In the past, electronics and high-tech distributors have led with innovation and been early adopters of technology. But many of those investments are now dated and no longer provide the capabilities, throughput and scale needed to address today's customer expectations. With M&A activity taking center stage in the industry, this is a prime opportunity to take advantage of synergies and look for opportunities to achieve greater efficiency and build flexibility to insulate against an uncertain future. But it will require investments in newer technologies and process changes that reduce operating cost overall.

Customers are asking for value-added services in the form of labeling, kitting, bundling and other labor-intensive operations. With a shrinking labor market and rising wage legislation, it will become more challenging to support these processes without some investments in automation. Robots in particular are getting very good at sophisticated picking operations using specialized end-of-arm tools. Moving toward 2020, companies will need to enable collaborative robots (co-bots) to work alongside humans to complete these complex tasks.

Additional complexity in the form of SKU proliferation is currently limiting growth due to space and capacity issues. But 3D printing is making strides toward enabling on-demand manufacturing across a wide array of materials. Over the next three to five years, this represents an opportunity for distributors to free up space currently occupied by long-tail SKUs, assuming licensing and cost issues can be worked out. Watch this area of technology development carefully as it could be key to future expansion.

As we think about 2020 and beyond, it would be remiss not to mention the tremendous opportunity from the growing wave of Internet of Things (IoT) sensors. Gartner reports 6.4 billion connected “things” in use as of 2016 and predicts that by 2020 that IoT number will grow to as much as 21 billion. The data from all of those tiny sensors can be used not only for the efficient tracking and authentication of products that today requires costly interventions, but to provide measures that protect customers against counterfeiting in the supply chain. Companies that find ways to make useful insights for customers from all of the data generated by those sensors will be creating not only new revenue streams, but also set themselves apart in ways that will take competitors years to catch up.

As always, innovation and efficiency are enablers of competitive advantage. The more efficient you can make your operations, the less impact you will feel from economic turmoil and impending change. Now is the time to undertake transformational projects that will provide a competitive edge for years to come.

The Outlook

The IoT will significantly change the landscape for distributors in this industry. Beyond 2020, competitive advantage will shift to those companies that make use of the real-time data collected from billions of sensors to the benefit of their customers — whether to extend the usefulness or life of the product, signal change and mitigate risk of widespread failure, or simply provide improved accuracy and authentication of goods as they transit through the entire supply chain.