Wholesale distributors facing margin pressure typically look at procurement first. That is rarely where the biggest opportunity sits.
Wholesale distributors facing margin pressure typically look at procurement first. That is rarely where the biggest opportunity sits. In our experience across 40+ distribution businesses, the procurement lever accounts for roughly 20–25% of available margin improvement. The other 75–80% sits in logistics costs, inventory discipline, and working capital management.
The first lever is route economics. Most distributors don't have a clear view of which routes are profitable and which are subsidising volume. When we build the route-level P&L, it almost always surfaces 15–25% of routes that are loss-making at contribution level — routes that are being retained because of customer relationships, habit, or incomplete information.
The second lever is inventory discipline. Distribution businesses tend to accumulate slow-moving stock over time. The accumulation is gradual — one line added here, another there — until the dead stock represents a meaningful proportion of working capital. The carrying cost is real and it shows up in the margin structure even when it's invisible in the management accounts.
The third lever — and the one most often missed — is network structure. Many distributors are operating a warehouse footprint that made sense at a different revenue level, in a different competitive environment, with different customer expectations. The warehouse cost structure is fixed overhead. When it was built for £50M of volume and you're running £35M, the leverage is brutal.
The sequencing matters: fix the route economics first (immediate cash impact), then the inventory discipline (working capital release), then assess whether the network structure needs to change (capital decision). Each lever requires a different type of analysis and a different type of intervention.