Many wholesale distributors typically operate in a range of 3-5 percent net profitability. But given current economic conditions (rising energy costs, inflation), that might be enough. Some distributors are now quietly operating in the 10-15 percent net profitability range because they have changed the mindset and processes in the company to get there. When a downturn reduces profitability by two points, it has a significantly different impact on the higher profit-level company.
Last week I participated in a two-day conference focused on profit improvement and two distinct trends emerged from the presentations:
- A key differentiator in today’s wholesale distribution landscape is the ability to implement process improvement – in sales, marketing, pricing, profitability. Managing beyond traditional product-focused and sales-driven financial metrics is critical in post-recession markets.
- Cost-to-serve has largely been either ignored, rejected or too complex (i.e. activity-based costing), but is critical to understand at customer, product and vendor levels.
Industrial Market Information helps distributors improve their processes and target a higher profitability range through:
- Market share analysis
- Developing Market Demand Reports to evaluate growth into a new region.
- Assessing new product line expansion through Market Demand Reports.
- Running Account Potential Reports to identify new prospects
