From the lights in our house to the buildings we work in, Industrial Distribution (ID) is all around us. It’s in the large trucks we’re afraid to drive by on the highway, to the huge factories seen in the distance, or much closer like the water you drink, and metal in your car. It’s everywhere and nowhere, but what exactly is Industrial Distribution?
Read on to find out
- Why you should read this
- What is Industrial Distribution
- Where did ID start?
- How it became what it is today
- Jobs in ID
- The future for ID
- Putting it all together
Why You Should Read This
Understanding ID can better equip you to understand international trade policy, why some people hate Amazon, how the world will build faster in the future, and what this means for the distribution network as a whole. (And yes, that impacts you).
That’s a lot to grasp, so this article gives a brief overview from its beginnings to its future, who “The middle-man” is, and what kinds of jobs there are in ID.
What ID Is and Isn’t
Let’s start with the name. Distribution is ‘the movement of goods’. No, not moving a chair from one room to another. In this case, it’s the purchase of a large number of goods (bulk) to be processed and sold to customers. These processes include breaking bulk and adding features, or bundling small items together (i.e. making bulk).
Hearing this, many of us may think of Amazon, Costco, or our local grocery store. They’re buying large quantities of goods, breaking the ‘bulk’, and selling to us, their customer. Although this is accurate, Amazon and others are “consumer distributors.” This is because the company distributing the goods has you, the average consumer, as their target buyer.
This brings in the second part: Industrial. Industrial is the term used to describe a unit or entity that produces in mass quantities, often a business. From this, we can gather a complete definition of Industrial Distribution. Industrial Distribution, is the large movement of goods through purchasing, processing, and selling from a supplier to an end-user who further processes and distributes.
Defined this way, we see a more accurate example is a distributor selling to a builder. This builder buys large quantities of lights that they “process” by putting them into homes. The chain ends with them as they sell the house to you the consumer.
Industrial Distribution is in a nutshell, Business to Business Sales
Where Industrial Distribution Began
Industrial Distribution, to no one’s surprise, began during the Industrial Revolution. Goods and services moved from being localized to a family unit or village to mass production. This provided enough goods for an entire country or region but required manufacturers’ reach to expand. Staying focused on production, they outsourced the selling of their goods to others.
Manufacturers stuck to production and outsourced the rest.
Smart entrepreneurs saw the opportunity and began to buy from the manufactures. They used trains to ship the excess goods and charged a premium for their services to make a profit. These “distributors” were called “traders” since they traded the goods in their possession for money.
It was a risky business as often times the market didn’t want what they bought. As time went on though, the market shifted away from the trader and towards a professional distribution center.
The Growth of Industrial Distribution — “The Middle Man”
Professional distribution centers became what we often call “the middle man”. This is the person “cut out” in marketing campaigns. Yet, unless the consumer directly talks to the manufacturer, there is always a “middle man”. This cost is justified in many ways though despite what the ads say.
As regulations and quality control increased, so too did the services provided by distributors. These include:
- Holding onto inventory for the manufacturer
- Increasing relationships with the customers
- Providing quicker access to goods
- Market transparency
- Improved supplier relations (which was vital in preventing traders from going out of business)
- Improvement in America’s distribution network (the world’s best)
Even nonindustrial consumers need “middlemen”. The subscription services growing in popularity are a consumer version of Industrial Distribution. Paying a premium for a nice box with everything curated is like paying for “making bulk”. They remove the need for consumers to negotiate prices and maintain relationships with suppliers.
Jobs in Industrial Distribution
Although ID had a straight forward development, the main purpose for its creation, to match supply with demand, has yet to be perfected. Human unpredictability and a host of complex issues create a variety of ways for businesses to make and save money. Due to this, there are several growing fields aimed at fine-tuning this dance so as to maximize profits and efficiency. We’ll look at two below.
Supply Chain Management
Statisticians have helped immensely with formulas and strategies. This has allowed distributors to better match the supply and demand. But, with varying models, unpredictable circumstances, and technological errors, humans are still needed to verify the model’s accuracy and usability. This is where students of a Supply Chain Management focus are able to learn best practices and help companies better utilize their data.
They also often go on to be managers where they make crucial day to day operation decisions for companies. With their knowledge of the big picture and their capability to lead they are a powerful ally in daily functions. If you like numbers, managing a team and reacting quickly, this is a great job to get started in.
The biggest challenge posed to distributors, after matching supply and demand, is finding customers. With large amounts of money moving in each transaction (millions), customers are keen on trusting those who have proved their worth. This poses an issue to new competitors attempting to enter the market but also an opportunity for great salespeople to bloom.
Building trust and providing solutions are the ways great salespeople succeed in the market. Learning these skills are students known as “Sales Engineers” and is often the more popular route taken. To succeed here requires a “wolf” mentality. Hunting down customers and presenting the company and yourself. With the movement towards side hustles and making extra income, this may be a long term play that suits those skills well.
The Future for Industrial Distribution
Industrial Distribution will not be going anywhere anytime soon. It is, however, currently facing a disruptive moment. As the world continues to grow accustomed to Amazon’s two-day shipping, easy website ordering, and low price guarantee, the Industrial world must catch up.
Many companies are still behind lacking websites, multi-week shipping, and a lack of specialization. Namely, they fail to show how their worth is greater than their competitors and why other businesses should trust them. This poses current companies with a clear but tumultuous path forward.
- Increase web presence (which we’re seeing with content creators)
- Allow for commodities to be sold online
- Dig deep into a specialization, and grow that, else, be replaced by Amazon
- Sell the experience of working with your business, not the product
These points sound clichè, but they serve to illustrate that an industry founded on nuts and bolts is having to fire on all cylinders to catch up with the world.
All in all, ID is easy to understand yet profoundly complex, providing numerous opportunities for growth. As markets develop and shift over time, new distributors pop up all over the country and world. Newer markets provide massive opportunities for distributors poised to capitalize on them. Even in older markets, companies go out of business, products improve, and older parts break. Business is everywhere and ever-growing.
As a student of Industrial Distribution, you learn the tools necessary to spot and take advantage of these opportunities. Looking for a job couldn’t be easier than in a field like this. Companies continue to fight for strong salespeople, managers, and effective team leaders. With little supply and high demand, the job market is booming.
Hopefully, this article has given you a brief idea of what ID is like and the challenges the industry faces. If you have any further questions, reach out! I’d be happy to help.