Looking into Distribution Risk

Looking into Distribution Risk

In 2024, Retail trade contributes significantly to Malaysia’s economic growth. Thus, Malaysian retail business is moving faster and becoming intense competition.  Only those distributors with effective risk management strategies are capable to safeguard their business operations and increase profitability. In this article, we’ll talk about three important areas of distribution sales risk and sharing with you the ideas on how your business will effectively reduce these risks. 

Supply Chain Risk Management of Distribution Business

Supply chain disruptions can have a significant impact on retailers’ ability to meet customer demand and maintain operational efficiency. According to the recent news from The Edge Malaysia about the inefficient distribution in Malaysia. There is a statement that claims that manufacturing can’t control the distribution process. Therefore, it is important for distributors to implement robust supply chain risk management strategies to identify potential risks and minimize the impact. For example, Malaysian distributor can practice to conducts regular risk assessments of its supply chain to identify vulnerabilities and develop contingency plans. By diversifying its supplier base and establishing alternative transportation routes, distributors can minimize the risk of disruptions caused by factor such as geopolitical tensions.

Moreover, distributor can leverage technology such as Distribution Management Solutions (DMS) and Salesforce Automation Solutions (SFA) to enhance supply chain visibility and enable distributors to respond quickly to disruptions. For instance, by utilizing DMS and SFA solutions, distributors & principle able to track inventory levels, monitor supplier performance through Supply Chain Reports (Sell In & Sell Out) reports, and identify potential bottlenecks in the supply chain. With effectively identifying and addressing supply chain risks, distributors able to have a seamless flow of goods and minimizes disruptions to its operations and responded to market demand efficiently.  

Social Environment Risk To Distribution Business

Social risk management is critical to distribution business whereby it can cause significant impact to their profits and lost. For example, consumer in the society will change their tastes and preferences from their education, religion, culture, media & internet.  

Therefore, distribution should ensure the products/goods are always sufficient to meet market demand in the good condition. To maintain the customer expectation & satisfaction for organizations that operate in an economically, socially and environmentally responsible manner, they can mitigated the social risk & concerns through a range of as CSR (Corporate Social Responsibility) activities. Popular CSR steps include building closer relationships with local partners and customers, increased transparency and public reporting, closer monitoring of suppliers and others in their supply chains. 

Convention Distribution Sales Business & Technology Risk

Financial Risk of Distribution Business

Financial risks such as fluctuating exchange rates, trade rates, credit risks, and cash flow constraints can pose significant challenges to Distribution Business. To lower financial risks, distribution organizations must practice smart financial management and execute effective risk mitigation techniques. For example, distributor can safeguard the foreign currency risk to keep its import costs as low as possible when the value of the currency changes like exchange rate fluctuations. Additionally, distributors can maintain a diversified customer base and conducts thorough credit assessments to mitigate the risk of bad debt. 

Furthermore, Distributors can implement strict cash flow forecasting and monitoring procedures to ensure sufficient funds are available to meet its operational needs.

implementing robust supply chain risk management, financial risk management, and cybersecurity risk management strategies, distribution in Malaysia

Conventional Distribution Sales Business & Technology Risk

Many distribution sales businesses are not aware of the risk of following the traditional method process, from order taking to delivery, by using handwritten forms. It is time consuming, unorganized, and not environment friendly. Example, salesperson taking orders from customer and conducting stock check at the store with handwritten form is really time consuming. For instance, the common issue that sales person has to go through when every time they placing order for customer. Salesperson is required to call admin for some verification, example checking for pricing, promotion and stock balance before they placing order for customer. The long process is slowing down the efficiency of your employees as well as increase the chance of human error with too much paperwork and data entry. However, those businesses adapting technology and practicing the modern process can help to save time to speed up the operations, sales activities and reduce human errors. Example, Manufacturing and distributions sales business that using sales solutions like (SFA) to optimized their sales process and activities, they can save more time and budget. No more manual process like submitting handwritten order form, doing double job for data entry and no more calling process which incur more cost in business.

Meanwhile, as distribution increasingly rely on digital technologies to conduct their business operations, cybersecurity threats such as data breaches, ransomware attacks, and phishing scams pose a significant risk to their operations and reputation. In Malaysia, distribution must prioritize cybersecurity risk management to protect their sensitive information and customer data. For example, e-commerce platform will implement robust cybersecurity protocols such as encryption, multi-factor authentication, and intrusion detection systems to safeguard its online transactions and customer data. The organization also can conduct cybersecurity training sessions for its IT employees to raise awareness about the latest cyber threats and how to prevent them, as well as strengthens its overall cybersecurity posture and reduces the likelihood of security breaches.

By implementing robust supply chain risk management, financial risk management, and cybersecurity risk management strategies, distribution in Malaysia can effectively mitigate risks and ensure the resilience and sustainability of their distribution sales operations.

LinkedIn : MC Crenergy | Datanory | IT Solution Provider

Updated On : 27th May 2024

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