Distributor margins are up. The operational problems underneath them are still there.
Inflation pushed distributor prices up and covered for what wasn't working underneath, manual order entry, bad ERP data, non-strategic SKUs. When the pricing cycle turns, and it always does, those problems show up on the P&L again, so the winners are using today's profits to fix operations before margins compress.
Inflation pushed prices high and covered what wasn’t working:
• Manual order entry
• Bad ERP data
• Non-strategic SKUs
High prices make a bad operation look profitable. When the pricing cycle turns, and it always does, the P&L reveals every problem you chose not to fix.
The distributors who win the next down cycle are using today’s profits to build digital infrastructure and start automating the repetitive work. This cycle will happen again.
If you don’t use this period to clean up your operations, you’ll be exposed when margins compress.
These problems aren’t going anywhere.