Economy slowdown: How can distributors prepare for it?
Economists are arguing whether or not the US is in a recession. Regardless of the answer, the fact is that there has been an economy slowdown for quite some time and it is affecting all sectors and distributors are not an exception. In this article, I will explain how distributors can cope with the effects of this economy slowdown.
Symptoms of the economy slowdown
An economic slowdown, also known as a business slowdown, refers to a state in which an economy experiences little growth; but whether it points towards a potential recession is arguable. The table below summarizes a group of indices, courtesy of Forbes, that help us project where we are headed. According to this table we are definitely not in a recession, but the economic outlook is not good.
Effects of the economy slowdown on distributors
The impact of an economy slowdown varies depending on the size of the company and how they have prepared to cope with it. One of the lessons derived from the COVID pandemic slowdown is that the world is changing fast and companies that are not prepared to deal with sudden changes are bound to disappear. These are some of the impacts economic downturns might have on companies:
- Decrease in sales
- Delays in customer payments
- Access to sources of capital decreases and becomes more complicated
- Increased laydowns and reduced employee benefits
- Decrease in net profit
How to cope with this economy slowdown
Actions aimed at improving sales
In “How to overcome the Distribution challenges in this new age?” we covered some of the actions that should be taken. I summarize some of them.
Diversify your sales channels: be prepared to expand your operation to be servicing stores, but add some B2C capabilities.
Add ecommerce capabilities: be it directly or through alliances with established companies in that sector.
Focus on customer satisfaction
Empower your sales force through training and involving them in the challenges the company is facing.
Actions aimed at improving adjustment to external changes
As shown in the graph below, courtesy of McKinsey, distributors that have made organizational changes designed to rapidly adjust to sudden external changes have a 70% better chance of surviving.
In “What are Agile & Resilient Organizations? Why are they important?” we covered some of the changes you should consider. Below is an excerpt.
Effective leadership: Resilient cultures begin with committed leaders who understand and support employees. Lack of senior leadership support creates risks of a disengaged workforce and therefore a weak company culture.
Transparency and communication: Communication is a powerful tool to drive behavior and creates open conversations around key issues. The corporate intranet platform (for large organizations) and regular departmental meetings (for smaller companies) are two of the mechanisms used to promote transparent communications.
Soothing Workplace: The workplace can be a stressful and overwhelming place, especially when undergoing change or disruption. Instead of encouraging employees to keep to themselves, build a more social and safe work environment. There are various digital tools that can help HR and talent teams improve employee collaboration.
Complexity and accountability: To function effectively at this level of organizational complexity, it is necessary to increase cooperation and information sharing, while establishing shared responsibilities across the whole team. Integrated software solutions like ERP + Warehouse Management + Route Accounting, can provide the necessary tools to do this.
I hope this article on warehouse digital transformation has been helpful to you. I will continue to post information related to warehouse management, distribution practices and trends, and the economy in general. If you are interested in this article or want to learn more about Laceup Solutions, please subscribe to stay updated on future articles.
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