It’s tough to be a distributor in today’s market. Margins are getting squeezed from all sides, and it’s more complicated than ever to differentiate your business from the competition. However, by focusing on key metrics, you can optimize inventory, operations, and sales to improve your bottom line. This blog post will discuss the most critical metrics for distributors and how to use them to improve your business performance.
Importance of Using Metrics
Metrics permeate distribution in every area, from purchasing to warehouse operations and accounting to sales. However, according to Forrester’s Business Technographics Survey, just 22 percent of logistics and distribution professionals and 17 percent of supply chain professionals use or plan to use big data analytics.
Tracking and analyzing key metrics allows business to become:
- More efficient—Efficiency is vital for distributors to maintain a successful business. Establishing benchmarks for receiving, put-away, picking, and order fulfilment activities allow management to see which areas need improvement. It also informs them of any changes. This way, they can prevent any problems arising that negatively impact profits and customer satisfaction.
- More competitive—Metrics can monitor total customer value, loyalty, market share, and growth. By understanding your weaknesses and capitalizing on market opportunities, you can fortify your company’s position against low-cost competitors or direct-to-consumer manufacturers. In a highly competitive marketplace, having this knowledge can give you the edge you need to succeed.
- More aligned—If a company is to succeed, all departments must work together towards common goals. This alignment begins with developing corporate initiatives that filter down to the department level. Each department must then identify metrics that will contribute to the success of these initiatives. Only by working together in this way can a company hope to achieve its desired results. When distributors cannot align their departmental metrics with corporate initiatives, it creates a disconnect that can lead to missed opportunities and wasted resources.
- More profitable—Businesses need to sell more, reduce costs, or increase prices to increase profits. Metrics can help with this by providing insight into which areas are most efficient and where there is room for improvement. For example, suppose a company notices that it takes longer to fulfil orders than its competitors. In that case, it can use metrics to identify bottlenecks and make changes to improve its fulfilment time. Similarly, suppose a company wants to reduce costs. In that case, it can use metrics to track spending and identify areas to cut costs.
- Less risky—In any business, minimizing risk is a top priority. After all, even a tiny mistake can have costly consequences. That’s where KPIs come in. Companies can get an early warning sign of potential problems by monitoring key performance indicators. This situation allows them to take corrective action before the issue becomes a full-blown crisis.
- Better decision makers—Making decisions is a core part of any business. From determining where to invest capital to expanding into new markets, decisions need to be made based on data analytics. This is where metrics come in. Metrics provide essential information that leaders use to make informed decisions. For example, metrics can optimize safety stock levels and determine where to expand or launch new products. It would not be easy to make sound decisions that align with business goals without metrics.
There are also other benefits to using metrics, including improved employee satisfaction, reduced bad debt, increased inventory turns, lower carrying costs, and happy consumers.
Bottom line
Metrics are essential for distributors to optimize their inventory, operations, and sales. By understanding which metrics to track and how to use them, businesses can make better decisions, improve efficiency, and increase profits. To learn more about the importance of metrics, request a demo of our innovative Distribution Management Software.
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