Challenges and opportunities for wholesale distributors in 2020
28 November 2019
Estimated Read Time: 2 minutes 45 seconds
Wholesale distribution is an integral part of the UK’s economy, with an approximate £980 billion turnover supporting more than a million jobs[i]
Shifts in the global economy, the looming threat of Brexit and technological impacts, however, are all leaving their mark on the industry. We take a closer look at what lies ahead.Supply chain interruptions
Britain’s planned exit from the EU coupled with the threat of a global trade war means supply chains could come under immense pressure. Possible impacts include increasing prices and certain products becoming difficult to get hold of. There’s also the potential that quotas could be imposed on certain goods, limiting wholesalers’ exports and imports.
Wholesalers will be monitoring developments and assessing what impact there might be on their own supply chain.Stockpiling
Uncertainty around Brexit has also seen many retailers stockpiling products, due to concerns over higher pricing and limited availability post-Brexit. Data from the Confederation of British Industry (CBI) shows stock levels compared with estimated sales are at their highest since the early 1980s[ii]
While stockpiling can be a sensible precaution in times of uncertainty, it can also be risky. If a business’s cash is tied up in stock, it limits its ability to invest and grow. It can also create demand distortion in the supply chain, leading some businesses to significantly overorder, making them vulnerable to going bust.Currency fluctuation
While news of the impending General Election has given sterling a recent boost, there’s no denying 2019 has been a year of currency fluctuation. Most prominent Asian currencies have depreciated at alarming rates and both the pound and euro have fallen in the face of sluggish economic growth[iii][iv]
Wholesale businesses are particularly affected by currency fluctuation. As well as directly impacting prices when buying and selling overseas, they also affect fuel prices and therefore, shipping costs.Robotics & AI
As technology advances, wholesalers can use robotics and AI to make their operations smarter and more efficient. Robots are commonly used within distribution centres, for example, Amazon’s Manchester warehouse makes use of a fleet or robots to help move shelves around.
AI can also help with demand forecasting. Companies can use it to analyse huge volumes of data, spot trends and predict problems. It is also increasingly helpful in terms of logistics, with many companies using AI to optimise delivery routes and choose the most appropriate carriers.
While using these technologies can bring great benefits to wholesale businesses, they are not without their challenges. They can be very pricey to implement and also require staff to be trained in how to use them effectively.
This year saw autonomous delivery methods hitting the roads, with companies like Amazon, Co-Op and FedEx trialling using robots for short-range deliveries[v].
Currently the focus is on the final phase of a product’s delivery journey, with consulting firm McKinsey & Company anticipating that by 2025 some 85% of last-mile deliveries will be carried by autonomous vehicles. However, with shorter delivery times and lower costs a priority for wholesalers, it’s likely many will be monitoring developments in autonomous vehicle technology.
Having the right insurance in place can help offer wholesale businesses peace of mind as they navigate the uncertain waters of the next 12 months. Get in touch with your NIG sales contact to find out more about products for your wholesale clients.