The data center market, as many know, continues to boom. According to recent data from the Bureau of Labor Statistics, almost 33% of the new construction office spend in May was by data centers! There are data center industry reports of 100 data centers scheduled to be built for the next 10 years … and this may be conservative. The driver of the need for all of this computational power and data storage … AI and the everything becoming more “technological.”
Many HVAC distributors are benefiting from the growth in this space, however, all can if the reason for data centers – AI – is put to work by data centers. Think of the heat that the servers generate? And they operate optimally in cool environments that are self-regulated since there is not much staff in the facility. Did you know that 35% of a data center’s energy is consumed by its HVAC system? And that 15-20% of a data center’s construction cost is for its HVAC system?
Many are talking “AI strategy” for their company. We’re hearing from distributors “I get it, but how to make it affordably actionable.” In other words, companies want to “put their foot into the proverbial water” and need a place to start.
Recently I was talking with Jeff Botsch, Distribution Industry Executive and Jared Helenic, Technology & Innovation Product Specialist, from Infor, and they offered to share how Infor is looking at the market. They also shared that they have a suite of tools (I called them applications) that they have deployed with Infor distributors, that are using AI to deliver results. They offered thse thoughts:
Strategic AI Implementation
“In the rapidly evolving landscape of HVAC distribution, data centers have emerged as a dominant trend. Recent projections for the Data Center Construction Market from 2024 to 2032 forecast a robust Compound Annual Growth Rate (CAGR) of 12.55%. This unprecedented growth is fueled by the surge in data consumption, the proliferation of enterprise cloud computing, and the increasing adoption of AI technologies. As electrical distributors find themselves at the epicenter of this boom, a critical question arises: How can they leverage AI to capitalize on this opportunity and drive their own business growth?
The AI Revolution: Beyond Data Mining
Artificial Intelligence has transcended its initial role as a tool for data mining and insight generation. Today, AI stands at the forefront of real-time decision-making and action, promising tangible operational changes rather than mere analytical reports. By integrating AI into frontline operations, distributors can enhance efficiency, drive growth, and stay ahead of the competition. The key lies in viewing AI not as a replacement for human expertise, but as a powerful augmentation of human capabilities – akin to having an on-demand, hyper-efficient assistant for every aspect of the business.
Driving Revenue and Margin Growth
While AI shows promise in prospecting and developing new relationships, its proven value lies in expanding existing accounts. Two key areas for implementation are:
- AI-Driven Pricing Recommendations:
- Maximizes profitability by analyzing market conditions, competitor pricing, and customer behavior.
- Enhances customer satisfaction through fair, dynamic pricing strategies.
- Reduces unnecessary discounting by identifying when discounts are truly needed to close a sale.
- AI-Driven Product Recommendations:
- Increases revenue through intelligent cross-selling and upselling.
- Improves customer experience by suggesting relevant additional or complementary products.
- Enables and accelerates the ability for new sellers to provide product advice and recommendations.
These AI-powered solutions enable distributors to tailor their offerings and pricing strategies to individual customer needs, driving both customer satisfaction and bottom-line growth.
And these are not “pie in the sky / someday we’ll achieve” promises. Infor is working with distributors in multiple industries to support their product recommendations and to optimize profitability.
Strategic AI Implementation for Operational Excellence
In today’s competitive business environment, operational efficiency is paramount. It is the cornerstone of increasing productivity, managing staffing, reducing expenses, conserving cash flow, and ensuring customer satisfaction. AI offers two high-impact areas for immediate implementation:
- AI-Driven Demand Forecasting:
- Boosts forecast accuracy using multifaceted data analysis, including market trends and customer insights.
- Elevates customer satisfaction by optimizing product availability.
- Optimizes inventory levels, reducing carrying costs while ensuring sufficient supply.
- AI-Driven Inventory Optimization:
- Streamlines resource allocation, identifying products that require more attention.
