Distributor margin rarely disappears in one dramatic event. It leaks. Slowly. Through timing gaps, unclear handoffs, and processes that span multiple departments but belong to none of them. The reality is that, in many cases, it didn’t truly disappear. If that’s true, the obvious question is: Where is the margin hiding?
Scott Sinning has spent years working on exactly these challenges. As former Vice President of Pricing Strategy at Graybar, he led enterprise pricing initiatives and saw firsthand how margin erodes when cross-functional execution breaks down. His perspective is grounded in real operational experience, not theory.
In this article, Scott identifies three areas where distributors can capture dollars hiding in plain sight. These are not glamorous strategic pivots. They are process improvements that require leadership attention, clear ownership, and disciplined follow-through.
Where Margin Is Hiding
Some of your biggest margin opportunities are hiding in core cross-functional processes
by Scott Sinning
It’s that time of year again when budgets are getting finalized, sales teams come together for kickoff meetings, and supplier cost increases take effect. The annual planning cycle moves quickly from discussion and debate to “Let’s go and get it done!”
My goal for this article is to give distributor executives a strategic perspective on three areas where they can capture dollars hiding in plain sight.
In my experience, the quickest and most attainable margin opportunities come from improving a few cross-functional price and cost processes, which span multiple departments but are fully owned by none. These rely on manual handoffs and limited visibility to drive improvements.
Leadership attention on these processes can have a big payoff.
Supplier Cost Increases Passed Through to Price (January and Q1 Focus)
January is when many manufacturers roll out annual price increases. How distributors respond often determines margin performance for the first quarter and sometimes the entire year. At the least, distributors should try to protect profitability by passing these into a new sell price. In some cases, it’s an opportunity to profit from the change and capture additional margin.
Cost increases fail at the handoffs between purchasing, pricing, sales, and finance. When execution breaks down, familiar patterns appear:
- Cost changes move slowly through internal systems
- Price actions lag cost increases
- Margin recovery varies by branch, customer, or salesperson
- Leadership struggles to measure how effective pass-through really was
This leads executives to ask, “Did we really pass through the increases?”
More revealing questions include:
- Did we communicate the important changes with the sales team and with key customers to maintain trust, alignment, and purchasing volumes?
- Were price increase actions aligned with sales strategy decisions?
- Are GM% results measured before and after the change to detect leaks to fix?
Strong operators treat cost-change execution as a repeatable operating discipline, not a one-time event. And yes, there are automation and AI tools to speed things up once you know what your desired process flow should look like. The first quarter is when that discipline matters most. Delays and inconsistencies early in the year are difficult to recover later, especially once customer expectations are set.
For a step-by-step plan, my previous article on this topic is linked here: Converting Tariffs Into a Competitive Advantage
Price-Setting vs. Price-Getting
Reduce unjustified discounts that override the system price. Most distributors have an established process to set their prices, especially for standard SKU stock sales (directs and projects are a topic for another article). Far fewer are confident those prices are getting realized in the market.
This gap lives in the space between how prices are set, how exceptions are governed, and how performance is measured across teams. It shows up as routine overrides, delayed discount approvals, and pricing rules that exist but aren’t evenly applied. Over time, this creates frustration and friction instead of insight and accountability.
The challenge isn’t choosing between control and flexibility. It’s balancing both.
Sales teams need discretion and speed to respond to customer requests. Leadership needs confidence that exceptions are thoughtful, justified, and aligned with margin goals.
Well-run distributors use overrides as a sales coaching moment and feedback loop for better price-setting, not just a cumbersome approval step. The goal isn’t to eliminate discretion; it’s to create guardrails that improve decision quality without alienating the sales team or overwhelming frontline managers.
Special Pricing Agreements and Distributor Margin
The SPA process offers one of the clearest opportunities to capture margin and unlock trapped cash. CFOs love this one!
SPAs are often viewed as a sales and pricing issue. In practice, they are just as much about cash flow and operational discipline.
The SPA lifecycle spans origination through supplier negotiations, data sync, claims, reconciliation, and final settlement when the distributor finally gets paid.
It touches sales, pricing, purchasing, operations, finance, and sometimes IT, making it one of the most cross-functional processes in the business. When no executive owns the process end-to-end, two problems emerge:
- Without holistic oversight, compliance complexity drives margin leakage.
- Cash gets trapped. Open and aged SPA reconciliations represent real dollars sitting in limbo, possibly for months, waiting on documentation, validation, or resolution. Many distributors underestimate how much money is tied up this way until it’s quantified.
Improving SPA discipline isn’t just about pricing accuracy. It’s about plugging margin leaks and accelerating cash flow.
The Bottom-Line Margin Opportunity
These are not isolated margin problems. They are cross-functional execution problems that sit between teams, not within them.
Margin grows when pricing and cost management are treated as operating model disciplines with clear ownership, defined handoffs, automation, and measurable outcomes. When that discipline is missing, margin doesn’t disappear overnight. It leaks through timing gaps, process breakdowns, and accountability blind spots.
That’s where the biggest opportunities are hiding, waiting to be found.
Closing Thoughts
What stands out in Scott’s analysis is the common thread running through all three areas. These are not technology problems or talent problems. They are ownership problems. Each process spans multiple departments, which means each one is vulnerable to the same failure mode: everyone assumes someone else is handling it.
The distributors who capture this margin are the ones who assign clear accountability, measure results at each handoff, and treat these workflows as strategic disciplines rather than administrative overhead. The dollars are real. The improvements are attainable. The question is whether leadership treats them as priorities or lets them keep leaking.
_____________________________________________________________
About the Author
Scott Sinning advises wholesale distributors on pricing strategy and margin performance. As former Vice President of Pricing Strategy at Graybar, he led enterprise pricing, software, and analytics initiatives and worked directly with the cross-functional execution challenges described here. Learn more at pricingfordistributors.com.
Leave a Reply