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Home » Commentary: The Pathway to Profitability in 2010

Commentary: The Pathway to Profitability in 2010

By    Thomas P.  Gale 
December 10, 2009
Where previous recoveries were marked by a "bounce," this one is forecast to be flat. Topline growth alone won't hide weaknesses this time. But there are many well-run distribution companies that positioned for profitability even before the downturn. Today they have healthy balance sheets. They have more flexibility (and cash) to respond to market opportunities and pick up share this year. An MDM survey in November examines what distributors and their suppliers are doing to improve profitability as we enter this slow-growth recovery over the next 12 months.
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Where previous recoveries were marked by a "bounce," this one is forecast to be flat. Topline growth alone won't hide weaknesses this time.

But there are many well-run distribution companies that positioned for profitability even before the downturn. Today they have healthy balance sheets. They have more flexibility (and cash) to respond to market opportunities and pick up share this year.

An MDM survey in November examines what distributors and their suppliers are doing to improve profitability as we enter this slow-growth recovery over the next 12 months. The survey is part of a project we undertook with Dr. William R. McCleave and will be featured in a free Webcast sponsored by Activant on Dec. 9 to explore how distributors and their suppliers are positioning for the current rebound. (See end of this article for information on the Webcast.)

The survey focused on four areas where companies can focus efforts in this environment to improve profitability and strengthen their market position. These are:

  • Sales and marketing – for topline growth
  • Purchasing – for reduced COGS
  • Internal process efficiencies – for expense control, and
  • External relationships – for other income production or cost control
There were some predictable findings in the survey – optimism levels in November are rising. A large percentage of distributors are focused on optimizing their inventory, streamlining slow-moving inventory and improving banking relationships. But there were a few surprises, as well.

Many distributors are looking at expanded product offerings, according to our survey. Some are exploring competitive alternatives to their traditional supplier-distributor relationships. This year has been disruptive. It has forced nearly every company to examine its supply relationships. Some are getting out of their comfort zones and making changes.

This market instability creates opportunities to gain market share. Distributors and their suppliers who use metrics and are disciplined enough to stay focused on marketing, sales and the other profitability opportunities outlined above will win over less-focused rivals chasing every topline revenue opportunity. At the risk of sounding like a bad fortune cookie - for 2010, small gains will define success.

To view the free Dec. 9 Webcast, Ready for the Rebound? Position Now to Take Market Share, go to www.mdm.com/rebound.

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