5 Surprising Metrics to Measure in Your Distribution Business

Submitted on: Thu, 09.11.2014 07:11pm - Annie Eissler |

If you are like many wholesale distributors today, the terms “data”, “metrics”, “KPIs”, “business intelligence”, or maybe even “big data”, are buzzing around in your brain. Your team is likely doing some level of reporting and analytics on your company’s operational performance and opportunities. But is it enough…and are you focused on areas that can have a quantifiable impact on your business?

I was thinking about this recently while reviewing a Business Intelligence ROI Guide that MITS put together after surveying their customer base. While the purpose of the survey was to identify how MITS customers measured their return on investment in business intelligence, it seemed to me that the metrics identified are important ones for any distributor to consider. And, I thought, some of these metrics just might come as a surprise and require some work on your part to answer.

Here are 5 of these metrics, including what we learned about MITS Customer Averages for each, so you have something to compare your own results against.

1. If your sales reps had access to Customer Scorecards before visiting their accounts, do you know by what percentage your overall sales could increase?

[MITS Customer Average = 5.11% increase in annual sales]

Customer Scorecards are useful for understanding buying trends and pinpointing opportunities for increased sales. On the other hand, knowing what the customer has slowed or stopped buying allows your salesperson to potentially recover lost sales. Having a complete picture of a customer—all the way down to the invoice level—enables sales to truly maximize their selling opportunities.

2.    If you had better visibility into customer profit margins and could better manage customer pricing, by how much could you increase your overall gross profit margin percent?

[MITS Customer Average = 1.60% increase in overall gross profit margin]

Being able to quickly see a margin breakdown for individual customers, products, product lines, warehouses, and other key dimensions allows your salesforce to focus on retaining your most profitable customers and product lines, and to take corrective action for specific customers or product lines that are dragging down profitability.

3.    If you could quickly identify all customers that are buying product A and product B but not buying companion product C, by how much could you increase your sales?

[MITS Customer Average = 6.88% increase in annual sales]

Many inventory items are complementary to one another. An example would be an air conditioner, installation supplies, and refrigerant. By reviewing a list of customers that bought the first two items, you have the opportunity to increase sales of refrigerant, a complementary product that you might not have been selling a lot of.

4.    If you were alerted every time someone ordered a product that wasn’t in sync with your inventory, sales, or branch stocking levels, how much less would you purchase each year?

[MITS Customer Average = 4.60% annual purchasing savings]

Keeping the right stocking levels and eliminating items that don’t sell can have a significant impact on your profit margin and help you run a leaner, more efficient company. Just remember that, a reduced investment in inventory can turn from a positive to a negative when you are turning customers away because stock is insufficient to meet customer demand.

5.    If you had early identification of products/customers with declining sales, how much could you improve annual sales?

[MITS Customer Average = 5.25% increase in annual sales]

With a list in hand of customers who are buying less, you can analyze why and develop strategies to mitigate or even reverse the decline—such as better pricing terms for increased volume or resolving product issues that contributed to the decline.

Take a few minutes to think about these metrics. How much time and effort would it take for you to evaluate them for your business? What resources (people and technology) and processes do you have in place to regularly track and manage these metrics? What impact could they have on the health of your business?

To learn about 8 more [surprising] metrics, download the MITS Business Intelligence ROI Guide.