In the never-ending push for growth, midsize wholesale and distribution companies are relying foremost on expanding their partner networks and are bullish on the potential for AI to improve results. But three strong headwinds are pushing them back:

• Weakness in procurement and the supply chain
• Business silos between departments
• Lack of integration between systems

These are among the key findings in exclusive midsize research from SAP Insights. Wholesalers and distributors seeking to expand their networks say they first need to wrangle their own internal systems to digitalize processes and get their data flowing.

To understand the challenges and priorities of midsize companies—defined as those having between 250 and 1,500 employees—SAP Insights conducted a global study in 2024, comprising 12,003 responses across numerous industries. Of those responses, 860 came from wholesale and distribution businesses.

The survey found that new technology tools are widely viewed as a way to overcome challenges, both internal and external. Simply put: “Technology-led transformation drives distributor growth,” as media Web site The Future of Commerce notes.

External factors challenging the sector include changing customer demands, expanding competition, and the need to cope with increased disintermediation and incursion by outside players. Respondents said AI offers promise; at any rate, advanced analytics is at the top of the wish list for technologies to tackle the growth agenda.

Underlying all of this is the need to better manage talent to bridge gaps that impede growth. New tech demands new skills—at a time when many markets already face difficulty simply filling open positions. “There’s a huge [frontline] labor crisis, especially in manufacturing, warehousing, and transportation logistics, especially in North America and Europe,” Matt Littlefield, LNS Research, previously told SAP Insights.

The businesses that can solve this tangled web of interconnected challenges and opportunities will be positioned to attain sustained growth and healthy future business. To do that, they’ll need deeper investments in technology that improve decision-making and support adaptability.

Gearing up for growth

Now is a crucial moment for wholesalers and distributors to remove the hurdles that impede growth. SAP research shows wholesale and distribution companies view revenue growth as essential: More than 95% of respondents in this sector cited growth as central to their strategy.

To reach that growth, midsize wholesale/distributors view expanding distribution channels and partners, expanding their existing market presence, and increasing the overall scale of business operations as key priorities.

These goals ranked highly for all sectors, but even more so in wholesale/distribution. Expanding into new markets—often a top priority in other industries – is relatively less important here.

As for those big-three challenges to achieving growth, wholesale and distribution respondents cited disruption or weaknesses in procurement and supply chain (41.1%), business silos between departments (34.4%), and lack of integration between systems hampering decision-making (34.1%). There is a growing recognition in this space that data analytics could be used to power better decisions and simplify and integrate processes, clearing the way for growth.

In terms of tools and technologies expected to help, survey respondents confirmed that data analytics tops the list. More than 17% cited analytics as their number one technical priority for overcoming business challenges; 51% ranked analytics among their top three.

This finding connects to a huge opportunity for the sector: a better understanding of customer needs—indeed, anticipating the next stage rather than reacting late to current developments. Respondents clearly view analytics as a pathway to achieving this deeper customer understanding, more accurately predicting demand, creating more engaging partner experiences, and reducing booking error—all of which would contribute to growth.

Respondents also cited the need to invest in new software and systems and to improve integration between systems as top tech priorities.

Working smarter with simpler processes

Wholesale and distribution companies are plagued by clutter, waste, or inefficiency in the ways they get work done.

Survey respondents said simplifying work and improving processes is an organizational priority, cited by 90.3% of respondents—clearly a sector-wide need. They further noted their top needs for improved processes as:

• Simplifying processes for new product/service development
• Improving cost control and spending management (which interested wholesale/distribution relatively more than in other industries)
• Increasing the integration between enterprise systems

But here, as in other industries, respondents said they were prevented from making the needed process improvements, again due to internal challenges. For the top three challenges cited, all were more pronounced in this sector compared to the aggregate of all industries. Disruption or weakness in procurement and supply chain, outdated or inefficient technology systems, and resistance to change from employees and management were the top three obstacles. These findings suggest the sector has much to gain from strategic technology investments.

Respondents ranked their top business plans that would help them to simplify and improve processes, including:

• Increasing process automation
• Improvement of management decision quality
• Increasing enterprise system integration

The first two were notably higher priorities in this sector than others.

As for the technology and tools these companies expect will help them specifically to simplify and improve processes, it is no surprise that analytics and decision-making tools most often come in at the top of this list, cited as number one by 18.5% of respondents. As with the tools and technologies that were expected to drive growth, updated business software and improved enterprise system integration were also cited as a top priority, by 15.4% and 14.7%, respectively.

Indeed, wholesale and distribution companies have a lot on their plates, citing a host of hot topics as “high priority” in their organizations, including preparing for cybersecurity threats (59.3%) adopting business AI applications (54.8%), increasing product and service sustainability (54.2%), making business operations more sustainable (54.8%), adopting generative AI (53.3%), and addressing supply chain gaps (51.5% vs. 50.7% for the group as a whole).

Meanwhile, the sector is using a variety of strategies to prepare for economic uncertainty, including investing in new software and technology tools, strengthening the supply chain, strengthening profit margins, and focusing on business innovation. Wholesalers and distributors were more likely than others to pursue outsourcing of nonessential functions, but even so, only 9.9% of sector respondents cited this as their top strategy.

GenAI comes to the fore

Wholesale and distribution companies expect generative AI to be a major force for industry, job roles, and process transformation within and for their organizations. They are pinning their hopes on the GenAI tools to drive significant improvements. To wit: Nearly half cited GenAI as helping them make processes more adaptive, just under 50% cited GenAI as improving customer experience and engagement, and a similar percentage cited the expectation that GenAI will drive more accurate and efficient decision-making.

These responses aligned with the aggregated responses across all industries. The only significant deviation was in GenAI’s ability to facilitate remote work and collaboration: these respondents rated this area lower than other industries did, perhaps because of their focus on physical goods and products, necessitating in-office or in-warehouse work.

Wholesale and distribution respondents are currently using GenAI tools to a “strong degree” in areas such as detecting fraud (40%), monitoring for cybersecurity threats (39.3%), aiding regulatory compliance (37.9%), creating management summaries and or/annual reports (37.9%), and gathering market intelligence (37.3%), among others.

However, in all these areas, wholesale and distribution reported lower levels of GenAI usage than the other industries in aggregate. This suggests a certain degree of hesitation in the AI land rush.

As for the risk associated with AI use in general—and generative AI in particular—the top concern was the lack of transparency with AI-generated results (34.7%). Other risks are acting upon incorrect information generated by AI systems (34.3%) and insufficient data sizes and quality for model training and accuracy (31.9%).

Of course, even as AI improves and its risks become better understood and managed, it’s clear that midsize wholesalers and distributors are looking to a variety of other tools and strategies to support growth. With many challenges facing a historically risk-averse industry, it’s all hands on deck.

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