Delivering for Best-in-Class Wholesaler-Distributors
November 12, 2020  |  BySenthil Gunasekaran, Co-author of Seven Enduring NAW Institute Best Sellers

If you’re considering analytics as a means to drive profitable growth in 2021, you’re on the right track. The distribution industry is facing an uncertain market, digital acceleration and a changed landscape. Analytics can help distributors make data-driven decisions to stay on course and be successful.

Yet many still hesitate to invest in analytics. Or they aren’t putting the full force of their current analytics into play.

We’ve worked with distributors for decades, and they have the same concerns about analytics today as they did before the COVID-19 pandemic. Some are stuck operating in a mindset of, “If it isn’t broken, don’t fix it.” Others think analytics are too expensive or their data isn’t sufficient to merit the investment.

However, it’s clear to us that distributors need analytics capabilities to grow and be competitive in the coming years. And even the most basic data is enough to make noticeable changes. If you subscribe to any of the following myths about analytics, let us debunk them for you so they won’t hold you back in 2021.

Myth 1: I’m successful so I don’t need analytics.

Changing your approach may seem unnecessary — and risky — if you’re doing “fine” and fared well through the pandemic. You may see the benefits of analytics but fear that introducing a new practice to a smooth operation will create new issues and lead to regret.

This is a common concern among distributors. But accelerated digital adoption and a volatile market have changed what it means to be successful and competitive in distribution. Agility and responsiveness are essential, and your competitors are investing accordingly.

Even if your financial KPIs reflect impeccable performance today, that is no indication of your future performance. Analytics can help you keep a pulse on changes that might disrupt your business, understand how your customer base may have shifted, identify new opportunities and more.

Plus, if your operations are running smoothly right now, there’s no better time to introduce a new tool. A chemical distributor (with 12% revenue growth amidst COVID-19) used the past two quarters to implement customer and pricing analytics.

Myth 2: Analytics capabilities are too expensive.

Budget concerns are always top of mind for distributors when it comes to analytics. But for the many that experienced constraints through the pandemic, analytics aren’t the highest-priority expenditure up for consideration.

If you’re thinking you can’t afford analytics right now, you’re probably viewing it as a capital expenditure. We encourage you to view it differently. This is an optimization tool that can help you grow your business and improve your operations by enhancing customer profitability and identifying opportunities. It shouldn’t follow the same approval process as a capital expense. Such a process will hold you back from making immediate gains.

If you’re worried about budget, take a “test and learn” approach. Try a subscription model or implement analytics in small increments. As you improve profitability, you can re-invest those profits in growing your analytics capabilities — and your business. A fluid power distributor deployed inventory analytics through a quarterly subscription, which resulted in enough working capital savings to not only cover the cost of that subscription but also to reinvest in new pricing analytics.

Myth 3: Our data isn’t good enough.

We can say with certainty that you can make substantial moves with what you might consider “crumbs” of data. The most basic transaction data can reveal actionable information about your customers so you can start improving profitability immediately. We helped an HVAC distributor use basic sales transactional data to identify marginal customers and implement a minimum-order policy along with pricing recommendations.

You already have this data. It’s just a matter of applying analytics and taking action. You can gradually develop more sophisticated analytics capabilities along the way, all while making high-impact improvements to your business today.

Debunking the myths that are holding you back is just the first step. Once you’ve decided to pursue analytics, it’s important to put your weight behind the strategy. Too many distributors invest in analytics and let it fall flat, allocating scarce resources and expecting major results. Actualize your analytics investment by treating it like any core function of your business: Give it time and resources. By doing so, you can make substantial, profitable changes that lead to growth and relevance in 2021.

 

 

Driving Profitable Growth: A Distributor’s Playbook to Generate-Manage-Sustain Competitive Advantage

 

 

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Senthil Gunasekaran, Co-author of Seven Enduring NAW Institute Best Sellers

Senthil Gunasekaran, Co-author of Seven Enduring NAW Institute Best Sellers

Senthil Gunasekaran is co-founder of ActVantage which helps distributors drive profitable growth through analytics and talent development. He has more than 18 years of experience helping hundreds of distributors and manufacturers, while co-authoring seven books for the National Association of Wholesaler-Distributors. He also delivers executive education and speaks at industry forums. Prior to ActVantage, he led research and industry projects at Texas A&M’s Industrial Distribution program.

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