Case Studies

Inventory sales management

In the Hot Box
Distribution businesses are often forced by manufactures to expand service levels and territorial coverage. At the same time, competitors are fighting for products and territories. While the sales increase is always intriguing, the cost.. Read more

 

 

Fundamentals of a Distribution Business

Distribution businesses need to focus on critical levers that drive profitability and growth. Leveraging existing infrastructure is important and fraught with distractions that take business owners away from what truly adds value.

Today, more than ever, business owners can’t afford to overlook the fundamentals.

Customer Segmentation:

Many companies look at customer profitability and have a pretty good idea of who their largest customers are, which products they buy and why. But few companies take the time to really understand the dynamics of the entire market they play in. Knowing the characteristics of each customer segment, market size, and buyer characteristics is important when deploying valuable and limited resources against those segments. Without increasing resources, most companies can increase profitability by developing customer specific strategies that are aligned with customer and product segments.

Inventory Management:

Sales people can never have enough inventory, operations wants to limit the amount of inventory they handle and finance seeks a faster turnover. Inventory management is part science, part art and can be more one than the other depending on the particular SKU you are considering. Pricing strategies, velocity of product movement, “application complete” kits all need to be considered and balanced with satisfactory return on assets. A well developed inventory strategy leads to optimal asset management; reduction in capital invested, increased cash flows and better returns.

Margin Enhancement:

Increasing margins is not just about raising price or reducing costs. Taking a unique look at product specific strategies, competitive offerings and long term share objectives can help set the guidelines for where you can enhance your margin without upsetting your customers or making your sales staff uneasy. Getting the most out of your existing offering will often come out of truly understanding where you make money and what specific, actionable changes you can make to capture value for what you provide. Customers typically say price is really what matters, but often it doesn’t even rank in their top three decision criteria when you really press them on it. What would your customers say are their top three purchasing motivators?

Sales Force Productivity:

Sales people are a fickle bunch. Knowing how to motivate a diverse group of people can seem like herding cats. What works today may not work tomorrow. As a result, it is important to continually evaluate and align territories, sales and gross margin under management, targets and time frames. Compensation systems must be designed to provide the proper incentives to accomplish your goals. Setting expectations, tracking performance, and monitoring progress are critical components in getting the most out of your sales force.

Measuring Success:

Clearly, growth in revenues and profits are important, but monitoring the 3-5 key drivers of success over time will help you to ensure that success will continue into the future. Having a well defined strategy and aligning everyone’s goals from top to bottom and establishing concrete targets will put you ahead of your competition.

Genoa Business Advisors:

Commitment to understanding these business fundamentals is core to any company’s success. Genoa Business Advisors has been helping businesses achieve results for over a decade. With experience as business owners and leaders in both private and public companies, Genoa can provide value quickly and assist management, boards and owners to be on the track to increased profitability.