Improving Distributor Bottom Line in 2014

2013 Electrical Distributor Performance
Here we are in early 2014 and you’re looking at your company’s performance wondering how you did.

Many will tell us, and tell their close “friends”, that “we only did 2-3%”…which makes everyone feel good because the “that is the industry average.”  But is average what you wanted? Remember, average means that there are many above you (and it is only a calculation generated by PAR).

But in the back of your mind you wonder how some companies continue to grow and post results like 7%, 8%, 9% and in a couple of cases 12-15%. So you check around with some of your buddies and have those hushed conversations about what they are doing with their companies in the areas of:

1. Inventory
2. Operations
3. Collections & Credit Management
4. Marketing to their customers
5. Sales management and sales compensation
6. Customer service
7. and the list goes on.

So, let’s think about inventory… (and yes, some of these are things distributors do that impact their bottom line).

Inventory:
In 2013 you may have decreased the overall size of your inventory by purging C and definitely D items. You made a conscious decision to buy those C/D items out of other distributors where you could or, as a last resort, you called the local rep or manufacturer.  You may have even consciously increased your purchases from “manufacturers” like All Current, WireXpress or Omni Cable and others that are master distributors sometimes supported by manufacturers.

Perhaps you direct your purchasing group to make sure they meet manufacturer minimums or to make free freight.  You just increased the dollar size and item count in your inventory. It’s just money, but it hits your balance sheet

Lighting projects/ High volume contractors: 
With these types of projects and customers you turned a lot of items, many of which are NON-Stock item. The non-stock item probably got crammed into the order with NO product ID and no way to reference it in a product category. In other words, from a computer report perspective, it was junk. To further compound the problem, your people may have called for a price from your friendly competitor, but the friendly competitor price checker or computer increased the price because it didn’t meet that company’s profit levels (for many, the old days of a 10% markup to competitors is now gone!) You might say, well it’s no big deal. But I say it is a bigger deal than you might realize.

Well if you have $1M dollars in non stock sales there is a very good chance that you under priced it by at least 20-25%. The bigger the company the larger the opportunity that you are leaving money on the table.

Some quick solutions:

1. Most ERP software have math built into them that helps you track what you sell, when to reorder and so on. You need to run some reports and start looking at stock-outs.  While your at it look at the over stock.
   • If your not using the math in your ERP, call your company and get them to teach you.
2. Each distributor has anywhere from 2 – 6 large dollar manufacturers that they stock that they do business with. Either call Datalliance or ask your manufacturer if they use Datalliance. The service is free to a distributor and it does NOT force you to order product. Their suggestions can save you money. So if you care about your company’s performance give them a call.
3. Run a report for all NON-stock sales for a year and if it totals more that $1M annually then you need to call us. We know it’s just money, but isn’t it better in your pocket?