Reducing inventory, as mentioned above, is the first place distributors look for cost savings and increased efficiency. Increase inventory velocity so that it spends less time in your warehouse(s). This is achieved through smart procurement, proper positioning, and close coordination with demand. In the extreme, goods can be cross-docked, moving right from the receiving dock to the shipping dock and never really sitting in your inventory at all.

Beyond that, look for these opportunities:

• Procure goods in the smallest practical quantities with more frequent deliveries. Optimize plans based on collaboration with both customers and suppliers to find the lowest cost / lowest inventory solution that satisfies real customer needs as well as supplier efficiency and transportation considerations
• Position goods as close as possible to customers, in the most appropriate quantities to serve their needs. This supports smaller, more frequent (and quicker) deliveries to customers, reducing their inventory needs. End-of-the-chain positioning is supported by a replenishment strategy that optimizes inventories and transportation up the chain and the possibility of movement across the chain as needs change.
• Collaborative forecasting, working closely with customers to uncover their true needs, is the driver for all of these efforts. Customers will often order defensively or respond to artificial incentives (quantity price breaks, for example, or load minimums or freight rate considerations). Open dialogues can often uncover alternative strategies that benefit both the customer and the distributor (and the supplier).
• Be demand driven: forward-thinking customers are becoming more willing to share detail demand data with distributors who, in turn, share the data with suppliers as part of the collaborative forecasting process. Point-of-sale data is the clearest measure of actual customer demand not disguised by local store inventories and shelf stock.

Inventory reductions notwithstanding, the need for warehouse space tends to grow to the extent that many distributors find themselves continually expanding yet constantly cramped for space. The solution is not to add more space, but to more effectively use the space you have, as well as reducing space requirements by reducing inventory). Automated warehouse systems can track locations and contents, allowing more effective use of available space. These systems can also monitor and manage stock rotation, shelf-life, environmental concerns (temperature requirements, proximity concerns), and optimum location for efficient access. Warehouse systems can also direct put-away and picking activity to increase labor productivity as well as making the most productive use of space and equipment.

Top line improvements can also come from product line expansion in the most general sense. Leading distributors are branching out from traditional product sale and delivery to offer value-added services like labeling, light assembly and packaging services.