Amazon and Walmart Turning Suppliers into Service Providers
We’ve been writing a lot lately about the new level of intimacy required to compete in today’s supply chains. The supply chain “Titans,” as consultant Jim Tompkins likes to callAmazon and Walmart, are responsible for stirring up both angst and creativity among competitors. The introduction of Amazon Flex, the e-commerce model we wrote about recently, now has brick-and-mortar distributors contemplating the idea of taking up residence inside their customers’ distribution centers to better differentiate themselves as service providers.
The National Association of Wholesaler-Distributors (NAW) addresses the importance of this level of service in its newly-published book, “Facing the Forces of Change: Reimagining Distribution in a Connected World.” The book is actually a report on NAW’s latest research about the business climate its members face. The last chapter of this book states that services continue to be of extreme importance to wholesaler-distributors when it comes to creating meaningful, sustainable points of differentiation among a widening array of competitors. It comes down to embracing a consultative, value-based sales approach.
According to NAW’s 2013 study, members are starting to assume responsibility for procurement within their customers’ organizations, becoming an outsourced service provider. This extends to the concept of embedding themselves on the customer’s factory floor, managing supply chain challenges from the inside. Indeed, 83% of distributor CEOs responding to the “Facing the Forces of Change” survey said they now generate up to 10% of their revenues from service programs.
“We could see a trend where distributors start making more of their money off services as opposed to reselling product,” the book quotes Ted Stark, president of janitorial supplies distributor Dalco Enterprises Inc.
MH&L has reported other examples of distributors going outside their box to strengthen their image inside their customers’ box. Glendale Warehouse, a family-owned and operated spice and food distribution company based in Edison, N.J., actually put a 445.41 kW rooftop solar photovoltaic system on top of its box. Glendale has already established itself among customers as a supply chain service provider, offering trans-loading of import containers, as well as container stuffing, long and short-term storage, weighing, sampling and repacking services.
By going to solar power, Glendale is hoping to make offering its broader array of climate-controlled services more affordable. Its 228,000-square-foot warehouse and distribution facility has a “cool room” that enables the distributor to protect the quality and integrity of sensitive products for clients.
In our news story about this site, Jamie Hahn, principal of Solis, the providers of the solar package employed at this site, said that this project will give Glendale Warehouse better control over its energy costs, protect them from rising rates, and help reduce the operational footprint of its facility. But in a subsequent conversation with Hahn, he told me that there are “Titanic” outside forces at work here too.
“A lot of companies are suppliers to Walmart, and they have implemented a supplier sustainability report card, requiring top suppliers down the value chain to complete this on an annual basis,” he explained. “We’ve done a couple systems for big suppliers of Walmart. Beyond the operating cost reductions savings and long term hedge, to them the real value was that now they have the ability to go back to Walmart and strengthen that relationship they have because they look like a good corporate citizen in the eyes of Walmart. That’s being pushed down the value chain.”
And you can bet that if suppliers to Walmart are getting more serious about adopting alternative energy sources to make them more powerful competitors, then we’ll see more suppliers to these suppliers adding energy commerce to their expanding resumes, right along with electronic commerce.