Taking stock of a fast-changing sector

Welcome to the McKinsey Distribution Blog.

For generations, distributors have been a vital link in the supply chains of many industries. Metals, construction materials, industrial equipment, electronic components, automotive parts, drugs and medical devices, foodstuffs, and consumer products: for companies in these sectors and many others, distributors have provided a key channel to diverse customer groups. Customers have built businesses that depend on reliable, responsive distributors for the supply of critical inputs.

Distribution may be a mature sector, but it’s also an industry in flux. Wherever they look, distributors can see disruptive forces stacking up:

  • Customers are becoming more demanding every year, looking for faster response times, better availability, and a wide range of value-added services.
  • Suppliers are increasingly looking to cut distributors out, by developing their own direct-to-customer e-commerce offerings.
  • New competitors are emerging in many markets, as established distribution players enter new segments, and big consumer-facing e-commerce companies enter the B2B space.
  • Technology is transforming distribution by making omnichannel an expectation, enabling sales with analytics, and improving demand planning and logistics through the application of artificial intelligence and machine learning.
  • Labor shortages are posing challenges in both frontline and high-skill positions.

With so many moving parts, we know that today’s market is uniquely challenging for distribution players. We also know that some distributors are navigating the complexity more successfully than others. McKinsey research has found that, against a background of slow growth and declining margins in the sector, top performers have increased their revenues, improved their margins, boosted their profits, and maximized their return on invested capital.

And that’s why we’ve started this blog. We’ve been researching distribution operations for more than a decade, and we’ve had the privilege of seeing leading distribution businesses transform themselves to meet new market challenges and capture emerging opportunities. We understand the things that make the difference in distribution.

In the coming months, we’ll use this space to share our findings and our insights, taking a deep dive into the topics that matter most to modern distribution businesses. We hope you’ll join us on that journey—there’s a lot in store.