Why Distribution KPIs Matter: A Sales-Driven Company’s Story
Everyone seems to say, “We’re a sales-driven company.” Have you ever wondered what that phrase really means?
It often means a company is willing to do whatever it takes to grow its brands within its market. This is initially a good strategy. It’s easy to measure increased revenue and see how it’s adding to the bottom line. You don’t even need sophisticated distribution KPIs to see that.
But what happens over time? At some point, a steep growth curve will begin to flatten out. To add to the bottom line, you’ll need to make improvements in other areas, such as efficiency.
We recently had the opportunity to work with a beer distributor that found itself in that exact situation. This company wanted to streamline and optimize its go-to-market process for distribution and sales.
The company’s existing process had evolved over a decade and had ended up highly inefficient. The company had hired managers who recognized the issues but didn’t have the time, tools, or knowledge to completely break down the process and start over from scratch.
To be fair, a total process reboot can be risky to managers’ careers because missteps cost large amounts of money. Hiring a consultant insulates managers from direct risk by mitigating the decision-making process. It also provides managers with perspective on how similar companies have solved these same challenges.
Why a Sales-Driven Company Needed Distribution KPIs
The beer distributor we worked with had three types of sales channels: chain accounts, on-premise, and off-premise. Sales reps who performed well were rewarded with more accounts, which gave them the chance to increase their compensation. Over time, this policy resulted in some sales reps collecting more accounts than they could possibly visit and service properly.
Another challenge came from the way this company took orders. Its top competitor required that customers purchase a minimum amount of product to last until the next scheduled sales call. Customers complied with this policy and tied up their coolers—and their cash—with the competitor’s product.
By contrast, our beer distributor offered a much more flexible policy. Whenever customers were running low on products, they could simply text, email, or phone in their orders and expect prompt delivery. This broken process resulted in small, frequent drops. It also meant the company had to run expensive delivery trucks all over its entire delivery area every day. And because of the segmented nature of the company’s sales channels, it was employing far too many sales reps, investing far too much time, and driving far too many miles for the amount of revenue it was pulling in.
From the start, we could see that this company needed to start using sophisticated distribution KPIs to diagnose problems and monitor performance. But we dug deeper. When we did, we found several more issues:
- Poor data quality. Customer data was distributed over many systems and difficult to cross-reference. There was no single pane of glass to see a 360-degree view of customers.
- No clearly defined objectives. Customers were serviced on whatever schedule and frequency they wanted. There was no companywide service policy to reduce delivery frequency, increase delivery order size, or group deliveries in a specific area of town.
- Superficial distribution KPIs. There was no measurement of company progress over time in areas such as improved data quality, route plan improvement, or route plan adherence.
How Distribution KPIs Made a Difference
Gridline helped this company combine its on-premise and off-premise sales teams, focusing on the goal of eliminating overlaps in covered geography. This change resulted in fewer delivery miles, less delivery time, and ultimately, eliminating the need to hire more reps to grow sales.
We also improved the company’s data quality and did a profitability analysis of its customers to determine several factors:
- How many deliveries they should receive based on account profitability.
- The best days to deliver.
- How often specific areas should be serviced to drive density.
- The optimal number of accounts for each rep.
In balancing these objectives, the customer was able to redeploy its existing sales team with a goal of increasing sales by 10% and a plan to help them increase their time in each account to sell more beer.
These changes had a huge impact on delivery, reducing the company’s annual number of deliveries by nearly 10,000. This enabled the company to service its existing volume—and plan for an expected 10 percent increase in sales—with 5 percent fewer trucks. The company also reduced miles traveled by almost 500,000 and eliminated most of its driver overtime.
By focusing on the right distribution KPIs and making these relatively minor changes to its delivery schedule, our client saved $1.3 million. This distributor also avoided the anticipated expense of hiring 10 new salespeople to reach its revenue goal.
Gridline provides decision-makers with distribution KPIs that help them ensure they’re meeting or exceeding their objectives. If you’d like us to do the same for you, contact us today.