Do Distributors Need a Chief Data Officer?

We don’t need to tell regular readers and distribution pricing experts that data is the most powerful catalyst for growth in the distribution industry. The importance of data analysis has grown in every area of distribution, from the small startups to the large national acquirers. Distributors are constantly learning new ways to find competitive advantages, speed their times to decisions, serve customers and create new offerings.

More and more distributors are increasing their digital strategies in all areas from supply chain management to purchasing to marketing and of course to price optimization solutions. Distributors find themselves right in the middle of the relationships between manufacturers, buyers and end users. These transactions generate numerous touch points – all rich in data. Analyzing demand patterns, inventory levels, customer buying behavior and market trends can be overwhelming even with the most robust self-serve data tools. So, this begs the question: do distributors need a chief data officer (CDO) to help them navigate this complex landscape?

The Role of Data in Distribution

The distribution industry has faced a lot of change over the last few years and the pace of change continues to increase. Distributors who have better access to data and data analysis can make faster decisions, discover new areas for improvements and use those ideas to drive a competitive advantage.

Making Data-Driven Decisions

A lot of distributors approach their businesses entrepreneurially. Certainly, good gut instincts are important in any local market. But distributors don’t have the luxury of relying solely on past experience. They need easy data tools to help them make informed, strategic decisions. Tools that make it easy to analyze historical sales, trends, customer behavior and more allow distributors to anticipate fluctuations in their business and identify patterns that can lead to new growth. Accessibility to data can prevent surprises and help you identify new opportunities in ways that simple gut instinct cannot.

Identifying New Areas for Improvement

Distributor margins are exceptionally thin and finding new efficiencies can directly improve both profitability and customer experience. Access to data analysis plays a critical role in streamlining operations, reducing costs, and minimizing waste.

For example, if you can analyze your data levels in real-time, you can help to optimize your stock levels. Better replenishment and inventory controls mean that you will avoid lost sales due to stockouts and reduced turns though overstocks. Similar efficiencies can be found in price optimization, order processing, logistics management, and supply chain coordination.

Gaining a Competitive Advantage with Data

Data can give you an understanding of customer behavior and preferences that help you anticipate buying patterns faster than your competition. Having access to customer data allows you to customize your marketing outreach with relevant offers and promotions. You can spot emerging trends in each location. You can identify your most important customers to help solidify your loyalty programs. Data is essential to gaining a competitive advantage.

The Challenges Faced by Distributors

As you can see, there are too many advantages to data to list. But there are also some significant challenges that most distributors face when it comes to data management.

Disparate Systems and Data Silos

Many distributors – especially distributors who have grown through acquisition – have unique challenges due to disparate systems and data silos. You’ve been in business for years and that means you have accumulated software applications, legacy systems, and databases that do not communicate with each other seamlessly. A lack of integration and centralized data prevents a comprehensive view of your business. Siloed information makes it difficult to have a unified reporting structure and that gets in the way of decision making.

Lack of Data Integration

A similar challenge to disparate systems is data integration. Distributors have a vast amount of data that is generated from various sources: sales transaction, CRM activities, supply chain and shipping systems, warehouse management, inventory control and market data. Most of these systems operate independently of one another and make it difficult to get a unified view across these systems.

Data Quality and Inconsistencies

The data that you deal with can be inaccurate or incomplete. Something as simple as an incorrect part number or missing customer field can cause many different problems throughout your entire organization. You may suffer from data entry errors, outdated information, duplicate information or other issues that distort your data analysis. And data can be represented differently in various systems. A simple example is a part number or name that is different on a purchase order compared to your system or compared to your customer’s order. When data is inaccurate, employees stop trusting the information and analysis, further complicating good decision making.

Limited Data Governance and Security

Security and data governance are more important than ever in distribution. The more systems you use, the more ways your customers interact with you, the more you need to insure data privacy and protection. Do you have the right frameworks in place for data access controls, data ownership and compliance? The last thing your company needs is a privacy, data or security breach that exposes your most important information and erodes customer trust.

Lack of Data Expertise

The final challenge can be the most limiting. Distributors often lack data expertise in their organization. How can you begin to extract valuable insights from your data when you do not have the knowledge or skills in data analysis, data visualizations and data modeling? Even if you find the right data software and tools, you may lack the expertise to maximize their use and value. Distributors often struggle finding the right talent and expertise they need to manage, analyze and interpret their data.

None of these skill sets are intuitive. They all require training and expertise. Without access to the right experts, it is difficult to use data to make good decisions, optimize your pricing and processes, drive new sales opportunities and manage costs. The paradox is that without a strong data culture and data expertise, distributors may not prioritize important investments in data. This can hinder your ability to grow and stay competitive.

For this reason, many distributors are turning to data professionals who can bridge the gap between data and decision-makers. One option is a chief data officer.

