Most distributors are not struggling because they lack data. They are struggling because they are not consistently acting on it.
That’s one of the clearest findings from Closing the Execution Gap: How Wholesale Distributors Can Apply Profit Intelligence to Achieve New Levels of Performance, a report published by Distribution Strategy Group in partnership with Cavallo.
The research uncovered a disconnect between what distributors know about profitability and what happens day to day. While many distributors measure customer profitability, margins are still leaking through pricing inconsistencies, small order losses, missed supplier pass-throughs, and disconnected sales workflows.
The report estimates that distributors lose 3%–5% of annual revenue to execution gaps, equivalent to roughly 150–200 basis points of margin improvement opportunity. For a $50 million distributor, that represents up to $1 million in recoverable annual margin.
Here are five key takeaways from the research and what distributors can do to start closing the gap.
1. Most distributors don’t have a data problem; they have an execution problem.
Most distributors already measure profitability in some form. In fact, 69% of survey respondents said they track customer profitability. The problem is that the information rarely reaches the people making pricing and quoting decisions.
Profitability data stays trapped inside finance rather than becoming part of operational execution. That creates a predictable cycle where finance identifies margin problems and leaders push for improvement, but sales teams continue quoting and discounting without the context they need to protect profitability.
2. Margin leakage happens in small, repetitive ways.
Distributors are losing margin through thousands of small breakdowns. The report identified four major sources of margin erosion:
- Incomplete supplier cost pass-through: Half of distributors surveyed pass through less than 90% of supplier price increases.
- Manual pricing inconsistencies: Nearly 38% of orders require some form of manual pricing intervention. That adds cost in the form of labor, error rates, and processing time.
- Small unprofitable orders: More than half of distributors identified frequent small orders under $100 as a major cost-to-serve issue.
- Unnecessary discounting
These actions become normalized inside daily operations. A sales rep applies a slightly deeper discount than necessary. A supplier increase is only partially passed through. A small order ships because “that’s how we’ve always handled the account.” A pricing exception gets approved without understanding total customer profitability.
Over time, those small “how-we’ve-always-done-it” decisions accumulate into millions in lost margin.
3. Sales teams are making decisions without profit visibility.
One of the most important findings in the report is how disconnected profitability data remains from frontline workflows. Only 34% of distributors provide sales teams with real-time access to profitability data.
Another 28% rely on periodic reporting that arrives too late to influence pricing conversations. The remaining 38% either provide limited visibility or no access at all, treating profitability as sensitive information too valuable to share with the people who influence it the most.
That means many sales teams are still making pricing decisions based primarily on:
- Historical customer behavior
- Competitive pressure
- Revenue targets
- Individual judgment
At the same time, compensation structures often reinforce the problem. Only 34% of distributors said they compensate sales teams primarily based on gross profit dollars. We’ve found that companies still prioritize revenue growth over profitability, which naturally encourages discounting behavior.
Salespeople can unintentionally give away margin simply because they lack the information needed to understand the true impact of pricing decisions. Profitability data cannot live exclusively inside spreadsheets and monthly reporting. It has to be embedded into the quoting and ordering process. When profitability becomes visible at the transaction level, sales teams can make better decisions in the moment, not weeks later during a performance review.
4. Tools and reports aren’t enough. Timing and integration matter.
Many distributors already have reporting tools. The problem is that most of those tools are retrospective. By the time insights are reviewed:
- the order has already shipped
- the discount has already been approved
- the margin opportunity has already been lost
The research found that 63% of distributors still rely heavily on Excel for profitability analysis, despite 40% identifying real-time profitability and order-level profit intelligence as priorities. But Excel cannot operationalize decisions in real time. The next phase of profit improvement requires embedding intelligence into operational workflows.
This is what that looks like:
- real-time margin visibility during quoting
- automated pricing guidance
- approval workflows for pricing exceptions
- transaction-level profit intelligence integrated into ERP-connected workflows
The report also highlights an important reality about technology adoption: Technology does not replace execution discipline. Distributors that lack standardized pricing processes, governance, and clean operational data will struggle to benefit from advanced analytics or AI-driven pricing tools.
5. Closing the execution gap simply requires better execution.
Distributors do not necessarily need to reinvent their business models to improve profitability. Most already know where margin problems exist. The opportunity lies in executing more consistently.
According to the research, distributors that systematically address execution gaps can achieve 150–200 basis points of margin improvement within 12–18 months. That improvement comes from:
- transaction-level profitability visibility
- pricing governance
- supplier cost pass-through management
- customer segmentation based on profitability
- small-order policy enforcement
- workflow-integrated decision support
Most companies know more than they act on. The distributors that outperform over the next several years will turn profitability intelligence into daily operational behavior.
Want to go deeper into the research? Access the full report, Closing the Execution Gap: How Wholesale Distributors Can Apply Profit Intelligence to Achieve New Levels of Performance.