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Armed with reams of knowledge, dedicated faculty, industry-wide connections with distributors, enthusiastic students and critical partnerships with trade associations and organizations – and service providers like Mincron Software – Texas A&M hosted its first consortium in 2006, called Pricing Optimization.
“Distributors can realize an incredible impact from pricing,” said Barry Lawrence, program coordinator and professor of the university’s Industrial Distribution Program. “When we added this to the inventory of best practices that we were encouraging, it became clear that distributors who adapted best practices to their needs could make a lot of money – at least in the short-term until too many others copied it.”
That was a light bulb moment for the program, and for distribution.
“We started really focusing on profitability, and what the potential was for distributors,” Lawrence said. “Realistically, distributors are capable of implementing three to four best practices over a three- to four-year period. So we wanted to determine which best practices had the most impact, so that distributors would be able to more wisely choose what they invested in their time and resources in. The failure rate for best practice implementation is incredible, even though many companies shared consultants. We learned that it all came down to ROI. If you could determine the ROI on a best practice, you could demonstrate and provide a profitability roadmap that would drive implementation.”
The findings of that first consortium led to questions that drove a second one. And that pattern has continued on, with the findings generated during one consortium leading to more questions and target areas to study.
Along the way, as word of these consortiums spread, A&M joined forces with the National Association of Wholesaler-Distributors in a partnership under which NAW members would support the consortium and the NAW Institute would publish books on the findings.
Following is a look inside the consortiums that have been held to this point:
Optimizing Distributor Profitability essentially created a framework to describe and document best practices.
It linked practices into individual business processes that could actually be measured and linked to return on investment.
“Once you measure the business process, it gives you something that you can connect to the income statement and balance sheet,” Lawrence noted. “At that point, ROI is just a few steps away. We found that the average distributor could double their earnings and triple their net return on assets by implementing the top three or four best practices.”
Out of the seven best practices identified and studied, sales, once a distributor’s primary focus, was the most worrisome.
That finding led to a third consortium on Sales & Marketing.
“We were concerned that there wasn’t a lot of information on the best ways for distributors to run their sales and marketing departments,” Lawrence explained.
The next one was on Growth, which proved to be hugely successful.
The topic encompassed everything studied to date, plus business development. Innovative growth has become critical to the future of distributors.
Optimizing Channel Compensation came next, which focused on the manufacturer-distributor relationship.
The consortium sought to link the supplier to the competitive efforts of the distributor.
It was followed by Optimizing Human Capital Development, which addressed the critically important human resources issue.
The new market dynamics and millennial generation will reshape distributor models and the consortium was able to address those changes and many other fundamental human capital best practices.
Next came Optimizing Value Added Services.
It examined how the foregoing trends were converging to reinvent distributors’ service offerings. The consortium defined services and how to monetize them.
The current consortium is called Optimizing Business Analytics.
Its premise is to recognize that a distributor’s ability to capitalize on their resources will define their future success.
“We believe that distributors are being reinvented,” Lawrence noted. “The open question is what type of company will they become? This consortium is trying to shed light on how analytics processes will support and alter the form of future distributor models.”
Mincron Software is participating as one of A&M’s partners in this important consortium.
As Lawrence summarized: “While consultants can add to the body of knowledge, much of the information they gather is proprietary. But with consortiums like the ones we host, our findings are published. That means they can be used for the future of our students, our partners and all of distribution. The organizations that support the consortium benefit by developing a deeper and more focused understanding of the body of knowledge. Being a part of the process that is coming up with knowledge for the future is a whole lot more important than studying it later.”
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