The only way to improve is to track and measure your performance — and then change it for the better. If you want to outpace your competitors, these 17 KPIs will help you measure, manage, and improve performance across the board.
The most successful distributors understand that not all customers contribute equally to their bottom line. Focusing on customers that drive the most profit means you leave nothing on the table.
Customer profitability segmentation provides clarity into who contributes the most to your bottom line. This KPI considers cost-to-serve, order frequency, and customer-specific pricing or discounts. Distributors can track purchasing patterns, pricing, and profitability by segment, then tailor their sales and marketing to create exclusive offers for high-value customers.
When you calculate customer pricing, do you look at how much it actually costs to serve that customer? This KPI takes into account hidden and upfront processes, labor, equipment, or other resources contributing to the cost of doing business with each customer – which can uncover unprofitable relationships.
Distributors leave money on the table every day. Margin leakage occurs when sales inefficiencies or poor pricing strategies erode profits. For example, you may miss opportunities to acquire additional wallet share, capture rebates, or increase prices on outliers without negatively affecting sales volume.
The biggest margin leaks are those you don't even realize you're incurring — like a slow leak you don't notice until your ship has already taken on too much water.
In many cases, the issue is a lack of visibility. Harness your data to uncover opportunities to plug these leaks.
Distributors need to measure the accuracy and effectiveness of their demand forecasting, which impacts their ability to plan inventory, production, and procurement — reducing stockouts and overstocking. This is a great use case for artificial intelligence (AI), which can help distributors incorporate real-time data and trends to refine forecasts.
Sometimes, “why” is the most powerful word in the English language. Understanding why you win or lose deals with quote win-loss reporting can help you refine pricing and boost bid success. Were discounts effective? How did response time impact the customer’s decision? Where do competitor offerings come into play?
How do you keep profitable customers long-term? The term "moat" refers to the barriers you create to safeguard these relationships, ensuring that your customers continue to see your company as the best partner. The result: greater loyalty, increased lifetime value, and lower customer churn.
The key to this, as in all KPIs, is analyzing the data behind the customer. For example, conducting wallet share analysis to evaluate the percentage of a customer’s total spend within a product category helps distributors identify upsell and cross-sell opportunities, as well as develop programs or solutions to incentivize them to stay put. All these tactics start with data — but can end with happier customers.
This measures how effectively a distributor leverages advanced analytics and forecasting tools to anticipate or prevent inventory shortages before they occur. It evaluates the accuracy and timeliness of predictions related to demand fluctuations, supply chain disruptions, or seasonal trends.
Real-time visibility into stock levels and demand patterns allows for optimal inventory management, reducing stockouts and carrying costs with automated reorder alerts and replenishment. Similarly, predictive analytics might flag delays in supplier shipments, allowing the distributor to source alternative suppliers or adjust delivery schedules.
Do you know which SKUs contribute most to your overall profitability and which items decrease it? Distributors need to consider factors like pricing, cost of goods sold (COGS), handling, storage, and any other associated expenses.
SKU-level margin analysis ensures visibility into every item sold or even those that are languishing on your shelves. AI is an especially powerful tool to identify underperforming products.
Long or inconsistent supplier lead times disrupt operations, leading to stockouts, delayed order fulfillment, or even excess inventory at the wrong time. Managing this KPI more closely allows distributors to maintain optimal inventory levels, cut emergency sourcing, reduce expedited shipping costs, and ultimately improve customer satisfaction.
Distributors can negotiate shorter lead times with suppliers to reduce delays or maintain buffer stock for critical items. Collaborating closely with suppliers to improve communication or using technology to track shipments in real-time can mitigate potential delays before they impact operations.
Precisely forecasting revenue per SKU can help distributors refine their sales strategies to maximize profitability. For example, with advanced AI-powered analytics, distributors can compare revenue trends across SKUs and prioritize inventory investment in high-demand, high-margin items.
Customers buy across channels: through a field rep or an email, from an ecommerce site, and more. Improving customer interactions in their preferred channels engages and retains these target audiences.
If analysis shows that customers frequently engage with product updates sent via email but rarely interact with the website, the distributor could prioritize email campaigns while improving the website’s usability and content. Additionally, monitoring customer service interactions might reveal common pain points, allowing the distributor to refine their support processes.
Rebates generate a significant portion of a distributor’s bottom line. Traditionally, rebate management has required a great deal of manual work, tweaking the numbers to maximize the return via SQL queries on an Excel spreadsheet. These laborious processes are a “necessary evil” because most distributors lack the right tools to optimize the rebate management process. ProfitOptics can help distributors optimize rebate management to maximize margins, uncovering untapped programs and fixing errors that might be depressing returns.
Customers tend to be less price sensitive on items they buy less frequently. A pricing optimization tool can help distributors develop strategic pricing for lower-velocity C/D items, helping them capture additional margin without lowering sales.
Distributors need to measure how quickly deals move through the pipeline to generate revenue. Sales velocity measures four metrics: opportunities, average value, win rate and how long it takes to close.
A higher sales velocity index means faster deal closures and larger deal sizes. Automation of sales processes can accelerate sales velocity. For example, implementing AI-powered CRM tools can help distributors track deals and shorten sales cycles. Automation can help distributors speed up quote generation, as well.
Efficient collection reduces outstanding receivables and improves cash flow, which is crucial for operational stability. A distributor tracking this might notice an increase in days sales outstanding (DSO) because invoices are past due. They could implement automated payment reminders, offer early payment discounts, or establish stricter credit policies to address this. Analyzing customer payment trends might reveal patterns, such as chronic late payers, allowing the distributor to take corrective actions like renegotiating payment terms or requiring upfront deposits.
Measuring customer churn requires collecting and analyzing data, such as dissatisfaction with pricing, service quality, product availability, or competition. Because retaining customers is often more cost-effective than acquiring new ones, this is vital for long-term profitability.
For example, a distributor may notice that a significant number of customers are leaving due to frequent stockouts of high-demand products. By identifying this trend, they can prioritize inventory management improvements, such as using predictive analytics to prevent the underlying stockouts. If customers cite pricing as a key issue, the distributor might reassess its pricing strategy or introduce programs to offset these or other customer concerns.
Are you tracking the percentage of a customer’s total spend within a product with your business? This KPI evaluates what share of the customer’s spend you capture and identifies opportunities to increase it. Ultimately, it can drive customers to consolidate more of their purchases with your business.
A distributor analyzing wallet share might discover that a key customer purchases certain product lines from a competitor. A distributor can capture a greater portion of the customer’s spending by offering bundled discounts, personalized pricing, or expanding their product catalog to include these add-on or cross-sell items.
ProfitOptics provides tools and data expertise to help you track — and act on these KPIs. Our clients attest that our technology uncovers hidden insights, automates workflows, and refines their sales strategies to do more with less.
Your KPIs are more than just numbers — they’re the foundation of smarter, more profitable operations. Let ProfitOptics handle the complexity so you can focus on growth and delivering value to your customers. Ready to elevate your game? Contact ProfitOptics today.
