When talking to buyers of Class C components, the majority will tell you their biggest challenges revolve around price, availability, lead time, and service. They want a wider variety of products available on demand, faster shipping, and a more frictionless customer service experience—thanks largely to the “Amazon Effect.”
Direct-to-consumer fulfillment is one way to address these challenges. A direct-to-consumer approach is also beneficial to distributors, as it requires less physical handling of products and lower freight expenses. Even so, few distributors offer this solution due to archaic business practices—they don’t have ways to control quality and can’t handle the complexity of managing suppliers or forecasting demand.
Instead, they rely on a traditional distribution workflow that fails to meet buyers’ high expectations.
Limitations of Traditional Distribution
With traditional product sourcing, the distributor purchases products in bulk from manufacturers, repackages those products with their own branding, stores them, resells them to customers, and consolidates purchase orders for shipping out to customers.
In specific use cases, this flow is logical. It gives distributors more control over quality and fulfillment timelines and allows customers to receive shipments that are nicely packaged up with everything they need in a single shipment.
But in most cases, this shipping strategy is wasteful and costly. With so many steps between manufacturer and customer, buyers may experience the following:
High costs. It takes a lot of time and effort to ship, receive, and repackage products for distribution, and those overhead costs ultimately get passed on to the customers.
Longer lead times. If a distributor doesn’t have the right inventory stocked or is located far away from a customer’s facility, waiting long periods of time for products to make their way through the supply chain can be frustrating.
Negative environmental impact. The traditional flow of goods often requires unnecessary transportation and additional packaging materials.
But a new way of doing business is emerging. Smart distributors are finding opportunities to fulfill orders more efficiently through automated shipment rebalancing technology.
Virtual Consolidation: A New Frontier of Technology-Enabled Fulfillment
Through a combination of machine learning, automation, and sophisticated quality assurance programs, top distributors have implemented Virtual Consolidation to cut out unnecessary shipping steps and meet buyers’ rising expectations. Virtual Consolidation involves using data and analytics to make decisions on where to source from, how to move products most efficiently, and how to provide the best experience for the buyer.
Automated Shipment Rebalancing
Virtual Consolidation looks at a buyer’s location and analyzes nearby suppliers, their inventory levels, customer requirements, weight and dimensions of products, shipping costs, and more to determine the most efficient way to get products to them quickly and cost effectively. It also assesses future demand and customer feedback to prevent supplier stock-outs and negative experiences.
Amazon-Like Advantages
Virtual Consolidation benefits customers in several ways.
Faster delivery. Buyers don’t have to wait for physical consolidation, which significantly reduces lead time.
Reduced costs. Less overhead and reduced freight leads to better product prices for customers.
Environmentally friendly. Leaner operations, lower emissions, and less waste align with green initiatives.
Better product availability. A wider range of products are available at any given time, in any location.
Embracing Generative AI
Companies at the forefront of innovation within the industrial distribution sector are embracing generative artificial intelligence (genAI) to unlock even more opportunities for productivity. GenAI refers to deep-learning models that identify patterns and structures within existing data to generate various types of high-quality content like text, images, and synthetic data.
Within the North American industrial distribution framework, genAI has the potential to shepherd businesses into a new era of shipment rebalancing, personalized customer service, and supply chain output. As more companies embrace this technology, they will be able to deploy Virtual Consolidation at scale.
Will Virtual Consolidation and Generative AI redefine how Class C components move through the supply chain?
It is clear that genAI stands to not only upend traditional markets and sectors but also create profound opportunities across a variety of new segments. We predict that buyers will continue to see more flexible shipping options as more companies embrace digitization.
Are you currently working with a supplier that can provide technology-enabled shipment rebalancing? At Blue Ribbon Fastener, we are actively creating a more connected and agile ecosystem to support this evolution. We have a growing network of regional distribution hubs throughout the United States and Eastern Canada capable of drop shipping directly to consumers—made up of only approved, top-tier suppliers to ensure the utmost quality and reliability.
Interested in taking advantage of our Virtual Consolidation program? Get in touch with us to learn more.
Robert Nathan started his career in the fastener industry at the ripe age of 7, sorting screws and poly bagging for his grandfather's industrial supply company. After building a career in the logistics sector, Robert founded Value Chain Ventures, an investment firm focused on providing capital to highly fragmented industries.