Covid-19 and Brexit among greatest challenges facing wholesalers

The ongoing fallout from the coronavirus and Brexit are the greatest factors affecting profitability for wholesale and distribution businesses.

This is according to a new survey commissioned by Kidderminster-based OGL group, in which 54% of respondents pointed to the continued effects of the pandemic, while 38% indicated Brexit as a key factor. The other main factors were manual processes (33%), stock availability (32%) and employee cost (27%).

Delving into the coronavirus and its effects, the key related priorities for respondents were to manage cashflow (81%), have a crisis plan in place (80%) and the flexibility of employees (80%).

Survey respondent Finbarr Creeney, Managing Director from Express Cutting & Welding Services, said: “The main issue is using tools to maximize gross profit and ensuring that all staff are fully productive as the biggest cost is the wages bill so being overstaffed is bad for profit. Inefficiency in the daily process and mistakes can also have an effect but are secondary”.

Read more - OGL Group kick starts recruitment drive to exceed 350 employees by end of 2022

When the survey was last carried out in 2019, Brexit was cited as the main factor affecting company profitability at 47%. It is perhaps unsurprising that the virus, with its heavy impact on supply chains, has surpassed it. These two factors have pushed inaccurate data (24%) and outdated technology (27%) out of the top five.

The survey also shows that manual processes are still plaguing the sector, with businesses struggling to digitalise successfully. 99% of businesses surveyed are still using them, while 67% noted their impact on profitability.

Other factors cited include “access to talent, variable costs, warehouse space and war” as well as “stock value and liquidity”. As with stock availability, many of these challenges are intensified by the ongoing uncertainty surrounding the two main factors.

Gary Reynolds, Operations Director across OGL Group, said: “This year’s findings reflect the huge impact the pandemic has had across any business that holds stock. Supply chain uncertainties exacerbated by Brexit and the pandemic have impacted companies’ profitability.

“Many smaller businesses just don’t have the ability or money to stockpile products to meet pent up demand, and now with the fuel crisis and war, they are having to take a pragmatic approach to supply customers.”

The ongoing Ukraine-Russia war, impacting cost-of-living and fuel prices, has placed a greater importance on wholesalers’ efforts to increase profitability, with technology being vital to this. 86% of 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.

One of the main challenges in this area was a wide spread of technologies used across disparate systems which are not interacting effectively. This manifests in more than 95% of respondents using one or more software system to aid with areas such as warehouse management, inventory/stock control to accounting software, CRM (customer relationship management) and ERP (enterprise resource planning). 68% of respondents saw a benefit in integrating these systems.

The effect of the pandemic can also be seen in the increased importance placed on eCommerce, with 84% of respondents stating that easily selling products online was important to them, and 75% saying that eCommerce platforms were an effective tool for managing business operations. Cloud computing has also grown, with 76% of respondents agreeing that hosting applications and data in the cloud have improved efficiencies and productivity – although security remains a concern for 50% of respondents (down from 55% in 2019, however).

Considering the results as a whole, 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.”

Read more - Concerns over ‘headwinds’ in the post-Brexit and post-pandemic economic recovery