Jeroen van den Berg Consulting

Project

Manufacturer/Wholesaler

Sell directly and unlock stocks for sales by partners in the supply chain.

Direct Channel

(Brand) manufacturers traditionally supply wholesalers and retailers. The direct channel to consumers nonetheless is particularly interesting since margins do not need to be split with wholesalers and retailers. Nike and Apple are examples of companies that supply both consumers as well as wholesale and retail.

Wholesalers are situated between manufacturers and retailers. In the omnichannel supply chain, wholesalers will lose revenue to manufacturers that start to sell directly. However, manufacturers need sufficient volume to deliver small orders in an efficient manner. Typically, wholesalers have wider product ranges and more detailed order patterns than manufacturers which makes the step to the consumer channel easier.

Dilemma

Strong brands may decide to sell directly. However, many manufacturers face a dilemma since they suddenly become competitor of their customers which might negatively affect relationships. Manufacturers and wholesalers can then choose to offer drop-shipping as a service to their customers. Moreover, existing distribution structures of manufacturers often are not suitable to deliver to consumers directly.

This is an opportunity for wholesalers. Thus, technical wholesale consumer electronics NEDIS expands its distribution center in ‘s-Hertogenbosch with mechanized picking systems to be able to deliver, beside traditional channels, large numbers of online customer orders quickly and efficiently from the one DC. In this way, the wholesaler provides an excellent opportunity to webshops to offer an interesting assortment while hardly keeping stock of their own. Most of the orders are supplied via drop-shipment to the customer.

Inventory Risks

Altogether, inventory risks in the omnichannel supply chain shift upstream. However, for manufacturers and wholesalers this risk is less severe than for retailers, since they can sell stocks across multiple clients/markets. In particular, slow-moving items (longtail) will be offered more and more as virtual stock.

Opportunities for manufacturers/wholesalers

  • Direct contact with consumers
  • Expand product range with virtual stock (one stop shop)
  • Enter additional distribution channels in retail and e-tail, also for obsolete (old season) stocks
  • Make wider (virtual) product range available to customers (longtail)
  • Enjoy greater customer loyalty