In David Gordon’s article “16 Distribution Industry Trends for 2016” he presents 16 steps to take for electrical distributors to achieve their goals and objectives – increase margins. All of these 16 points will directly positively impact your margins. After reading the article and doing a little investigation, I would like to thank David for the document and extend it to industrial distributors and manufacturers. Additionally, I would like to expand this a little further, focusing on something that is extremely important and totally misunderstood – doing more with less.

Do more with less!

Boy, if I had a nickel for every time I heard that! I know everyone is tired of hearing it.

Employees get scared out of their wits at the mention of this for 2 reasons:

• More work and longer hours… or layoff/firing!
• (For ownership it means) operational issues with potentially less margin as they get squeezed by both the manufacturer and the customer.

This does not have to be the case for either the employees or ownership. There is software available that allows you to pan for your profit rather than to fall into it!

Jonathan L.S. Byrnes wrote a book called Islands of Profits in a Sea of Red Ink that explains one major reason why distributors do not meet their profitability goals. The very basic theory explains that a small percentage of your products (approximately 20%) support the remainder of your business (the other 20% are sold at a loss while the balance is, more or less, sold at break-even). This is not a theory! This has been proven from multiple engagements at distributor sites large and small.

One of the main reasons responsible for this situation is that, without the proper Software Solution, you will not be able to identify the customers you believed were your most profitable – top line revenue does not equal profit. With the correct software solution, you can identify this situation by implementing (as an example) regular Cost to Serve sessions which will point out areas of loss and the reasons for it.

Sadly, this type of margin erosion is usually overshadowed by Operational Costs. I agree with David that operational costs must be addressed with a vengeance. However, there is a portion that will need to be addressed at a different level at the same time that you are addressing the operational costs – pricing, trade agreements, commissions, sales discounts and so much more.

Can you do more with less? Absolutely – if planned and executed with the proper tools and expectations based on the correct root issue.

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