maybe in five years…would it be different? Or not? Yeah? And I think taking all of these aspects into consideration and then starting a pricing project. That means you need to have a partner and work with the partner on this.[00:20:00]

You need to have really people working with you in this area. Go away or let's say, use it as one part from the cost price plus to a really more market appropriate dynamic pricing.

Lindsay Duran: Suzanne. So, at Zilliant, we work closely with your team at SAP. Can you talk a bit about our partnership and how companies in the distribution space can benefit from a joint Zilliant SAP approach?

Susanne Adam: Well, I just mentioned, we bring together our strengths SAP and Zilliant, we bring our strengths together. And I think we can really help customers to shift to a new pricing strategy. Yeah? And really going into the area of dynamic pricing and really get this dynamic pricing done. Yeah? Improve the customer experience and all the various states channels [00:21:00] that a distributor has that we just have discussed.

And I think also with our partnership is as good as we say, Zilliant, your product is tightly integrated to the SAP solution portfolio, which I think is this for us as SAP, very important. So that really the customer's able to actually have and deliver all these consistent prices over, across all sales channels, be it in the back shop or ERP or CPQ.

Lindsay Duran: Absolutely. I think for companies that are interested in learning more about how Zilliant solutions come together with SAP solutions to deliver really a seamless integration in value in terms of margin and revenue lift. We recently produced a joint white paper called “Enabling more profitable pricing and wholesale distribution.”

Look for the link to the white paper in the show notes for this episode, Suzanne, is there anything else that you would like to add for our listeners? [00:22:00]

Susanne Adam: I was just thinking - I talked a lot about challenges and reactions to challenges, and I actually thought maybe we can look at this from a different angle, from a different perspective.

Because these challenges are also opportunities. Yeah? And one of them is, I think a great opportunity, is the area of pricing. And the white paper that you just mentioned is just a first starting point. If you have not, maybe really looked into that before, and to read this and get a good introduction into this whole topic.

Lindsay Duran: Absolutely. I think that's a great way to frame it. Suzanne, I'd like to thank you for joining us or this episode. I hope we can invite you back on a future show.

Susanne Adam: Thank you so much, Lindsay. It was my pleasure.

Lindsay Duran: And thank you all for joining us today. We also ask that you leave a rating and review as that helps us to be able to continue putting out great content for free.

Thank you and join us for the next episode of B2B Reimagined. [00:23:00]

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