The New Kids On the Block

A new generation of industrial buyers is rethinking how companies buy.

Millennials: Easy to skewer, impossible to ignore.

Sure, they clutch their smartphones and other mobile devices like baby blankets. But be honest: Who doesn’t these days?

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Millennials have leveraged their affinity for technology to reshape consumer-facing businesses.

The difference? Millennials – defined (roughly) as folks between ages 21-34 – don’t apologize for it.

Millennials have quickly changed the world, leveraging their affinity for technology to reshape consumer-facing businesses, including the retail, music distribution and transportation industries.

And they did all that practically as kids, confronting a rapidly changing global economy while shouldering unprecedented levels of student debt.

Now, as they enter their prime professional years and make up the fastest-growing demographic in the world’s workplaces, members of this tech-savvy, price-conscious, status quo-questioning generation are upending the industries where they work as well.

Case in point: the industrial distribution and manufacturing supply sector, that sprawling ecosystem of middlemen that keeps factories running by ensuring everything from silicon microchips to personal protective equipment gets to the plants when and where it’s needed.

The traditional model was a simple and lucrative one: Manufacturers made the things that other manufacturers needed – parts, tools, mops, whatever – and then sold them to their end customers through intermediaries, who earned their keep by stockpiling massive inventories of products in equally massive warehouses and passing the overhead along in their prices.

Millennials look at this old universe of costly intermediaries with disbelief, and they’ve started a dramatic re-ordering of the system by asking two simple questions:

  1. Why can’t we buy from lower-cost internet sellers?
  2. Why don’t we just buy direct from the manufacturers themselves?

Adding speed to the revolution

The rise of asset-light e-marketplaces and other non-traditional shopping channels are challenging the old model more rapidly than previously thought.

Click here to download whitepaper

For the last four years, UPS has been tracking these changes through its Industrial Supply Dynamics surveys.

We have uncovered a consistent pattern of migration, from traditional industrial supplier relationships mediated by sales contacts and good old-fashioned product catalogs to something a lot more diverse and a lot more dynamic.

It is no longer enough to deliver product. Buyers now expect an increasing level of service to come with that product, including training and on-site maintenance and repair, often with short response times.

Buyers also expect faster delivery. Two in five buyers say they need one-day delivery for at least a quarter of their industrial orders, and 60 percent say they typically need delivery for all orders within 48 hours or less.

This is creating a huge challenge for distributors’ logistics systems. Distributing from Point A to Point B may seem easy. When you distribute from multiple locations to multiple customers, logistics complexity increases exponentially.

This is often the reason that service suffers – and the reason why UPS has been busy helping clients restructure their logistics operations, using a combination of better warehousing, express delivery and the UPS Access Point network.

A new white paper from UPS, the third such study compiled since 2013, highlights the strategies some traditional suppliers are adopting to thrive in the new world.

The report, based on a survey of 1,500 industrial product buyers between the ages of 21 and 70, captures a sector undergoing demand changes and channel shifts at a startling speed.

But it also identifies four ways distributors – including those with smaller ambitions or limited funds – can remain competitive, and it offers solutions to reach these young corporate buyers on their terms:

Recognize rising threats

It is imperative to consider strategic investments to stay ahead of competitors.

Think digital

Online channels are a necessity, and distributors need to strengthen e-commerce capabilities, particularly for mobile ordering.

Address buyers’ need for speed

More than half of buyers want quick deliveries in a day or two, so old-fashioned shipping methods need to change.

Go beyond the sale

Buyers want interaction beyond the sale, with half of respondents stating they would switch to a supplier offering assistance with returns, training and on-site maintenance or repairs.

Keep these lessons in mind as you go about attracting those coveted millennial buyers. You’ll reap sustainable, new business – as your competitors wonder what went wrong.

To download a copy of the UPS Industrial Buying Dynamics Study: Buyers Raise the Bar for Suppliersclick here.

You might also like:

Retail Steamrollers: Power Shoppers and Millennials

Get Ahead of Shifting Customer Loyalties

Industrial Buying is Changing Fast 

Kelly Brock is the Director of Marketing, Industrial Products and Automotive at UPS.

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Reprinted with permission of Longitudes, the UPS blog devoted to the trends shaping the global economy.