London’s wholesale sector’s profitability hit by Covid, Brexit and outdated tech

A new survey commissioned by OGL Group reveals that Covid, Brexit, the continued reliance on manual processes and outdated technology are the greatest factors affecting profitability for wholesale and distributor businesses in London in 2022.

Both the Covid pandemic and Brexit have hit supply chains hard and saw many businesses pivoting to online sales. London businesses that hold stock are citing top technology priorities for the next 12 – 24 months as linking ERP with eCommerce 46%, inventory management software 44% and business performance reporting 40%.

The five main factors affecting London wholesale and distributor firms’ profitability in 2022 were cited as the Covid 19 pandemic (61% compared to the national statistic of 54%), Brexit (46% compared to the national statistic of 38%), outdated technology 33%, employee cost 29%, manual processes 28% and inaccurate data/errors at 28%.

Digging deeper into coronavirus and its effects, London respondents’ business priorities did not reflect the national stats. In London having flexible employees topped the list at 93%, upgrading/improving IT systems 88% and effectively managing cashflow 88%. Nationally priorities were to manage cashflow 81%, have a crisis plan in place 80% and flexible employees 80%.

The pandemic has led to supply chain shortages and a threat as some wholesale businesses are stockpiling products and parts to ensure supply to clients. Manual processes are still plaguing businesses leaving them behind the curve with regards to digital transformation, with 99% still using them and 67% citing them as a problem that slows down their business efficiency.

Respondents also cited major factors damaging profitability as: “access to talent, variable costs, warehouse space and war” as well as “stock value and liquidity”.

Adrian White, Managing Director of Chelmsford Safety Supplies commented that the major factors affecting profitability “are ensuring that there is excellent visibility and accuracy, especially in terms of inputting and monitoring orders. Armed with up-to-date information, the purchasing team can drive down costs when buying.”

Entering another potentially uncertain economic period with continuing supply-chain issues, the Ukraine-Russia war, cost of living and fuel price rises, wholesalers’ efforts to increase profitability are critical. Technology is at the heart of this. 86% of all respondents agreed that technology is vital to the efficient running of their business, while 82% agreed that automating business processes helps their companies stay competitive.

A key finding of the research was the wide spread of technologies used and the disparate nature of systems that are not necessarily “talking to each other” to provide a full view of operations. Wholesale businesses use a range of software systems to function: more than 95% of respondents use one or more software systems to run their business, from warehouse management, inventory/stock control to accounting software, CRM (customer relationship management) and ERP (enterprise resource planning).

68% of all respondents saw benefits from integrating disparate systems. 45% listing the main reason to use a single system as removing duplication of work across different departments, followed by 44% citing reduced administration time, and 44% stating improved efficiencies by improved accuracy of information.

Single systems are beneficial for online stores, where stock checks and reporting ensure that customers have a good understanding of delivery timescales and product availability. Survey respondents confirmed that eCommerce has grown exponentially, with 84% of all respondents stating that being able to sell products online easily is really important to them. Additionally, 75% of respondents stated that using an eCommerce platform was an effective tool for managing business operations. This comes as little surprise as businesses shifted online en masse to ensure continued supply.

As the pandemic accelerated digital transformation, cloud computing continues to be a driver for change, with 76% of all respondents agreeing that hosting applications and data in the cloud have improved efficiencies and productivity (or would improve them if cloud were implemented). Despite the benefits of cloud, concerns about security remain, though have reduced marginally from 55% in 2019 to 50% in 2022. This reflects the growing acceptance of moving core applications and data to the cloud.

Critically ERP systems are a key technology with 74% of all respondents agreeing that ERP systems give greater availability and control of stock. ERP refers to a suite of integrated software that businesses use to manage day-to-day business activities, such as sales order management, stock control, warehouse management, CRM and more. Positively, there has been a reduction in respondents thinking that ERP systems are for large enterprises only, now at 42% down from 46% in 2019.

In a time when eCommerce has grown exponentially, integration with third party software, especially eCommerce, online shopping channels, route planning and online payment methods is key, with 39% citing this as a benefit of using a single central ERP system.

Survey respondent Adrian White, Managing Director of Chelmsford Safety Supplies, comments on implementing a single ERP system: “We moved from a manual system 12 years ago, and are still reaping the benefits even today with the integration of sales, purchasing, accounts and more.”

The main barriers to deploying an integrated software solution were cost, with 47% citing it as a factor, down from 53% in 2019, followed by 33% with business disruption, and 30% with data security. Cost is often associated with the misconception that ERP systems are only for larger businesses, and the lack of information about affordable subscription-based models.

Charlie Grant, Head of Operational Product Development, OGL Software commented: “In October 2019, we had no idea that we were in the eye of a huge storm. Since then, the business model for wholesalers and distributors has evolved quickly. From our 2022 survey, we have identified several changes, including the pandemic and stock availability entering the top five factors that impact profitability; the drop in concerns about security of cloud computing, and the growing realisation that ERP systems are not solely for large enterprises.

“Digital transformation has no doubt saved many businesses that have pivoted to online sales and it’s heartening to reveal that 74% agreed that ERP systems provide greater visibility and control of stock, especially as part of a multichannel sales strategy. Positively, 76% of respondents stated that hosting applications and data in the cloud has improved efficiencies and productivity; while 67% of our respondents confirmed that manual processes slow down business efficiency, although they do struggle to move away from them.”

OGL Group’s top 5 tips for a successful ERP implementation for wholesale and distributor businesses

Conduct a Business Process Review – review your existing IT infrastructure to see how you can better use technology to increase business effectiveness.
Review and clean data – take the time to review and clean your customer, supplier and product data to ensure that only quality data is transferred to avoid further complication and data errors.
Select an ERP platform based on your future strategy and goals – choose a software solution that will grow with your business and support your needs in the future. Ideally, one that can integrate with other products and provides an API for automating processes.
Don’t underestimate training – identify super users for each department and they will help to train staff moving forward, while taking ownership of business processes for their division.
Choose the right partner – invest in a software provider that can support you and help you to achieve maximum potential from your investment.

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