- Improves customer satisfaction by ensuring timely availability of products.
- Reduces inventory costs by balancing holding costs against stockout risks.
These AI-powered solutions enable distributors to create sophisticated, adaptable demand forecasts quickly. As current information becomes available, forecasts can be adjusted in real-time, ensuring agility in a fast-paced market.
While demand forecasting can be tough in the electrical distribution industry for some product categories due to the nature of projects, for “stock and flow” items this is very feasible, and inventory optimization is core to Infor’s DNA.
Expanding the Value Chain through AI
As organizations gain experience using AI to support key transaction workflows, they can undertake larger initiatives like expanding their value chain through product portfolio diversification. This strategy combines previously discussed AI use cases with additional AI-driven analytics and execution to:
- Identify and integrate complementary product lines.
- Bridge technical and business gaps for new products using AI-enhanced workflows for:
- Product advisory
- Pricing recommendations
- Demand forecasting
This comprehensive approach enables distributors to enhance their traditional offerings while minimizing risks associated with entering new product categories.
The Imperative for AI Adoption
The HVAC distribution sector stands at a critical juncture. As a key player in the data center construction market, the industry is contributing directly to the development of advanced AI resources. It is not just an opportunity, but an imperative for distributors to learn to leverage the fruits of their labor.
Rapidly expanding technologies like Generative AI and AI-enhanced process intelligence are already being employed by forward-thinking organizations to expand their value chains. However, the good news is that AI adoption is not limited to large enterprises with substantial resources.
Democratizing AI: Infor’s Solution
Our Infor Augmented Intelligence Service delivers key use cases like those discussed earlier (e.g., product advisory, product and pricing recommendations, demand forecasting management, etc.) as a service. This accelerates time to value and reduces the need for internal data science investment, making AI capabilities more accessible and actionable for distributors. This is how Infor is helping distributors compete.
Seize the AI Opportunity
The data center construction boom presents a prime opportunity for HVAC distributors to adopt and leverage artificial intelligence technologies. By implementing AI-driven strategies in operations, sales, and value chain expansion, distributors can enhance efficiency, drive growth, and maintain a competitive edge in an evolving market landscape.
The time to act is now. Those who hesitate risk falling behind in an increasingly technology-driven marketplace. While IT typically takes the lead on the adoption of these kinds of technologies, cloud host SaaS offerings have enabled functional leaders in sales, operations and finance more direct involvement in paving the way with deploying, and utilizing, artificial intelligence.
As we move forward, the question is no longer whether to adopt AI, but how quickly and effectively it can be implemented to drive business success. The fruits of the industry’s labor in supporting AI infrastructure development are ripe for harvesting – it is time for electrical distributors to reap the benefits of the AI revolution they have helped to build.”
Thoughts
- An interesting question is, who within your company should be inquiring, or driving, AI from a thought leadership perspective. In larger companies, it should be the Chief Digital Officer, VP Digital Technologies or something with a strategic view of digital transformation or growth. For mid-sized companies, it’s a good question … is it ownership / leadership? IT? An enlightened sales operations leader? Perhaps a VP of Sales or a VP Operations? Maybe a CFO? Someone needs to and, if no one has “time” (which is inevitably an excuse), find an “up and comer” and ask them to spearhead learning more and bringing ideas to a management roundtable. Don’t delay, start today.
- Your company is already using AI. Ask your marketing department. Ask anyone using Microsoft Office. Remember that ChatGPT thingy you researched yesterday. It is entering all phases of our lives. Now it’s time to begin deploying it more broadly within your business and having AI help you drive profitability (unless you are content with low single digit net profit.) AI needs to be considered as part of your 2025 initiatives with a goal of “launching something”.
- If you are an Infor distributor, AI should be on your radar, and you should be reaching out to your Infor account team or executive to ask what you could be taking advantage of now. If you are not an Infor distributor and are wondering “can my ERP system support my next phase of growth”, you should give Infor a call.
