Navigating the WatersProfitability management for wholesale distributors |
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The fragmented nature of the wholesale distribution industry creates a very competitive environment. Growing complexity in pricing, product costs and operations compounds the pressure. To grow shareholder value and win in the marketplace, organizations must price competitively, source and deliver the products at the right time and at the lowest possible cost. In many cases, due to growing transaction volumes and the complexities associated with pricing, costing and operations, wholesale distributors lose sight of the profitability of their customers, channels and products. Growing indirect expenses in proportion to direct expenses can set further hurdles on linking cost to serve to the costs associated with customer acquisition and retention.
Recent financial analysis of over 45 companies in the sector shows that the profitability of wholesale distributors is slipping. Compound Annual Growth Rate (CAGR) for sales averaged 9.18 percent across the organizations while net income averaged only 7.69 percent. Net income is increasing at a slower pace than sales, which can indicate weak control over Cost of Goods Sold (COGS) and Selling, General and Administrative Expense (SG&A).1
Where should wholesale distributors look to turn this trend around? How can they navigate the complexities of pricing, costing and operations and maintain a focus on profitability?
Deloitte’s Profitability Management Model presents a holistic approach to profitability that can help companies make smart strategic decisions, prioritize ongoing initiatives, and gain clarity from existing data. Our latest report explores how such an approach can help your organization account for product, service and customer profitability, and produce meaningful insights from sometimes impenetrable data.
Download the full report below.
1Deloitte Analysis, 2010
Navigating the waters
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