October 7, 2020

    AI in the Distribution Industry: 6 Use Cases for Distributors

    For all the talk around the rise of Artificial Intelligence (AI) in distribution the technology isn’t new.

    In fact, many of us use AI in our daily lives.

    Predictive text is the most visible example. Say you frequently text a friend to meet at the bar. You type: “Meet me at the …” Your phone suggests “park” or another common place to meet. Over time, your phone learns, and the suggestions start to prioritize “bar” over other words.

    At its most basic, AI takes data, analyzes it, implements a solution (suggesting the next word), evaluates the results (recognizing that you almost always type “bar” with that friend), and then repeats the process with improved recommendations based on data. Over time, the system grows smarter. Other examples of AI in everyday life include pricing on ridesharing apps, facial recognition in social media and even non-player characters in video games.

    AI is the next big disrupter in the wholesale distribution industry, as solutions such as Microsoft Dynamics 365 embrace the technology to help distributors sell more, grow profitability and improve productivity.

    Until recently, AI had only been available to a few companies with deep pockets. Taking advantage of AI called for a big data center, specialized software and data scientists in house. But thanks to the rapidly growing adoption of cloud-based technology even before COVID-19 hit, companies of all sizes could more easily plug into AI-infused applications at a much lower cost, setting the stage for accelerated adoption of AI.

    The potential for AI is so great, Gartner added several new AI categories to their 2020 Hype Cycle for Emerging Technologies, replacing several others mentioned in previous Hype Cycles.

    Here are six ways you can use AI to benefit your distribution business:

    AI Use Case 1: Optimize how your team spends their time.

    Imagine your Accounts Receivable team reaching the late-paying customers most likely to respond. AI can help distributors differentiate between accounts that need to be turned over to collections, and those more likely to pay with one reminder phone call. AI could also direct your team to focus on certain times of day to increase the likelihood someone picks up the phone. Given the importance of cashflow to distributors, this is a powerful application of the technology.

    Now, imagine your sales team finding better ways to make the most of their time. Tools such as Microsoft’s Dynamics 365 AI for Sales can identify the data points that influence purchasing, such as whether a prospect downloaded a white paper, they have an account exec assigned to them, or if they have previously purchased related products.

    AI also can identify opportunities for salespeople. It could even be something you can’t control, like the weather forecast. If it’s going to be 110 degrees, you can expect an uptick in sales of air conditioning units or parts to fix them in certain areas. AI then adjusts those recommendations based on how customers respond, and the cycle continues. AI also helps salespeople to have more meaningful, personalized conversations and relationships with customers.

    AI Use Case 2: Analyze and improve sales team performance.

    You can also deploy AI tools such as Dynamics 365 AI for Sales to improve training and sales execution.

    • The AI tool can help salespeople optimize their time and have meaningful customer conversations. The tool can also suggest creating new records and using the sellers’ notes, which can boost efficiency.
    • Sales managers may find the AI insights can unlock opportunities to coach their teams. Comprehensive insights into their team members’ individual performance to target the best areas for improvement. And AI can use sales records to identify successful conversations and tactics so you can coach your teams to replicate them.

    AI Use Case 3: Grow sales and margin with existing customers.

    When a customer is making a transaction on a website, via your call center, at the counter or through another channel, how can you sell them more? Enter AI. For example, let’s say that data show that small electrical contractors regularly buy red, green, white and black 10-gauge copper THHN wire at the same time of the month or year. So, when an electrical contractor of that size selects just red, green and white copper wire, a salesperson should be prompted to ask: “Are you forgetting black?” Chances are the customer may add black wire to the basket.

    Identifying those relationships between products – black wire is always purchased with red, green and white wire, for example – and coding them into your system is a lot of work. Add to that the evaluation of whether sales offers were effective – how often they were accepted, how often they weren’t (and why) – and adjusting for that on the next sale, it becomes increasingly difficult if not impossible to do manually when you’re talking about thousands of products. AI can do this far more quickly and effectively than a human can and can have a big impact on your top line.

    A foodservice distributor grew sales volume by 5 percent almost overnight after turning on an AI-powered cross-sell and upsell recommendation engine on their website. But this is not just about selling online; distributors are using cross-sell/upsell technology to grow wallet share across their channels. The ROI can be huge, and it requires very little upfront work by humans.

    Pricing software is a more mature application of AI-based technology; it can determine the optimal price for an item based on lost sales, historical sales volume and other data points.

    AI Use Case 4: Gain actionable insights into customer behavior.

    Beyond cross-selling, AI enables you to tap into the wealth of data behind an individual, including transactional, observational and behavioral information. Tools like Microsoft Dynamics 365 Customer Insights unify that data, generating comprehensive customer profiles and nearly endless possibilities to enhance customer experiences – and increase customer lifetime values. Again, the insights can be useful in whatever way a customer interacts: in person, over the phone or on your website.

    AI can identify behaviors that indicate a customer is likely to leave, so you can then target them with appropriate marketing and strategies to keep them active. For instance, you may offer an irresistible coupon code. Further, the technology can help you understand individual preferences to improve customer satisfaction. And AI-driven recommendations can even help you find new customer segments.

    AI Use Case 5: Sharpen your ability to meet customer needs.

    Tools like virtual assistants and chat bots were great for distributors as the pandemic forced distributors to interact with customers in new, more distant, ways. These are known as cognitive services, which are a combination of AI, algorithms and machine learning. When you deploy these services, your technology can interact with and assist your customers without a person, using the data and documentation it has available. The technology can intelligently interpret images, understand language and sentiment, and answer in-depth questions.

    AI Use Case 6: Create greater agility for an indeterminable future.

    A final, key benefit to AI for distributors – and most industries in general – is that it enables greater flexibility and responsiveness in real time. COVID-19 has made agility even more critical as a must-have business strategy. Think of it like going from snail mail to instant alerts on your phone. Practically speaking, AI and distribution analytics allow you to make better forecasts using historical, current and predictive data. This is valuable for core functions like supply chain management. It allows for faster decision-making informed by current operational data, and you can further use that data to make better long-term decisions around efficiency.

    What’s your AI strategy?

    COVID-19 isn’t the only driver behind increased AI adoption. It was already gaining traction before the pandemic’s effects on the distribution industry. As younger employees are hired into purchasing roles, they expect the kind of customer experience that AI-powered technology can deliver. And as your competition invests ahead of you, you must find the right technology to stay competitive and profitable. This technology is here now; every distributor needs a strategy to respond.

    At Enavate, we work closely with distributors to implement technology that enables and delivers the kind of functionality I discussed in this blog. It’s not just a technical decision. There are real business benefits to using AI, including growing average order size, boosting margins and tightening customer relationships. Don’t wait to invest. AI technology is soon going to be table stakes to compete, if it isn’t already. The Cloud has been a great enabler for distributors ready to move forward.

    Contact us if you have questions or you’d like to talk more about what Enavate is doing to support distributors in embracing AI.

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