Editor’s note: This article ran on pme sister publication Supply House Times’ website at SupplyHT.com. It gives an excellent glimpse into the world of artificial intelligence — a discussion topic popping up more and more throughout the PHCP supply chain.

Artificial Intelligence is changing the way we buy and sell. AI has already transformed consumer markets, and it’s starting to reshape B2B. 

Contractors in the PCHP industry are poised to enjoy smarter distribution and personalized sales. But, for PHCP distributors, AI will pose something of a make-or-break challenge. Some will win big, others will lose out, and the key difference will be timing.

According to a recent McKinsey simulation, AI will create $13 trillion over the next decade, however, this growth will not be distributed evenly. McKinsey’s analysts warn: “At one end of the spectrum, front-runners are likely to benefit disproportionately. By 2030, they could potentially double their cash flow. At the other end of the spectrum, non-adopters might experience around a 20% decline in their cash flow from today’s levels.”

PHCP distributors can leverage AI to boost revenue in a big way, but only if they adopt the technology soon.

In order to understand why timing is so critical, it is helpful to know how AI works. AI analyzes large quantities of data and finds patterns that humans are not equipped to see. Computers excel at narrow, specific tasks like these due to their immense storage capacities and processing speeds. In advanced forms of AI, such as machine learning or deep learning, programmers expose highly advanced algorithms to data, and let them find connections themselves. With enough time and data, these types of AI are extremely effective.

Outside the PHCP industry, companies have already achieved success by integrating AI into top-down business approaches. Amazon, for example, analyzes mass quantities of consumer data to find items that consumers want or need. “Customers also shopped for,” “recommended for you” and “more items to explore,” are all examples of AI in action. Big-data analysis reveals what items have the highest probability of selling with each customer, allowing consumers to find what they want to buy, and businesses to sell more. A lot more. In fact, 35% of Amazon’s online revenue comes from its AI recommendation engine.


The real winners

But while customers unavoidably win with AI, only select companies do. AI tends to create winner-take-all scenarios due to its reliance on data. This phenomenon often is called the data network effect, and describes the virtuous or vicious cycles that AI can create.

The more data AI can analyze, the better it can perform tasks. Thus, when AI analyzes customer data to improve shopping experiences, the effects compound over time. First, customer data is captured. The data is then analyzed by AI, and used to create better customer experiences. In return, improved experiences attract more customers (and thus more data), allowing for even better future service.

As this cycle plays out over time, companies with superior AI dominate rivals. Amazon adopted AI early, and has been capturing and analyzing data for years. Today, its tremendous data advantage and massive market share prevents competitors from catching up. Others can employ AI, sure, but Amazon’s monopoly on customer data means that rival AI simply won’t be effective at predicting customer purchases, and will thus struggle to win customers. This means the sales, and data, and so on, all stay with Amazon.

The good news here is that no PHCP distributor has that kind of data advantage, yet. As competition from non-traditional distributors emerges, traditional distributors emphasize customer service to stay competitive. When AI breaks onto the PHCP scene, big winners will emerge, because those with the best AI will be able to curate excellent customer experiences and win over contractors (and their data).

When this happens, contractors will start to buy from distributors with the most AI-improved customer service. Currently, contractors reach out to distributors for quotes on specific units or lists of items. Sales reps receive orders and generate quotes, but have no way of offering personalized counter-offers because they cannot track and analyze data in real-time. With AI, this will all change.

PHCP customer service currently suffers because information gets lost across multiple channels (for example, if contractors purchase from reps and e-commerce sites), and because human players are prone to forgetting items or making bad bids. With AI, however, distributors will track data across every channel, and use that information to guide contractors to the right products, at the right price. Once certain companies start offering AI-enhanced product selection, contractors will give preference to those businesses at the expense of others.

AI will also identify when contractors are making incomplete purchases. Sometimes contractors don’t know all the items a distributor carries. Other times, they are unaware that certain products should be purchased with complimentary items. AI can turn these incidences into win-win situations by recommending smart order kits or bundles. This maximizes distributor share of wallet and saves time and money for contractors who don’t have to deal with multiple vendors.

Distributors can maximize the impact of AI by capturing data from all sales channels. More data paints a more complete picture of customer habits, and this helps AI recognize clear patterns in items that are often bought together, frequently requested or occasionally returned. These insights can then be used to improve the shopping experience across all those same sales channels. As seen in countless B2B and B2C cases, sales reps and e-commerce sites that make accurate product predictions yield massive returns.

With enough data exposure, AI will accurately predict purchases and transform sales channels. Instead of passively receiving orders, PHCP distributors will be able to proactively make orders across all channels with AI. Contractors will also enjoy buying from distributors with the AI-enhanced services. 

When imagining this bright future, however, it is important not to forget the data. AI needs data to function and only gets better as data accumulates. 

Established PHCP businesses are positioned to capitalize on AI, but they must adopt it soon or risk losing customers, future data, future customers, and so on. It is not too late to invest in AI, but if PCHP distributors wait any longer, it will be.