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How to Overcome the Top Three Challenges in Distribution

February 9, 2015

Distributors, wholesalers and resellers are constantly challenged to maintain, let alone improve, the thin operating margins prevalent in their industries. Gains in operating profit have become harder to achieve through better cost management as these efforts reach the point of diminishing returns. Pricing improvement, however, remains a largely untapped source of potential profit lift for most distributors.

The distribution industry as a whole has historically recorded operating margins in the low, single‐digit percentages. With such a fine line separating profit and loss in this highly price‐competitive industry, not only must distributors constantly improve their operational efficiencies, but they must also move beyond their role as providers of product inventory by continually refining their value‐added service offerings. This paper describes three pricing challenges faced by many distributors, and presents examples of how leading companies have overcome these challenges with price optimization, achieving significant profit gains as a result. 

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