Wholesale distributor margins will always be dependent upon striking the right balance. Distributors are challenged with simultaneously satisfying the buy-sides (manufacturers and suppliers) and sell-sides (retailers, resellers and other customers) of their business, while also recalibrating volume and price. In order to sustain eroding margins or beat the odds and improve margins in this competitive and changing environment, a distributor must be agile.
On the manufacturing side, wholesale distributors (WSDs) work hard to meet and exceed upstream sales goals so they can earn performance incentives and negotiate better contract terms. Downstream, distributors coax and incite their sales channels to create pull-through demand for the manufacturers’ products. Balancing the earned income and slim-to-none markups against unreimbursed promotional program costs and operational expenses is the existential challenge facing WSDs.
One proven path to achieving a healthy balance is to accurately plan acquisition costs, sales costs and demand. Top-down planning has been historically sabotaged by the lack of real-time, data analytics-driven business intelligence—particularly where incentive programs might contribute. Outdated, fragmented systems and manual processes that are supported by paper or spreadsheets, with point solutions managed outside of their ERP systems, add to the chaotic data feed.
Many WSDs that grew through acquisitions are still working with inherited legacy IT systems that were never consolidated, so each region or product line may have its own proprietary system. Meaningful and accurate visibility is difficult in these situations. Forecasting future outcomes can be nearly impossible. ROI and profitability might be
guesstimates that are fueled equally by intuition and data.
For many years, WSDs have been trying to improve the accuracy and timeliness of cost recovery from claims—40% of a typical distributor’s profit. This is a shrinking minority of a WSD’s profitability when compared to the potential reward (or disaster) of performance incentives.
These are the challenges we will explore and resolve in this eBook.