Large consolidators are bringing a new level of operating discipline to distribution — and raising the performance bar for mid-market firms in the process. After acquiring Beacon Roofing Supply, QXO centered its operating model on six KPIs: inventory turns, EBITDA per site, order-to-cash velocity, on-time delivery, digital penetration and cost-to-serve. The message was clear: Scale alone is not enough. Buyers increasingly want proof that a distributor can grow without sacrificing service, tying up excess working capital or allowing margin leakage.

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Ducker Carlisle — a global consulting and M&A firm supporting clients with industry research, data, strategy and performance-improvement services — sees mid-market distributors trailing best-in-class benchmarks. Those gaps include inventory turns of 4-6x annually versus 8-12x, on-time delivery of 85%-90% vs. 95-98% and on-time in-full performance of 80-85% versus 95% or better.

MDM spoke with Amy Marzonie, Managing Principal of Ducker Carlisle’s Supply Chain Practice, and Chris Fisher, Managing Principal and Global Construction Lead, about how acquirers use those metrics, where the largest gaps remain and why operational gains must be paired with a stronger commercial model.

See our conversation below, edited for brevity and clarity:

MDM: How are strategic acquirers and private equity-backed platforms using operational KPIs today?

Marzonie and Fisher, Ducker Carlisle: Buyers are using operational KPIs to determine whether a distributor is truly scalable.

It is no longer enough to show revenue and EBITDA. Buyers want to know whether the business can continue growing without creating inventory problems, service issues, higher costs or margin leakage.

They examine the level of operating discipline already in place, how KPIs are integrated into overall business performance management and how the company compares with direct and indirect competitors.

There remains a debate in distribution over the relative importance of EBITDA versus return on net assets. Investors, however, are increasingly looking for efficiency and productivity measures tied to the amount of inventory being managed.

Outside investment is bringing more discipline and focus to distribution KPIs and tighter business management. Higher valuations are paid to distribution businesses that can demonstrate rigor and consistency in how they measure and manage performance.

MDM: What does QXO’s management reset and focus on six KPIs signal?

Marzonie and Fisher: It signals that QXO is focused on improving the business quickly and in a highly measurable way.

Rather than talking generally about synergies or broad value creation, QXO appears to be identifying the operating metrics it considers most important, the areas where it expects improvement and how it will determine whether the business is getting better.

The six-KPI focus shows that consolidators are not buying distributors merely for their size. They are looking for businesses they can run more efficiently, scale more effectively and improve through stronger operating discipline.

It also indicates that QXO — and private equity investors before it — sees building products distribution as a market where inefficiency, limited organization or volatility can be systematically addressed.

This is a playbook QXO’s leadership team has used successfully before: Focus on what is important, measure what is meaningful and use those insights to improve the business and create value.

MDM: Which KPIs reveal the biggest performance gaps?

Marzonie and Fisher: The most revealing KPIs typically include:

• Inventory turns, which show whether a company is managing inventory effectively or tying up too much cash in the wrong products.
• On-time in-full and on-time delivery, which show whether the company can reliably deliver what customers ordered when they expected it.
• Cost-to-serve, which shows whether the company understands which customers, orders, routes and services are actually profitable.

These metrics are powerful because they quickly indicate whether a distributor is well-run or whether it has hidden problems involving planning, service, cost and profitability.

Our analysis found that inventory turns among mid-market distributors average 4-6x annually, compared with a best-in-class benchmark of 8-12x. On-time delivery averages 85-90%, compared with 95-98% among best-in-class operators, while OTIF performance averages 80-85% versus a target of at least 95%.

MDM: What does it mean to build a “commercial model on top of operational improvements?”

Marzonie and Fisher: It means operational improvements are necessary, but they are not sufficient on their own.

A distributor can improve inventory management, delivery performance and branch productivity but still leave money on the table if it does not also improve how it sells, prices and serves customers.

For example, the company may serve all customers in essentially the same way even though some are significantly more profitable than others. It may also have inconsistent pricing, weak cross-selling or a limited understanding of which customers warrant the greatest investment.

While KPI management and operational improvement are internally focused, the commercial model is externally focused and puts the customer at the center. It encompasses the people, methods and processes used to engage, sell to and serve customers, along with pricing strategy, execution and the mix of products and value-added services.

Improving operating KPIs is often the easiest and quickest fix for a lower-performing distributor. The more significant challenge is expanding customer share of wallet, winning business from competitors, rationalizing less-profitable accounts and scaling the sales organization and commercial order book efficiently.

The market is already changing. Home Depot is adding thousands of sales representatives, while QXO is reshaping customer-facing sales teams. Commercial talent and sales processes are in the midst of a broader transition.

The winning formula will likely be an effective sales-to-operations model that combines digital capabilities, strong customer relationships and expertise with better operating performance.

Fixing operations helps protect profitability. Improving the commercial model helps the business grow.

MDM: What should mid-market distributors prioritize during the next 12-24 months?

Marzonie and Fisher: Mid-market distributors should focus first on getting the fundamentals right.

That means establishing clear visibility into performance by branch, customer segment and product category. Management should know which locations are performing well, which customers are profitable, where inventory is moving and where service or cost problems are emerging.

The largest priorities should include:

1. Better inventory management
2. More reliable delivery performance
3. Clearer cost-to-serve data
4. A stronger commercial model built around pricing, customer segmentation and growth

For owners who may want to sell, these improvements make the business more attractive to buyers. For owners who plan to remain independent, they provide a stronger foundation for competing against large consolidators before those performance benchmarks become the market’s standard expectations.

Distributors that already have solid execution and perform well against these KPIs should shift management’s attention toward growth. That may include increasing share of customer spend, winning new accounts from competitors, improving customer mix and expanding value-added products and services.

Private-label, white-label and owned-brand offerings may also help differentiate the business and create additional value.

MDM Analysis

The central takeaway is that operational KPIs are becoming more than internal management tools — they increasingly shape competitive position, scalability and business valuation. Distributors should not wait for a sale process or competitive threat to expose weaknesses in inventory turns, delivery reliability, cost-to-serve or branch performance.

But better metrics alone won’t produce durable growth. Executives must connect operational discipline to pricing, customer segmentation, sales productivity and share-of-wallet expansion. A distributor that delivers reliably but cannot identify its most profitable customers, price consistently or cross-sell effectively is improving only half of the business.

For mid-market firms, the mandate is twofold: close measurable operating gaps and build a commercial model that converts stronger execution into deeper customer relationships, profitable growth and greater strategic value.