Generally, all seems well within the industrial distribution space when you look at the upward momentum in the S&P Industrial Sector Index and ISM’s Manufacturing Purchasing Managers Index. However, these positive indicators conceal pressures within the industry which, if left unchecked, could limit distributor profitability in the future.
In this Executive Insights, L.E.K addresses the “danger zones,” or challenges facing distributors if they do not differentiate, lack adequate scale, fail to build their ecommerce presence or acquiesce to manufacturers with broad downstream resources.
In order for distributors to remain competitive, L.E.K. recommends they steer clear of these “danger zones,” such as not having a clearly defined broadline or specialty value proposition, or lacking the scale to meet the complex supply chain needs of large national accounts. Those who respond or reposition themselves while taking the necessary steps to boost their capabilities in ecommerce, marketing and product support will gain competitive advantages and be well positioned to improve profitability.