Successful teamwork between a supplier and a distributor relies on consistent communication – including a common understanding of objectives, continual progress reporting, and frequent discussions about results and market conditions. The SiriusDecisions Research Brief describes five components of a performance scorecard that can be used to facilitate communication and decision making between a supplier and a distributor.

1. Research Brief
© SiriusDecisions. All Rights Protected and Reserved. 1
Measuring Distributor Performance
Communication is the key to a
successful supplier/distributor
relationship
A performance scorecard provides
suppliers with a consistent method
for measuring distributor progress,
pinpointing challenges and
identifying improvement
opportunities
To obtain a complete view of
partnership health, the scorecard
must capture five categories
of metrics
American football quarterback Peyton Manning is well known for his signal
calling at the line of scrimmage, before each play begins. Standing behind the
center, Manning surveys the opponent’s defense and identifies rushers and
blitzers whom his blockers need to block. He may decide to replace the play
called in the huddle with an audible – a new play called at the line. Making
himself heard over the noise of the crowd, shouting numbers and code words
and waving his arms, Manning uses every second before the ball is snapped to
communicate with his teammates and adjust their plans.
Successful teamwork between a supplier and a distributor relies on consistent
communication – including a common understanding of objectives, continual
progress reporting, and frequent discussions about results and market
conditions. Consistent communication enables both parties to adjust their
plans as needed to respond to circumstances and improve sales performance
and profitability. In this brief, we describe five components of a performance
scorecard that can be used to facilitate communication and decisionmaking
between a supplier and a distributor.
One: Sales
Every supplier/distributor partnership should measure standard sales metrics
(e.g. actual vs. target revenue, year-over-year sales growth). Other sales
metrics, specific to the type of offering being sold, may also be included in the
scorecard. For example, if the distributor is selling subscription-based offerings
(e.g. software as a service, telecommunications, insurance), report monthly
recurring revenue (MRR) and MRR renewal rates. Do not complicate the tool
by including too many metrics; focus on a select mix of sales metrics that go
beyond simply reporting what has happened (lagging indicators) to uncover
actions that should be taken to improve results. Key sales metrics include:
• Monthly sales by partner. The total monthly sales by each partner for all
of the supplier’s offerings is an effective gauge of how important each
partner is to the supplier/distributor partnership and whether its revenue is
trending up or down. Depending on the results, the supplier may decide to
invest marketing development funds (MDF) with the best partners to increase
sales or try to replicate what the best partners are doing to drive sales with
other partners where significant opportunity exists.
• Monthly sales by partner by SKU. This metric provides greater insight into
partner performance and can significantly change the strategy of the supplier

