When I retired from a welding and atmospheric gas distributor in 2018, I made a decision to continue in that distribution sector as a consultant. To stay relevant, I continue to read and watch webcasts produced by Distribution Strategy Group (DSG), Modern Distribution Management (MDM), and the National Association of Wholesale Distributors (NAW). I recently came across a survey completed by DSG that reveals important information about how AI is impacting our business. AI can require large monetary investment. This has created a gap between small- and medium-sized distributors and the big guys. Here are some insights to help you close that AI gap.
AI Top 25 in Distribution
In July of this year, DSG released the results of a survey titled The DSG AI Top 25 in Distribution. The purpose of the survey was to determine the top distributors using AI and what separates them from everyone else. DSG researched over 300 distributors using 34 data points across eight evidence categories. Of the 25 distributors listed in their report, eight stood out significantly above the rest. In this article, I focus on two of the eight top distributors that impact the welding and gases distribution sector, and what DSG states sets these top players apart.
Two Distributors Leading with AI
The first distributor in the top 25 we look at is Grainger. It applies AI to product search and to Grainger’s contact center. Of specific note, Grainger installs a data engine with computer vision to manage inventory for their best customers. Computer vision enables Grainger to interpret, analyze, and process images and videos. It uses AI deep learning to recognize objects, people, and patterns with a high degree of accuracy.
The second top distributor in the Top 25 that is relevant to the welding and gases industry is Fastenal. It puts AI where product moves. Also, they have 136,600 vending and bin-stock devices that predict tool failures and reorder on their own, driving 62% of sales. Robots run 15 of Fastenal’s distribution centers.
A five-step roadmap
Given the facts above, it’s easy to understand why independent hardgoods distributors are experiencing substantial leakage. DSG suggests these five steps to close the AI gap:
- Name an owner — Select one person with budget authority and a mandate to execute AI applications.
- Build the data backbone — Develop clean, reliable data.
- Pick one function — Start where you have volume and measurable waste, such as pricing, search, or order automation.
- Prove one ROI use case — Accurately measure and report results of an AI application to your C-Suite.
- Then go broad — Expand your use of AI to a second and third function.
Closing the gap
The DSG survey demonstrates the need to create a pathway for independent distributors to adopt AI and outlines a five-step roadmap to do so. What DSG prescribes is actionable for any size distributor, starting with naming one owner and proving one measurable ROI use case before expanding further. Select one person in your business to own your AI plan — and get started today.
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