Delivering for Best-in-Class Wholesaler-Distributors
September 17, 2020  |  ByBrent Johnstone, Analytics and Technology Expert Focused on Wholesale Distribution

During and after extreme disruption, such as that caused by the COVID-19 pandemic, the thought of doing a performance assessment can be overwhelming. However, taking a microscope to performance in a time of crisis can tell us more about our core underlying capabilities than in a time of stability.

Disruptions magnify strengths and weaknesses. Challenges multiply, required response times shrink, resources are constrained, data becomes suspect, and teams must draw heavily on prior training and processes to make decisions. If your company hasn’t adopted best practices before going into a crisis, it will show in your performance. Doing an assessment now, mid-crisis, is one of the most valuable things you can do to shore up core capabilities for the “new normal.”

We’ve identified key questions for each of the 7 Ss identified in Optimizing Distributor Profitability: Best Practices to a Stronger Bottom Line to assess your performance through the pandemic and pave your way forward:

1. SOURCE: Selecting, monitoring and managing suppliers

Response time in the face of shortages has been the barometer of effective supplier management in the pandemic. If you had a benchmarking system in place, like supplier stratification, you were likely able to communicate with suppliers more effectively, anticipate disruptions and plan for supply shortages.

  • Were you able to prioritize communications with your most strategic vendors and get ahead of potential disruption?
  • Could you track vendor performance in real time as opposed to relying on verbal assurances?
  • Were you able to tap substitute suppliers quickly as shortages occurred?
  • Did you prep your sales force to promote substitute products from core vendors amid supply disruption?

2. STOCK: Inventory forecasting and management

How well your inventory management system handled fluctuations in demand, and how you adapted it to meet new and changing conditions, tells you about your ability to adjust stock quickly and effectively.

  • Could you monitor weekly demand patterns on a granular level for vendors, product categories, customer segments, customers and items to override and revise system-generated forecasts?
  • Do updated inventory turns and working capital needs highlight the need to adjust safety stock levels and reorder points within your systems?
  • Are current stock/non-stock policies and procedures out of sync with new demand patterns and cash needs? Are you prepared to make adjustments?

3. STORE: Optimizing internal warehouse management

Sudden changes in demand and new, immediate health safety restrictions had implications for warehouse management. Those who couldn’t make rapid adjustments faced fulfillment hurdles.

  • How well did you manage and optimize warehouse shifts considering changes in demand and health-impacted resource availability? Does this signal a need for formally reevaluating shifts?
  • How did changes in demand impact product placement and accessibility? Does this make you rethink your primary and overflow storage criteria?

4. SELL: Sales, customer management, pricing and marketing

Sales have been at the forefront of the pandemic’s challenges. The use of benchmarking and analytics were key to staying balanced and proactive, but many distributors weren’t prepared.

  • Did you use a benchmarking/tiering system, like customer stratification, to prioritize proactive conversations with your core customers, allocate limited supply, and justify those allocations?
  • Did you have centralized, predefined procedures for pricing or did excessive discounting at the sales level expose a need to update pricing policies, rules and constraints?
  • Could salespeople monitor customer orders against historical purchasing patterns to prevent hoarding?
  • Did you creatively adjust compensation components and/or targets to maintain sales force morale?

5. SHIP: Transportation and shipping management

Shipping was greatly impacted across industries throughout the pandemic, and the effects continue today. Many distributors faced challenges in their ability to manage this in real time.

  • Did you use analytics to measure the capacity and profitability of your shipping routes versus expected demand changes? Could you optimize on the fly?
  • Can you use your data to analyze potential route consolidation and/or outsourcing post-pandemic?

6. SUPPLY CHAIN PLANNING: Warehouse facility deployment and management

Performance data can greatly inform your warehouse and supply chain strategy moving forward.

  • Can you analyze performance data across warehouse locations and evaluate which new demand patterns are likely to continue?
  • Do regional demand patterns highlight a need to consolidate, expand or relocate?

7. SUPPORT SERVICES: IT, finance and HR

Agility and speed were key in transitioning support services during the pandemic. Inflexible and slow transitions cost distributors time and introduced risk.

  • Did you use data and analytics to confirm or refute customers’ verbal assurances concerning credit risk?
  • Did you struggle with quick decision-making because you lacked robust analytics, reporting tools and alerting capabilities?
  • Was your IT infrastructure nimble enough to rapidly transition your teams to work and communicate virtually as needed?

During a crisis, companies often have no choice but to fall into reactive mode. Once key fires are out, however, an assessment is a great way to once again become proactive. Use the core questions above as a starting point to analyze what worked and what didn’t. When you spot a shortcoming, don’t get discouraged. Rather, embrace it as an opportunity. Dive deeper to understand possible root causes, and if you do nothing else, consider the very first step you might take to begin addressing that challenge.

Optimizing Distributor Profitability: Best Practices to a Stronger Bottom Line

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Brent Johnstone, Analytics and Technology Expert Focused on Wholesale Distribution

Brent Johnstone, Analytics and Technology Expert Focused on Wholesale Distribution

Brent Johnstone is co-founder of ActVantage with an extensive background in putting analytics and technology into practice as an analytics-focused private equity principal, as CEO of a pet supply distributor, and after serving several prominent roles at large and small analytics-oriented software companies. Before ActVantage, he founded Granite Analytics and developed GraniteEdge, a distributor-focused, customer-facing suite of tools designed to reinvent engagement between distributors and their customers.
Brent Johnstone, Analytics and Technology Expert Focused on Wholesale Distribution

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