2. Research Brief
© SiriusDecisions. All Rights Protected and Reserved. 2
and distributor. For example, a partner may appear to be
a top performer based on total revenue, but it may have
simply bought one product in quantity a couple of times,
vs. other partners that demonstrate more consistent
performance. This metric also provides insight into the
performance of specific SKUs. For example, what looks like
a successful SKU may actually be moving through only a few
partners. As a result, the supplier may initiate a promotion
to build awareness and demand with other partners.
• Unique resellers. List all partners that ordered any of the
supplier’s SKUs from the distributor within a specific time
period to determine whether the distributor is successfully
gaining new partners for the supplier. This metric also helps
to calculate the ROI on any marketing programs aimed at
growing the partner base, and can help the supplier decide
whether to continue the promotion, discontinue it or make
needed adjustments to improve its success.
Two: Logistics
One of the most important benefits that suppliers derive from
distributors is reduced cost from more efficiently moving
offerings to partners and customers. Logistics metrics that
should be captured by the scorecard include:
• Inventory on hand. Monitoring how much of each SKU is
present at the distributor’s facilities and ready to be ordered
can help avoid costly returns, shortages and lost sales. For
example, if there is too much inventory relative to the
average run rate, the supplier may consider a promotion or
price cut to move it faster and avoid inventory obsolescence.
If the run rate is higher than the stock, the supplier should
remind the distributor to re-order to avoid lost sales.
• Initial fill rate. This metric reports the percentage of orders
that are shipped complete – 100 percent of all items on the
partner order – on the same day the order is received by the
distributor. Higher initial fill rates indicate fewer items out of
stock and higher service levels for partners and customers.
• Average order size. Smaller shipments drive up supplier
costs, and if a distributor is incapable or unwilling to
consolidate smaller orders into larger shipments, fulfillment
becomes more expensive. If average order size is low, it may
be prudent for the supplier to establish minimum order
amounts.
Three: Marketing
Most distributors are capable of driving some demand for
a supplier’s offering with partners. Several distributors even
use mentoring and training to enable partners to be more
effective demand creators. However, distributors are high-
volume, low-margin organizations, so they may be tempted
to leverage supplier marketing funds to boost profitability vs.
delivering new demand. To set expectations and track results,
include the following metrics in the performance scorecard:
• Return on marketing investment (ROMI). This metric
is a ratio that compares the revenue generated by a
distributor’s partners to the supplier marketing funds
provided to the distributor. Comparing ROMI results and
trends across several distributors enables an assessment
of how effectively the supplier’s investments in distributor
marketing funds are being applied.
• Partner acquisition cost (PAC). This ratio compares all
funds provided to a distributor over a specific time period
for partner recruitment activities to the number of new
active partners added in that time period. For instance, if the
supplier provided the distributor $300,000 for recruitment in
a year and the distributor added 30 new active partners
during that year, the PAC is $10,000 per partner.
• Marketing-generated leads. Although distributors typically
focus on marketing to partners through vehicles such as
promotions and events, they can also aid suppliers by
marketing through partners to buyers, as well as marketing
for partners directly to customers. To motivate a healthy mix
of marketing initiatives focused on the customer, include at
least one metric tied to the distributor’s efforts in this area
(e.g. marketing-generated leads that result from partner-led
demand programs).
Four: Value-Added Services
Most distributors provide value-added services to partners
(e.g. training, technical support, design and configuration,
aggregation, light manufacturing and assembly) to increase
their profits as well as partner engagement and loyalty.
Include the following types of metrics to track the results
of value-added services funded by the supplier:
• Activity. These metrics quantify what was done (e.g.
number of unique partner personnel trained, number of

3. Research Brief
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configured solutions shipped, number of technical support
calls taken) but not what occurred as a result.
• Quality. These metrics measure the extent to which the
distributor’s value-added services meet the objectives
and/or expectations of the supplier and/or partners (e.g.
first-call resolution, failure rates, satisfaction survey scores).
• Efficiency. A supplier’s objectives when outsourcing services
to a distributor include maximizing outputs and/or reducing
costs. Efficiency metrics include the cost per technical
support call, percentage of new partners onboarded, and
adoption rate of professional services offered on behalf on
the supplier.
Five: Relationship
No matter how many partners a distributor has in its
database, or its success rate with other suppliers, the
absence of a positive working relationship between supplier
and distributor significantly decreases the odds of the
partnership’s success. Relationship metrics score key
attributes of the partnership (e.g. on a scale of one to
five, where five is excellent/outstanding, three is average/
satisfactory and one is inadequate/unacceptable). Examples
of relationship metrics include:
• Executive engagement/strategic alignment. Does an
individual within the distributor’s organization at the
executive level keep up-to-date on the supplier’s priorities
and key issues, ensuring that the distributor’s team is
delivering on its commitments? If so, a shared vision, mutual
concern and a productive long-term relationship are more
likely to become a reality.
• Investment. Does the distributor look beyond day-to-
day issues and cost-cutting to make strategic investments
in people, systems, skill development, value-added services
and training to ensure the future success of the partnership?
• Reliability. Does the distributor meet promises,
proactively communicate when things change, and
hold itself accountable for results? Reliability is the key to
overcoming obstacles and sustaining a mutually beneficial
relationship.
The Sirius Decision
Just because something can be measured doesn’t mean it
should be measured. When scoring the performance of a
supplier/distributor partnership, choose metrics that are
easy to understand and easy to obtain, as well as relevant
to the partnership. Most importantly, meet at least quarterly
with the distributor to review the scorecard and discuss
required changes. The result of the meeting should be
an explicit agreement on which areas to prioritize for
improvement and specific actions that each party will
take to drive performance.