Distributors are experiencing a major shift in the standards for B2B purchasing. More companies are purchasing goods via multiple channels rather than from a dedicated distributor. Buyers are accustomed to having detailed information on all products—availability, delivery data, etc.—at their fingertips online. To meet these expectations, distributors are expected to have top notch eCommerce sites to compete. eCommerce growth indicates how well your distribution company is adapting to the changing purchasing environment and the rate at which you are growing your online business.
|Gross Margin||Percentage of revenue after cost of goods sold. This metric signifies how efficiently your company uses its resources to deliver products profitably. The higher the percentage, the better.|
|Inventory Turnover||Ratio showing how many times your company’s inventory is sold and replaced over a period of time. The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand. A low turnover ratio signifies weak sales and excess inventory. A high ratio suggests either strong sales or large discounts.|
|Order Fill Rate||Percentage of customer or consumption orders satisfied from stock at hand. It’s a measure of an inventory’s ability to meet demand. A higher fill rate indicates a better ability to meet sales requests, influencing higher customer satisfaction.|
|Cash Flow Adequacy Ratio||The cash flow adequacy ratio is used to determine whether the cash flows generated by the operations of a business are sufficient to pay for its other ongoing expenses. In essence, cash flows from operations are compared to the payments made for long-term debt reductions, fixed asset acquisitions, and dividends to shareholders.|
|Cash to Cash Cycle||The cash to cash cycle is the time period between when a business pays cash to its suppliers for inventory and receives cash from its customers. The concept is used to determine the amount of cash needed to fund ongoing operations, and is a key factor in estimating financing requirements.|
|Sales per person||The derivation of sales per person is a two-step process. First, determine the number of full-time equivalents (FTEs) in the business, which is the amount of staff time that equates to a forty-hour work week. For example, four employees working 10 hours per week are the equivalent of one FTE. Second, divide the number of FTEs into net annualized sales.|
|Customer Service Responsiveness||This metric represents the average time it takes to respond to customer questions, issues or concerns. A lower response time drives more efficiency, freeing labor time for more valuable tasks and can reduce the need to hire additional staff.|
|eCommerce Growth||This metric indicates the rate at which your company’s e-commerce revenue is growing.|
|Liquidity ratios||One of the commonly used liquidity ratio is the cash ratio. This ratio compares just cash and readily convertible investments to current liabilities. As such, it is the most conservative of all the liquidity ratios, and so is useful in situations where current liabilities are coming due for payment in the very short term.|
|Debt service coverage ratio||Calculated by dividing total net annual operating income by the total of annual debt payments. This measures the ability of a business to pay back both the principal and interest portions of its debt.|
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