The Responsibilities of a Chief Data Officer

So what does a chief data officer (CDO) do? The CDO’s main role is to help distributors overcome the data challenges they face and unlock the potential in their many data sources. Having an explicit focus on your data elevates data in all areas of your business. Giving data a c-level voice on your leadership team provides the focus you need to make the most of your wealth of information.

Data Strategy Development

Perhaps the most important responsibility of a CDO is in developing an overarching data strategy that is in line with your top-level strategies and objectives. Your CDO can work closely with your other top executives as a peer to understand specific business requirements in each area of your company and align a data strategy to support their goals. They can listen to other officers and leaders to identify areas that data can be used to drive growth, new efficiencies and improve customer loyalty. The CDO can create new strategies for data collection, integration, governance, analytics and software selection to ensure that data use is maximized in the pursuit of your corporate goals.

Data Governance and Compliance

As we mentioned above, data governance ensures accuracy, integrity and security of your data. The CDO can specialize in these areas so that your governance is not fractured across your departments, branches and business units. Having one expert maintain data ownership and stewardship helps you maintain consistency with your data standards, policies and procedures.

Data Integration and Architecture

Integration and architecture should not be overlooked. A CDO can facilitate integrations from your many sources and systems and work closely with IT to design and implement new solutions. Your data flows across many different systems and departments and a CDO can take a high-level, corporate view that department head lack. IT may be good at the technical challenges of integrations, but a CDO maintains a c-level point of view on the strategies to make sure your data is driving your company forward, providing a holistic view of your business and empowering your decision makers in the areas you have identified as the most critical to your success.

Developing a Data Culture

By overseeing the development and implementation of advanced data analytics in your company, the CDO is in a unique position to train employees and instill a data-driven culture. The CDO is your data champion who leads employees and decision makers to new insights. They can work with leaders to develop new predictive models, dashboards and reports. They demonstrate how easy it can be to identify trends, forecast demand, optimize pricing and control inventory when you have access to data. The CDO can educate all employees on the importance of data analytics and promote data literacy across functional areas. The CDO can also play a pivotal role in helping to identify new talent for your company that are focused on data and innovation.

Should You Hire a CDO or Outsource?

Having your own CDO dedicated to your own data strategy ensures that you data initiatives are given the attention they deserve. They can garner the internal resources needed to overcome unique data challenges and unlock the potential of your company’s data sources. They play inside and have an inside advantage. But, for many distributors, adding another c-level executive is not in their budget, not to mention finding the right person with both data expertise and distribution industry experience is always a challenge. Outsourcing may be the most reasonable way to approach your CDO needs.

Many distributors are already comfortable outsourcing their data strategy to managed services providers like Tridex Systems.  Outsourcing your CDO role can provide unique advantages such as access to wider expertise, cost-effectiveness, best practice implementation, access to robust tools and specific database expertise.

Greater Access to Expertise

Outsourcing your CDO role lets you tap into a pool of experienced data professionals with deep experience in your industry. You get multiple minds working on your projects and strategies. Instead of hiring one individual, you get access to a team of data scientists, IT specialists, data management experts, analysts and developers who are well-versed in distribution, strategy, governance and advanced analytics techniques. When you leverage a company like Tridex Systems in your CDO role, you benefit from the highest level of proficiency in generating insights from your data assets.

Cost Effectiveness

Probably the biggest pushback on hiring a CDO is the financial investment it requires. Many distributors under $250MM in annual revenue probably don’t have the resources to bring on another c-level hire including salary, benefits, bonuses and other overheads. On the other hand, outsourcing the role can prove to be very cost-effective. You can leverage an entire team of data experts on a contractual basis, paying for exactly what you need when you need it. This gives you flexibility to optimize your data management and allocate resources as you are able.

Understanding of Best Practices

Managed services providers specializing in data management, like Tridex Systems, have extensive experience working with diverse clients specifically within distribution.  Distribution is unique, and not all data experts understand the subtleties of your business. Outsourcing can give you access to industry best practices that are specific to distributors and have been proven across other distribution clients. A good partner will stay up to date with the latest industry trends, technological advances and ensure that you are pursuing best-in-class solutions and practices.

Access to the Newest Tools

Managed service providers have access to the most leading-edge tools and technologies available for data management – and they use them everyday so they are experts. For example, Tridex Systems dedicates a significant investment in the latest software, analytics capabilities, infrastructure and employee training to deliver optimal results to our clients as quickly as possible. When you have access to the best tools, you will see a faster return on your data investments.

Specific Database Expertise

Distribution technology is as unique as the industry itself. Distribution ERP systems, data systems, warehouse systems all have unique databases and data structures. Specialized knowledge of these databases comes in handy when it comes to managing and optimizing data storage, retrieval, and analysis.

Outsourcing the role of Chief Data Officer to a managed services provider offers distributors several compelling advantages. It provides access to a highly skilled team of experts, ensures cost-effectiveness, leverages best practices, grants access to the latest tools, and harnesses specific database expertise. By partnering with a reputable provider, organizations can optimize their data management practices, drive valuable insights, and stay ahead in today’s data-driven business landscape.