On September 27, 2017, Barnes Dennig, Martin & Associates and WesBanco hosted Distribution guru, Bruce Merrifield, to give his insights on strategy, boosting profits, and measuring the intangibles at the 20th Annual Wholesale Distribution Seminar. Merrifield used his many years of experience advising Wholesalers and Distributors and writing books and articles for the National Association of Wholesale-distributors (NAW) to share “Four Topics and An Elephant” with those in attendance. The key takeaways from each of the topics covered during the presentation follows:
Topic #1: Customer profit analytics at a line-item level
Businesses cannot focus only on gross margin percentage; they must equally analyze the gross margin dollars provided by each product. Analyzing each product’s gross margin dollars and the profit/loss associated with each customer allows distributors to see which areas of the business are “winners” and which are “losers.” Winners are profitable SKUs and customers that generate more profit than the cost of all resources used to make the sale.
Topic #2: Working on the business instead of just in the business
Once analysis is done, decisions must be made to solve the issues with the losers so that the money can be reinvested in the winners. Freeing up these resources will then allow next-level service to be provided to the winners. To get a starting point for what next-level service might be for a specific business, Merrifield suggested asking customers: “What irritates you when working with distributors?”
Topic #3: “Acquisitions” for niche domination
Merrifield then spoke of many means of growth through acquisition beyond just acquiring another business:
- If a competitor has an MVP salesperson with their own economic franchise, consider bringing them into your company by paying a bonus labeled as a franchise fee.
- Become a One-Stop shop by stocking new products that current customers get from other vendors.
- Boost stock of most profitable SKUs to ensure that they are always available when a customer is in need.
- Invent next-level service by evaluating all skills, metrics, and capabilities of the business, employees, and technology.
Topic #4: Best, engaged, kept people
Since employees are often motivated by compensation, distributors must use the correct metrics to spur on innovation. Merrifield suggested using gross profit dollars per FTE to help align employee interests with those of the company. Paying good wages to employees allows the business to expect more from them and to create buy-in to the vision of the company, which ultimately flows back to the company as increased growth and profits. As employees go above the call of duty, employers should publicly recognize these efforts in order to encourage and motivate.
The Elephant: Amazon
Merrifield spent the last part of his talk discussing the elephant in the wholesale distribution industry: Amazon. He acknowledged his opinion that it is the most innovative company ever, and then spoke about how the businesses in the room could mitigate the impact of the e-commerce giant on their profits. With this, he discussed the potential erosion of product-pushing sales representatives, the importance of having an Amazon Channel Strategy, and the significance of building platforms and gaining a critical mass.
Those in attendance of the Wholesale Distribution Annual Seminar left with many ideas about how to grow profits through analytics, service improvement, innovation, and talent retention, as well as an awareness of the industry changes that Amazon is bringing. We encourage you to listen to Merrifield’s entire presentation so that you can hear all of his insights and ideas by visiting our website here.
If you have any questions about the material covered in this seminar, or how Barnes Dennig can help your distribution business become better positioned in the market, have a team member reach out to you by asking a question here.