2013 distribution trends

2013 Distribution TrendsMicrosoft Dynamics® AX Industry Summit

February 12, 2013

© 2013 Evergreen Consulting. LLC

• NAW Institute Fellow

• Author of eight books about W-D

• Distribution CEO

• Business school faculty

• International firm CPA

Brent R. GroverEvergreen Consulting, LLC

29525 Chagrin Boulevard, Suite 214Cleveland, OH 44122

brent@ evergreen-consulting.com(216) 360-4600 ext.101

• Distribution TRENDS

• High level overview of DISTRIBUTION METRICS

• Talking & selling to DISTRIBUTION DECISION MAKERS

• Distributor IT INVESTMENT OUTLOOK

2013: The Year to Invest • Housing starts rebounding

• Return of manufacturing

• A good year in 2013, a mild pause in early 2014 followed by several nice years

•Distributors more interested in investing in productivity than in adding staff

Housing starts, vehicle production, energy

• 2013 housing starts projected at 980K units

• Domestic vehicle production SAAR 15.5M

• Natural gas exploration

• Individual microeconomics depend on trade line, customer segment and geographic market

Washington uncertainty: resolved

• Health care taxes

• Income taxes

• Estate taxes

• Low interest rates

• Plenty of cash available to qualified borrowers

Work force demographics

• Median age increase from low 40s to low 50s

• Baby boomers, Gen X and Millennials

• Aging distributor sales force

• Changing role of distributor sales professionals

• Multichannel marketing

• Need to keep up with technology

Can’t just “move boxes”

•VMI, consignment, JIT, other inventory programs

•3PL, 4PL

•Value-added services required

Vending machines• "Candy machines" no more

• Placement doubled in 12 months

• Plan to place 30,000 in 2013 (goal was 10,000 in 2012)

• 25% of sales in fourth quarter

• Safety supplies, cutting tools, fasteners

Co-opetition•Distributors of non-

competing products share locations

•Distributors of competing products in different markets share inventory

•Distributors share customers

•Distributors share buying power

amazonsupply.com

• 500,000 stock products in 14 product categories

• B2C buying experience for B2C: one click, Amazon Prime®

• Free shipping, $50 minimum, 365 day return privilege, phone support, charge accounts

• Experimenting with same-day delivery in some metro areas

Strategic Pricing

•Pricing autonomy without market pricing information

• Identify and fix outliers

•Promote consistent pricing to resistance

•200 basis points adds 8-10 points to ROI

Customer Profitability Analysis & Cost to Serve

• Measure operating profit of transactions, customers and groups of customers

• Track cost to serve differential for customers

• Holistic balance of order size, margin, cost to serve

© 2013 Evergreen Consulting. LLC 16

TECHNOLOGY

Strategic profit model for distr ibutors

17© 2013 Evergreen Consulting. LLC

Strategic profit modelfor distributors

18

NI

Equity

Sales

Sales Assets

Assets NI

EquityX X =

Return on Sales

Asset Turnover

Leverage Return on Investment

Strategic profit modelfor distr ibutors

19

$300,000

$1.0M

$10M

$10M $2.5M

$2.5M $300,000

$1.0MX X =

3.0% 4.0 X 2.5:1 30%


Hidden Risk: ERP Upgrades


Half are more than one version behind.


Most do not know if their costly mods are included in the current releases

available from other vendors.

Technology goals in the 2013 distributor strategic plan

• E-commerce: critical mass• 85% plan to upgrade their websites

• CRM: coming of age• Mobile: game-changer

• 1/3 of Grainger visitors on mobile often reserve orders for will call (vs. 2% on grainger.com)

• Analytics: center stage • Strategic use of sales resources – reality gap

Analytics in action

• Pricing optimization: strategic pricing• Eliminating pricing outliers• Establishing pricing consistency• Holding sales reps accountable

• Customer profitability / cost to serve• Protecting high profit customers• Building order size; reducing costs to serve• Focusing on profitable customers

Transaction profitabil i ty: Three Legged Stool

Margin

Order size

Cost to serve



Peak earnings potential

Actual earnings -

net of losers

30

Small Losers

Small Winners

BigWinners

BigLosers

• High invoice profit• Low $ volume• Penetrate• Build volume

• High invoice profit• High $ volume• Protect

• Low invoice profit• Low $ volume

• Build % & order size• Willing to let go

• Low invoice profit• High $ volume• Reduce CTS• Willing to keep, if strategic


“We wrote the books on distribution.”™

Brent R. Grover

Evergreen Consulting, LLC29525 Chagrin Boulevard, Suite 214

Cleveland, OH 44122

(216) 360-4600

[email protected]


mailto:[email protected]