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AI in Distribution: Where to Start?

June 23, 2022
View artificial intelligence as a tool rather than a technology.

For a while now, artificial intelligence (AI) has been viewed by many as exciting new technology that might be able to help a manufacturer or distributor modernize and, more importantly, digitalize its operations. Accenture defines AI as a constellation of technologies that allows smart machines to extend human capabilities by sensing, comprehending, acting and learning. This allows people to achieve more with less effort.

After several decades of development, AI has embedded itself in our everyday lives. Do you unlock your phone using your face to get to your social media feed? The facial recognition and what you see on your feed are made possible through AI. When is the last time you went an entire day without using a browser search?  When you are searching for things online, you are using the power of AI, which makes those search engines super-fast, comprehensive and robust.

The smart devices in your home, such as a smart thermostat, use AI to learn your patterns to maximize efficient use of energy. And then there’s shopping. If you ever shop Amazon, you know it gives you product recommendations by learning what you search for and buy, and what other people like you are buying.

Adding AI as a Tool

AI is a tool you can add to your digital toolbox. AI makes your operation run more efficiently on its own with parameters set by you. Here are some of the ways it can help a distribution company:

  • Sales recommendations. Having AI recommend items to your customers can do a couple of things for you. In self-service situations, AI can make recommendations for additional purchases based on what the customer is buying, thus increasing your company’s sales and wallet share. For counter sales, it provides similar information that the counter rep can use to make suggestions to the customer. A 30-year veteran at the counter knows what additional items their customers may need for their job, but a new employee does not have the experience, which is where AI can help.   
  • Proactive supplier recommendations. Selecting suppliers is one of the most critical aspects of any organization. Any inaccuracy in the supplier selection process can lead to poor supplier performance, supply disruptions and inefficiencies in the business process. AI-powered machine learning models segment suppliers based on three metrics: promptness, quality and quantity of other available suppliers/vendors.
  • Discount recommendations. Using historical data of customer orders, AI learns about the customer, division, item, quantity, price and discount for each order. It augments the business users’ knowledge with the recommendation of maximum value that can be offered for a given order.
  • Inventory optimization. There is no more significant asset on a distributor’s balance sheet than its inventory. Having the right amount of inventory in the right location is critical to supporting your customers. Too much inventory fills up your distribution centers and ties up valuable capital. Not having enough inventory prevents you from filling orders. Suppose your inventory is not in the proper distribution centers throughout your network. It can add cost and delivery time to your customer. AI can analyze your customer order patterns and optimize your inventory levels to increase sales and profitability.

In addition, AI also can:

  • Help maximize the life of assets through predictive analytics on health, maintenance and parts needs.
  • Generate customer insights on what to sell and how to keep your customers happy, improving customer interaction efficiency and retention while growing revenue.
  • Initiate automated process triggers based on specific events or conditions to improve process efficiency and reduce manual processes.
  • Access hidden data insights to increase automation and drive better business efficiencies.

View from the Front Lines

During a recent discussion with Dan Schuberth, chief revenue officer at the National Association of Wholesaler-Distributors, I asked Dan: “Do you think AI use will continue to increase in distribution?” Dan replied: “Data is king, and distributors that make data-driven decisions in fine-tuning their operations will compete favorably in the arenas of strategic pricing, logistics and customer service. AI dials up the speed and precision at which data is put to work. Distributors that adopt this technology will quickly distinguish themselves as best in class.”

When I asked Kevin Gammonley, executive vice president of the North American Building Material Distribution Association, the same question, he stated: “AI will absolutely continue to grow as a valuable tool for distributors, and this is a good thing as it will help distributors remain competitive in an environment that is changing rapidly.

“With growing competition, distributor sales reps must do what they do best—spend time with customers and sell. AI provides distributor sales reps with very straightforward direction on what steps to take to increase sales requiring no time wasted on analyzing data.

About the Author

Will Quinn

Will Quinn is director of distribution industry and solution strategy at Infor.

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