It is always a good practice to examine the cost structures and business model that have supported your company — especially when they’ve contributed to a record year, according to Tom Gale, MDM CEO, in Plan Now for Price Inflation.
Financial indicators point to the second quarter to be the peak for 2018, with moderating growth for the rest of the year. The end result will likely be a record year for many distributors. Still, concerns about maintaining both revenue and profit levels linger.
Gale says to ask yourself, "What does the definition of success in 2019 look like, especially if revenues are flat or 10 percent lower than this year?"
Start by reexamining your selling process, he said. Not only is it the largest internal cost for nearly every distributor but it is also typically the least managed.
Threats, both known and too new to fully quantify how they will affect your business, are increasingly making traditional distribution models less profitable and sustainable. "If you aren’t applying analytics to your pricing model, it’s a natural first step to begin strengthening your future profitability and have the ability to invest in future growth," said Gale.
Digital transformation is changing customer behavior and supplier relationships overall, according to last month's Baird-MDM distributor survey.
"There has never before been the same level of disruptive forces with the potential to take out parts of your business that historically have been rock solid," said Gale. "Of course, there have been prior cycles of disruption to wholesale disruption: integrated supply, the dot-com blip, recessions. Today, traditional competitors are getting stronger; non-traditional competitors typically don’t have the same cost structures to cover."
Read more in Plan Now for Price Inflation.
Using analytics to make better decisions, based on the data in your daily operations, is the first step to combating threats to traditional models. MDM will be presenting analytics best practices and case studies at the Analytics Summit 2018 conference in September.
