Industrial Goods Playbook

Abstract

Industrial goods manufacturers must adopt digital business models to keep up with rapidly changing consumer demands and increased competition. To do so, they need to have the right mindset, and view commerce technology not as a threat but as an opportunity. Learn about the four major challenges facing the industry, and three key digital commerce solutions to solve them.

The status quo of the industrial goods industry

The industrial goods industry encompasses everything from machinery and equipment to chemicals and raw materials across various sectors, including manufacturing, construction, and energy. Simply put, industrial goods are broadly the machines that manufacture goods that are then used or sold, for example, semiconductors or tractors.

The industry took a big hit in 2020 when the covid-19 pandemic caused havoc in supply chains, and consumer demands shifted. However, even as macro factors such as geopolitical instability and a potential economic downturn continue to impact all industries, the demand for industrial goods is expected to increase. Global industrial goods sales are projected to reach over $15,000 billion by 2030, with Chinese companies accounting for over half of that.

As the global need for large-scale industrial projects increases, so too does the pressure for digital transformation. 2023 and beyond will see several key trends impacting industrial goods, from Internet of Things (IoT) and artificial intelligence (AI) to sustainability and ongoing supply chain disruption. Efficiency and productivity will be vital in differentiating the winners from the losers, with those able to adapt and evolve with new technologies better able to ride the digital transformation wave.

For industrial goods players to secure their position in this lucrative market, they must first understand the challenges they're facing, and analyze the digital commerce solutions before them. The key to success lies in digitizing quickly, iterating, and increasing capabilities along the way. Read on to find out more.

Challenges facing industrial goods

The major hurdles currently facing the industrial goods industry can be categorized into four main areas of concern: changing customer expectations, digital transformation, increasing competition, and supply chain disruptions.

Changing customer expectations

The world's increasing digitization has fundamentally transformed how customers expect to transact, even in B2B. What used to be fully digital transactions are now considered a commodity, and customers now demand seamless, always-on, and end-to-end solutions that cover the entire customer journey. As a result, providing a B2C-like purchasing experience has become essential to keep up with elevated customer expectations.

In the traditional three-step distribution model, manufacturers typically have no direct relationship with their customers, only with intermediaries. Even when manufacturers sell products to customers directly, the relationship is often analog and ends immediately after the purchase. This means manufacturers have no access to their customers and cannot re-engage or strengthen the relationship.

Therefore, the major challenge for manufacturers is how to create long-term value for customers to initiate a digital customer relationship and drive customer loyalty and retention. By doing so successfully, manufacturers can create added customer value and engage in a (digital) relationship to improve the overall customer experience.

In short, changing customer expectations:

Increases the pressure for B2B to provide a B2C-like experience
Boosts the importance of direct access to customers and their data
Means manufacturers must create added customer value

Digital transformation

Industrial goods manufacturers are facing a significant challenge in the current landscape: the need for digital transformation. One of the considerable obstacles to digitization is the complex purchasing journey, which involves multiple players, alignment, and approval processes.

Customers typically engage in a multi-stage digital purchasing journey, starting from initial research and self-configuration of the product, moving onto the actual and binding configuration of the product solution by an installer, followed by a visit to a local distributor to get the items and to trigger an order of missing items from the manufacturer. All these processes require digital enablement to make the purchasing journey more streamlined and efficient.

In addition to the complex purchasing journey, industrial goods manufacturers face a challenge in enabling customers to find the right product efficiently and avoid mis-purchases. Industrial goods are usually complex solutions that require certain combinations and configurations. Often, experts are needed to configure solutions on behalf of the customers.

With increasing digitization, customers expect to be able to do this themselves and find or configure the right solutions independently. In the after-sales business, finding the correct item is even more critical as mis-purchases can lead to significant business damage if customers don't receive the right spare part, and a machine cannot run without it. Therefore, industrial goods manufacturers must provide efficient digital solutions to help customers find the right products and streamline the entire purchasing journey.

In short, digital transformation in industrial goods:

Isn’t straightforward due to complex buying journeys
Enables customers to self-serve
Can help with issues like mis-purchasing

Increasing competition

The industrial goods market is becoming more crowded with aggressive price positioning for both products and after-sales items, making it increasingly difficult for manufacturers to differentiate themselves based on product quality alone.

Manufacturers must provide their customers with added value to avoid pure price competition with cheaper third-party alternatives. They must find innovative ways to differentiate their products and services, such as offering customized solutions, enhanced customer service, and unique financing options. By providing additional value to customers, industrial goods manufacturers can set themselves apart from competitors and build customer loyalty.

