In a question-and-answer interview, B2B ecommerce and eprocurement expert Brady Behrman, CEO of software firm PunchOut2Go, shares his insights on how the coronavirus pandemic is affecting manufacturers, distributors, retailers and digital commerce.
Brady Behrman, CEO, PunchOut2Go
While some companies in direct-to-consumer ecommerce are seeing increases in orders, Behrman notes, a review of 400 manufacturers shows a decrease in orders fulfilled to big-box retailers. There are also other signs of a drop in B2B ecommerce and eprocurement, and companies that rely on just-in-time inventory are facing supply challenges.
But companies set up with effective ecommerce and eprocurement systems, Behrman contends, should be positioned to work with agile supply chains and pick up growth as the coronavirus pandemic clears.
Q: Can you provide some perspective on the current coronavirus pandemic is impacting manufacturers, ecommerce and eprocurement?
Behrman: Many more B2B manufacturers are looking at direct-to-customer ecommerce sales models because the traditional distributor/retailer/ buyer channels are disrupted. It’s likely that channels will be changed for good and that ecommerce will be a big part of the strategy for dealing with the coronavirus pandemic and with future sales.
Ecommerce and procurement automation radically reduce supply-chain friction and delays, generating the supply-chain agility that manufacturers will need in the coming weeks.
The impact on manufacturers varies depending on the manufacturer and the industry, but the majority of manufacturers are seeing disruptions throughout their supply chain, distribution channels, and shipping operations. We have seen comparable localized disruption in the past, with events such as earthquakes in Japan and Southeast Asian tsunamis. But the coronavirus pandemic is different because it’s global, which makes it even more difficult to pivot and acquire new suppliers—everyone is in the same boat.
In many industries, order-flow is excellent, but fulfilling those orders is increasingly challenging. Manufacturers that have been declared non-essential have shut down factories and warehouses. One example is the golf industry: consumers and distributors are placing orders, but manufacturers don’t have the staff and resources to fulfill them.
Other industries are doing well, with minimal disruption to ordering and fulfillment. It all depends on the mix of industry, state regulations, and supply chain.
The biggest impact across all sectors is labor availability. The coronavirus and the lockdowns in affected countries impact labor availability for manufacturing and logistics. But we’re also seeing impacts on cashflow and consistency of availability across trading relationships.
With a sample size of about 400 manufacturers, we’re seeing that companies selling to Big Box retail are experiencing significant reductions in orders. New orders aren’t coming in and orders that had already been shipped are being rejected or returned. Large quantities of products are flowing back into warehouses, putting a huge strain on manufacturers and distributors.
In the B2C space, ecommerce has seen a rapid expansion of orders, but the situation is different in the B2B space. PunchOut2Go’s data shows an overall slowdown of under 10% in B2B ecommerce and eprocurement activity. But the true impact for many manufacturers is likely obscured because a handful of suppliers have in-demand goods and are seeing significant increases in orders. Suppliers who don’t fall into this category are experiencing more significant slow-downs.
Q: From an ecommerce perspective, how ready are (or were) manufacturers for dealing with all aspects of the coronavirus?
Behrman: Manufacturers who had invested in ecommerce and organizations investing in procurement automation are in a stronger position than those who did not.
Manufacturers are ordering less from suppliers, but, in spite of the disruption, orders haven’t stopped. Many manufacturers are likely to want to ramp up production as the situation becomes clearer, but they will need to be agile to work around supply-chain disruption. Ecommerce and procurement automation radically reduce supply-chain friction and delays, generating the supply-chain agility that manufacturers will need in the coming weeks.
Direct spend suppliers have been less enthusiastic than indirect suppliers about embracing ecommerce, but manufacturers that have invested in procurement automation with direct spend suppliers that offer ecommerce are better equipped to overcome supply issues caused by the crisis.
Q: What, in general, is the impact on ecommerce for just-in-time industries such as automotive?
Behrman: Just-in-time supply chains are inherently vulnerable to the type of disruption, staffing shortages, supply constraints, and delivery issues caused by COVID–19, the disease caused by the new coronavirus, and by crisis-control measures. However, we aren’t seeing order volumes changing across automotive with our customer base in North America and Australia for instance, but do not have all the data across all areas of B2B, outside of eprocurement integrated channels.
Manufacturing and sales will suffer in industries that depend on just-in-time supply chains. Manufacturers that have built safeguards into their supply chain—redundant geographically dispersed suppliers, for example—are less vulnerable to supply chain disruptions.
Home Improvement companies that have embraced B2B are seeing an influx of business around maintenance whether its facilities maintenance, garden, builds and beyond. Projects that may have been back-burnered because of office logistics and so forth are coming to the forefront.
Suppliers with B2B ecommerce stores are better placed to endure COVID–19 supply chain disruptions, particularly those who are equipped to integrate with supplier eProcurement platforms via PunchOut catalogs and purchase order automation. They are better able to communicate their product selection, real-time availability, and shipping capabilities. They are equipped to execute sales easily and remotely.
Q: Some manufacturers are closing down some or all production or shifting gears to produce medical supplies – what’s the impact on ecommerce?
Behrman: Direct-to-customer (D2C) sales via ecommerce are becoming increasingly important because, in addition to shifting production, B2B manufacturers need to communicate product availability and to transact with the customers most in need.
As we mentioned earlier, traditional channels are seeing significant disruption and manpower shortages, but D2C pivot on ecommerce gives manufacturers a sales platform to route around that disruption. Those with an ecommerce platform have a clear advantage compared to those without.
Q: What as a rule are manufacturers doing well from an ecommerce perspective dealing with the impact of the coronavirus? Where are they falling short?
Behrman: We’re early in the crisis and the data isn’t available to make a clear assessment of how successfully manufacturers are dealing with the impact of coronavirus. But we expect to see an increasing number of manufacturers turning to ecommerce as an alternative to their traditional distribution channels. Because ecommerce has proven so crucial to handing supply chain disruptions, manufacturers who were slow to adopt ecommerce in the past are more likely to see its true value.
Q: What long-term ecommerce lessons should manufacturers take away from this coronavirus crisis?
Behrman: The key lesson is that manufacturers need a direct-to-customer ecommerce strategy and a diverse supply chain supported by ecommerce and procurement automation. On the flip side, those direct-to-customer companies that have embraced B2B are in a really unique position right now.
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