Creating a Digital Roadmap to Drive Profits

Published on October 7, 2019 by Steve Bailey in Advisory, Consulting, Wholesale / Distribution

On Thursday, August 26, Barnes Dennig hosted the annual Seminar for the Wholesale/Distribution Niche. We had a great turnout to hear Mike Marks present on Creating a Digital Roadmap to Drive Profits.

For those who have not had the opportunity to hear Mike present, he has had a long and distinguished career in the wholesale/distribution industry. In addition to being the managing partner of a successful distribution consulting firm, he is an author of 6 distribution books, NAW Institute Research Fellow, and adjunct faculty member at Purdue University.

Mike began his presentation showing that the distribution industry remains robust but is facing dramatic changes. At the heart of these changes is a shift in the Competition Model and the changes that technology present.

Changing Competition Model:

Mike presented three specific touchstones for distributors to address the changing competition model:

1. Make the Transition Costs as High as Possible: this means make it costly for your customer to switch to competitor. What do you do for them that would make it costly for them to switch to a competitor?
2. Implement Strategic Pricing: according to Mike, distributors who begin implementing strategic pricing increase their profits by an average of 2%
3. Deal with the Field Sales Fixation: field salesmen have historically wielded a lot of power over distributors. Are they being managed well? Are they being properly incentivized to fuel growth, and not just be an “order receiver”?

Managing Digital Disruption:

Digital investments are no longer just an opportunity for growth but are becoming increasingly important just to maintain your position. Mike said that a distributor today does not have to “be Star Wars” in terms of technology, but you should have a plan of attack:

1. Decide how much you are willing to invest over your next planning horizon – Mike suggests that distributors analyze their cash needs over the next 24 months and not violate a 30% Margin of Safety;
2. Determine whether to invest the resources externally or internally – determine whether you are ahead or behind your customers and competitors, and if you are current, invest internally to lower your recurring SG&A expense;
3. Put identified alternatives on a “heat map” of most valuable returns and invest the funds you identified in step 1;
4. Execute.

Mike offered a wealth of valuable information from years of study and experience, all presented with engaging humor and a true understanding of what distributors deal with in the real world on a daily basis. For more information on these topics or if you’d like to watch the playback recording of this event, contact us at Barnes Dennig here.

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