In addition to providing added value to customers, industrial goods businesses must drive customer acquisition with new, attractive purchasing and pricing options. Customers today expect more flexible purchasing options with different value approaches. Manufacturers must keep up and diversify their offerings beyond traditional invoices and financing options. By offering new and innovative pricing options, manufacturers can attract new customers and retain existing ones.

However, as manufacturers move towards a direct-to-consumer (D2C) model, they must also avoid channel conflicts with intermediaries such as distributors and installers, especially when they are still vital parts of the puzzle regarding delivery and other areas of expertise. Finding intelligent solutions to integrate intermediaries into their D2C ecosystem in a meaningful way to provide value to both sides and ensure the availability of items when customers need them.

In short, increasing competition means manufacturers:

Must provide customers with added value
Need to drive customer acquisition with attractive digital offerings
Should consider how D2C can be integrated as an additional sales channel

Supply chain disruptions

One of the significant challenges faced by the industrial goods industry is the disruption of supply chains, which can lead to shortages of critical materials and components. This can cause significant problems for manufacturers, as production schedules may be delayed or even halted altogether. Disruptions can occur due to various factors, as we've seen in recent years, including natural disasters, geopolitical instability, and unforeseen global events like the covid-19 pandemic.

In order to stabilize supply chains, businesses must carefully manage the sourcing and procurement of materials and components. This may involve identifying alternative suppliers and developing contingency plans in case of supply chain disruptions. In addition, businesses may need to invest in technologies and processes that improve visibility and control over their supply chains, such as real-time tracking and monitoring systems.

By taking a proactive approach to supply chain management, businesses can reduce the impact of disruptions and ensure the availability of critical materials at competitive prices. This, in turn, can help to minimize production delays and maintain customer satisfaction.

In short, supply chain disruption is:

Caused by a multitude of factors, often out of the manufacturer’s control
Carefully managed by sourcing and procuring materials
Mitigated with technology and digital processes

The bottom line – challenges facing industrial goods

Like almost every industry, industrial goods face a rapidly changing market environment. From the customers themselves to new market entrants, those who understand and wield digital technology successfully have the upper hand.

With that in mind, let's review how some of the industry's hurdles could be viewed as opportunities for digital commerce.

Three digital commerce opportunities for industrial goods

To tackle the challenges facing industrial goods manufacturers, businesses should consider the digital commerce opportunities available to solve them. There are countless strategies and technologies available. Here, we'll highlight three of them to give you an idea of the possibilities.

Launch a customer portal to meet customers' rising expectations

B2B customers increasingly demand a B2C-style seamless buying experience. You can achieve this with a customer portal, designed to be the 'single source of truth' for all things customer-related.

The customer portal handles all relationship-related matters along the complete customer lifecycle, from invoicing to after-sales support. Your customers can say goodbye to poor visibility and complex manual processes to access information.

A customer portal can have many capabilities, but the industrial goods industry will particularly benefit from dynamic pricing, digital quote management, product configuration, and more.

A study by PWC stated that 40% of companies adjust their prices at least weekly. Despite the complexity of B2B pricing, customers expect prices to be fair and accurately reflect market conditions in a personalized way, even for extensive quotes. This can be achieved via a customer portal using real-time quoting and customer-specific pricing, vastly improving customer convenience and satisfaction.

One challenge that costs the industrial goods market a great deal of time and money is mis-purchasing. With a customer portal, you can quickly enable your customers to find the right product and even customize their orders via a configurator tool.

Benefits of a customer portal for industrial goods

Increased process efficiency
24/7 availability
Higher customer convenience
Lower costs
Reduction of recurring manual tasks

Benefit from D2C while avoiding channel conflict

Industrial goods manufacturers must deal with a highly complex distribution model with multiple intermediaries. One way to tackle this is by establishing your own direct-to-consumer sales channel. However, doing so can jeopardize your relationship with your resellers, as they feel they've been cut out of the equation.

It's vital to keep your distribution network on your side, as even with a D2C channel, you'll still need their expertise and logistics power to execute. One way of benefiting from D2C while avoiding channel conflict is to establish an indirect sales solution through a marketplace where your resellers are established as merchants.

Through this method, you integrate your resellers as partners, while owning the ultimate brand experience yourself. This hugely increases the convenience for your customers, who can find everything they need in one place, and gives you access to customer data and preferences you previously didn't have.

