Distribution companies need to stop pretending they’re ready for AI in 2025

The distribution industry is charging into 2025 with grand visions of AI-powered warehouses and automated efficiency. There’s just one problem: We’re building castles in the clouds while our foundations crumble.

The hard truth? Most distributors can’t effectively use the data they already have, let alone handle the complexity of artificial intelligence (AI). They’re frantically chasing AI solutions while lacking even basic cybersecurity response plans. It’s time to step back from the hype and focus on what actually moves the needle.

Putting the AI cart before the data horse

While some look at AI as a tool to transform distribution, they’re not telling you that the companies seeing real results aren’t starting with AI at all. They’re starting with their data.

The successful distributors of 2025 won’t be the ones who bought the shiniest AI tools. They’ll be the ones who first got their data house in order, understood what information they already had and took strategic baby steps toward solving identified challenges. This requires a team approach that brings together operations, IT, finance and often external partners to create meaningful key performance indicators (KPIs) and actionable dashboards.

Think about what’s actually happening in warehouses today: Companies are investing millions in AI systems while their basic data infrastructure remains fragmented and unreliable. They’re trying to build predictive models on top of inconsistent data, implement automated decision-making without understanding their current processes and deploy advanced analytics before they’ve mastered basic reporting.

But where automation does work isn’t in eliminating jobs — it’s in revealing how desperately we need human workers in different roles. Those headline-grabbing automated warehouses? They’re not replacing workers; they’re redeploying them to more valuable tasks.

Take the emerging “autostore” systems, for example. These massive, automated storage units use robots to retrieve products, dramatically reducing the physical demands on workers. But contrary to popular belief, these systems aren’t eliminating jobs. Instead, they’re freeing up workers to focus on complex problem-solving, customer service and strategic planning — tasks that machines can’t handle.

All of this requires a comprehensive talent strategy. True innovators in 2025 won’t be asking, “How can we automate away our workforce?” They’ll be asking, “How can we use automation to make our human talent more effective?” Leading companies are focusing on personalization, meeting each employee where they are in their career journey and providing tailored development resources and advancement opportunities. Culture has become a crucial factor in engagement and retention, with high-performing organizations prioritizing recognition and creating clear paths for growth.

The resilience gap

While the industry obsesses over AI, more fundamental vulnerabilities threaten distribution businesses. Most companies are running lean operations without basic protections and contingency plans, essentially gambling with their entire value chain.

According to a Deloitte survey, 91% of companies reported experiencing at least one cyber incident or breach in the recent past. One successful cyberattack could halt order processing, fulfillment and shipping, essentially killing a distribution business overnight. Yet in 2025, we’ll still see organizations without clear response protocols or even designated team responsibilities when incidents occur. When attacks hit, companies will discover they lack the internal resources to respond effectively, scrambling to coordinate with outside vendors and often making costly mistakes in the process.

The same vulnerability extends to supply chain relationships. The post-pandemic era taught us that supply chain flexibility isn’t just about having multiple suppliers — it’s about building deep, multilayered relationships that can withstand disruption. Yet many companies are still treating supplier relationships as transactional rather than strategic partnerships.

In 2025, successful distributors will move beyond simple supplier diversification to create true resilience, developing collaborative relationships with suppliers, including competitors when necessary, and maintaining open lines of communication before crises hit.

These strengthened partnerships also create opportunities for better customer service. Just as we’re personalizing employee experiences, customer interactions need the same level of customization.

Leading distributors are using their data to understand customer profiles and anticipate needs before they arise. This might mean predicting order patterns, tailoring communication styles or creating targeted marketing campaigns based on specific customer behaviors and preferences.

Building a realistic road to 2025

Distributors need to focus on three priorities:

1. Get the data right: Before diving into AI, establish strong data management practices. Understand what information you already have and how to use it effectively. Start with small projects that can demonstrate value and scale from there.
2. Focus on human-machine harmony: Stop thinking of automation as a replacement for workers. Build systems that enhance human capabilities rather than trying to eliminate them. Invest in training programs that help workers adapt to new roles.
3. Shore up the basics: Develop concrete response plans for cybersecurity incidents. Ensure every team member knows their role in maintaining operational continuity. Test these plans regularly and update them based on real-world experience.

We can continue chasing every new technological trend, or we can build sustainable foundations for real innovation. The choice we make will determine whether 2025 becomes a year of meaningful progress or just more digital wheel-spinning.

Success won’t come from having the most advanced technology, but it will come from having the right foundation to use that technology effectively. That means starting with the basics: clean data, clear processes and well-trained teams.

The winners in 2025’s distribution landscape won’t be the companies with the biggest AI budgets or the most robots. They’ll be the ones who took the time to get the fundamentals right first.

How Wipfli can help

In 2025, distribution companies must balance technological advancement with operational fundamentals while building resilient organizations. Success requires both deep industry expertise and practical innovation.

Wipfli can help. Our distribution industry expertise and technology solutions can help companies build strong data foundations, implement right-sized automation, develop comprehensive cybersecurity protocols and create resilient supply chain strategies. We focus on practical solutions that enhance both operational efficiency and human capabilities. Learn more about our services for the distribution industry.