How MHEDA’s DSC Study Helps Distributors Maximize Financial Performance
By John Mackay
EACH YEAR, MHEDA conducts its annual Distributor Statistical Comparisons (DSC) study, a comprehensive financial benchmarking analysis designed to help members enhance their business performance. This study has become an invaluable tool for MHEDA members, providing critical insights into industry trends and best practices. Without active member participation, such a powerful resource would not be available.
The DSC study is not a one-size-fits-all analysis. It is divided into three distinct reports, each tailored to each MHEDA member industry segment: industrial truck distributors, storage and handling distributors and systems integrators. Each of these sectors operates under unique business models, necessitating specific benchmarking approaches.
The Key to Exceptional Profitability
Why is it that one in every four storage and handling distributor generates twice the profit of their industry peers?
The answer lies in the strategic management of critical profit variables (CPVs) — key financial metrics that directly influence a company’s profitability. Highly successful distributors do not necessarily outperform their peers in any single CPV; instead, they manage multiple profit drivers just slightly better, which results in significantly improved return on investment.
The storage and handling DSC Report identifies these CPVs and provides a data-driven roadmap for companies looking to optimize their financial performance.
Key profit drivers include:
• Revenue Growth
• Gross Margin Management
• Expense Control
• Inventory Turnover
• Accounts Receivable Collections
Benchmarking: Typical vs. High-profit Companies
The DSC study categorizes distributors into typical companies and high-profit companies based on financial performance. A typical company represents the median performer within the industry, meaning that half of the participating MHEDA distributors outperform this bench mark, while the other half fall below it.
In 2023, the typical storage and handling company recorded a profit margin of 6%, meaning that for every $1 in sales, only $0.06 translated into profit.
By contrast, high-profit storage and handling companies achieved a 10.8% profit margin, coupled with greater asset efficiency, ultimately leading to significantly higher return on equity for business owners.
Mastering the Critical Profit Variables
For companies striving to transition from typical to high-profit status, a thorough understanding of CPVs is essential. While many financial metrics influence performance, the CPVs identified in the DSC study are the most actionable and impactful.
Interestingly, the differences between typical companies and high-profit companies may seem marginal at first glance. However, these small improvements — when combined — create a multiplier effect, driving significant increases in profitability.
From a management perspective, it is not necessary to excel in every area. Instead, focusing on key benchmarks such as operating expenses, employee productivity (sales per employee) and inventory turnover can yield substantial financial gains. By implementing targeted strategies to optimize these variables, distributors can establish a sustainable path to higher profitability.
The Path Forward
Each year, high-profit storage and handling companies consistently achieve superior financial results, demonstrating that success is not limited by industry constraints. Rather, it is driven by strategic financial management and a commitment to continuous improvement.
The MHEDA DSC study serves as a crucial resource, offering members a clear roadmap to higher profitability. By leveraging this data, distributors can set realistic, attainable financial goals and implement the key benchmarking strategies necessary to achieve them.
With one in four distributors already earning over 40% return on owner equity, the potential for increased profitability is within reach for the remaining three-quarters of the industry. By participating in the DSC study and utilizing its insights, distributors can position themselves for long-term financial success and greater industry competitiveness.
The MHEDA DSC report is a profitability study designed to obtain, understand and analyze best practices in the material handling industry. More importantly, the DSC survey is designed to help you improve your own financial performance.
About the Author
John Mackay is managing director of Mackay Research Group, a survey research organization that specializes in profitability and compensation research for trade associations, including the MHEDA DSC study. He can be reached at john@mackayresearchgroup.com. Stay tuned for Mackay’s next DSC article as it relates to additional sectors within the industry.