Benefits of a D2C channel for industrial goods

New sales opportunities
Better brand and customer experience
Direct insights from customers

Stabilize supply chains with a sourcing platform

In the face of supply chain disruptions, industrial goods manufacturers can turn to buy-side marketplaces as sourcing platforms to stabilize their supply chains and ensure the availability of materials at competitive prices. These marketplaces allow buyers to connect with multiple suppliers, compare prices and offerings, and negotiate contracts more efficiently, all in one place.

By using a sourcing platform, manufacturers can access a larger pool of potential suppliers and streamline their procurement process, improving their supply chain management. With an advanced catalog with endlessly scalable custom features, manufacturers can have complete control of their orders and enhance analytics, ensuring that items are ordered on time. Predictive ordering supports procurement processes, making sure that necessary items are available when needed.

Multisourcing has become increasingly challenging with the fragmentation of markets. A sourcing platform drives efficiency by uniting all suppliers in one place with one common structure and maximum transparency.

This can improve internal procurement processes and even become a new business model, allowing manufacturers to focus on their core competencies while the platform handles the procurement process. Overall, utilizing a buy-side marketplace as a sourcing platform can help industrial goods manufacturers stabilize their supply chain and ensure the availability of materials at competitive prices.

Benefits of a sourcing platform for industrial goods:

Flexible and competitive
More efficient
Secures supply chains
Convenient
Reduces costs

The bottom line – digital commerce opportunities

There are countless digital commerce opportunities for industrial goods manufacturers. To decide which route your business should go, consider which business outcomes you want to achieve. Whether that's more secure supply chains, establishing a D2C route, improving the customer experience with a self-service portal, or something else entirely. The crucial element is that digitizing aspects of your business will increase your ability to keep up with a rapidly changing market.

How Spryker can help you

Spryker is here to help you future-proof your business. Our sophisticated transactional commerce technology can enable every digital commerce solution outlined in this industrial goods playbook, from launching a D2C channel or a sourcing platform to a digital self-service portal for your customers. Our industry experts are here to guide you through the challenges facing industrial goods manufacturing to ensure you stay agile in this rapidly evolving market.

Industrial goods manufacturers must automate multiple processes to maintain consistency, efficient inventory control, and streamlined order management, while optimizing storage space and improving production. B2B clients, like B2C customers, demand personal, omnichannel experiences that are easily accessible with increased speed, accuracy, and agility.

Trusted by our customers

STAUFF is a leading manufacturer of hydraulic components and systems with a strong focus on innovation and sustainability, and a global presence in over 50 countries. STAUFF partnered with Spryker to create a one-stop-shop experience with B2C-style easy purchasing and navigation, as well as IoT integration to offer further services to its customers. This project was executed within less than six months, and STAUFF now addresses all its customer needs with their B2B commerce platform, powered by Spryker.

Conclusion

Rome wasn't built in a day. And neither will industrial goods businesses digitize overnight. It's no longer an option to let fear of failure or an analog mindset hold you back, because your competition is leveraging digital technology right now, and soon there will be no catching up. Starting small, testing, iterating, and evolving in stages is the best method for future-proofing your business.

This playbook hands you everything you need to know about the hurdles you face, but more importantly, about how these challenges can be viewed as opportunities. The question is, do you have the mindset to adapt, or will your business end up in the scrap heap? The power is ultimately in your hands, but we're here to help guide you.

Find out more about Spryker’s solutions for industrial goods by exploring our use cases, such as improving customer experiences through a self-service portal and securing supply chains with a sourcing platform.

About Spryker

Spryker is the leading global composable commerce platform for enterprises with sophisticated business models to enable growth, innovation, and differentiation. Designed specifically for sophisticated transactional businesses, Spryker’s easy-to-use, headless, API-first model offers a best-of-breed approach that provides businesses the flexibility to adapt, scale, and quickly go to market while facilitating faster time-to-value throughout their digital transformation journey. As a global platform leader for B2B and B2C Enterprise Marketplaces, IoT Commerce, and Unified Commerce, Spryker has empowered 150+ global enterprise customers worldwide and is trusted by brands such as ALDI, Siemens, ZF Friedrichshafen, and Ricoh. Spryker is a privately held technology company headquartered in Berlin and New York backed by world class investors such as TCV, One Peak, Project A, Cherry Ventures, and Maverick Capital. Learn more at spryker.com.

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The Industrial Goods Playbook