Operations leaders in distribution face tighter margins and rising complexity in 2026. What can you do to combat this?
Back to the blog
Operations leaders are finding increasingly tighter margins, slower sales that hold up revenue, and broader customer demand for products and services that weren’t previously on their radar.
Builders’ merchant sales value was broadly flat in 2025, with like-for-like growth of just under 1%, driven by volume rather than price. In practical terms, that means more orders going through the system without the margin uplift to match - more work for less return.
As a result, operations leaders must avoid knee-jerk reactions to chase growth at any cost. The focus should be on running a tighter, faster, more controlled operation in a market that’s constantly changing. By doing so, growth will come naturally. It won’t happen by standing still or continuing the status quo hoping the business climate will revert.
There’s still demand out there, but it’s materialising differently.
In many product categories, margins have tightened despite volumes increasing. This has a clear operational impact. More orders to process, more deliveries to coordinate, and more pressure to move stock quicker, but without the margin buffer that used to absorb inefficiencies.
At the same time, the UK builders’ merchant market has experienced quarterly value growth inconsistencies in recent years. In 2025, both Q1 and Q2 were positive at +0.7% and +2.6% respectively, but the next two consecutive quarters faced a decline, with Q3 down by -0.3% and Q4 decreasing further to -1.2%. It’s competitive and fragmented, with nationals pushing for scale while regional distributors fight to stay close to their customers.
What this creates is a market where operational discipline matters more than ever. Small inefficiencies that were once manageable are now visible on the bottom line.
Costs have been unpredictable, from materials through to energy and labour. Passing on those increases isn’t always an option, especially when customers are more price-aware and willing to shop around.
That shifts the focus internally. Margin protection now comes from how well the operation runs.
These aren’t new questions, but they’re being asked more often and with greater urgency.
The day-to-day reality hasn’t fully settled since the pandemic instability.
Lead times can still change with little notice with some suppliers continuing to be incredibly reliable, others less so. Import processes also continue to add complexity, especially when timing matters.
For operations teams, this often turns into constant readjustment. Reallocating stock, chasing updates, managing customer expectations. So, ask yourself:
Without that visibility, it’s difficult to stay ahead. Most teams end up becoming reactive.
Across branches, warehouses, and transport, your staff are stretched.
Hiring remains challenging, but just as important is keeping the people you already have. Experienced staff carry a lot of knowledge, and when they leave, the impact is immediate.
That’s why many distributors are focusing on making the day-to-day easier.
If your team is spending time working around systems rather than with them, it’s a sign they’re under unnecessary strain.
Distribution has always been a balancing act, but the number of moving parts has increased.
You’re now coordinating across:
Each part generates data, and each depends on the others running smoothly.
The challenge comes when you’re trying to keep everything aligned. When systems don’t talk to each other or processes aren’t joined up, inefficiencies start to become more pronounced.
B2B customers expect more than they used to, and they’re comparing your service to experiences they have outside of your industry or work hours.
They want the basics to simply work (and they expect the order and delivery experience to match that which the experience they receive from consumer platforms like Amazon or major retailers):
And they want it without having to pick up the phone every time.
If that experience isn’t there, they don’t always complain. They just start placing orders elsewhere. It tends to happen gradually, which makes it harder to spot until it’s already affecting your revenue.
The challenge for most distributors is whether the operation can handle it efficiently enough to protect margin and service levels.
Over the next year, the gap will widen between distributors that can adapt quickly and those that can’t.
The ones that stay in control tend to focus on a few practical areas:
Most distributors already have an ERP system in place. But it’s integral to questions if it still fits how your business operates today.
What worked when the business was simpler can start to feel restrictive as new channels, locations, and demands are added.
This is where operations leaders often start to question the role of their current system. Not in terms of features on a list, but in how it performs day-to-day.
When the business needs to change direction, the system should move with it.
If changes are slow or difficult to implement, it limits how quickly the business can respond.
Decisions are only as good as the information behind them.
If teams are relying on spreadsheets or delayed reports, there’s always a gap between what’s happening and what’s being seen.
Very few distributors run on a single system. According to a recent report by Klipboard, 40% operate across multiple standalone systems and / or rely on manual processes and spreadsheets rather than a single ERP.
Ecommerce platforms, delivery tools, reporting systems, supplier integrations. If they don’t talk, or aren’t integrated under one system, information will inevitably get missed.
The more manual or disconnected the process, the greater the risk of errors and delays.
This is often the simplest test. Ask the people using it every day.
If the system creates extra steps, it adds cost and frustration in equal measure.
Growth brings pressure, and systems need to cope with it.
If the answer is uncertain, it’s worth addressing before those plans become reality.
The role of operations in distributive trades has moved on, even compared to a few years ago.
Getting product out of the door accurately and on time is still essential, but most distributors are now managing far more complex, multi-channel operations. The challenge is that many of those moving parts are supported by disconnected systems.
This creates fragmented information. Teams switch between systems, re-key data, and spend time piecing together what’s happening. It slows decisions, introduces errors, and makes it harder to stay in control as the business grows.
A more joined-up approach changes that.
This is where a more joined-up approach makes a difference. Platforms like ERP One bring operations together end-to-end, from order capture through to fulfilment, invoicing, and payment. And with payment solutions such as Klipboard Money built in, payments and cash flow sit alongside the rest of the operation, not in a separate process.
The impact is practical:
From the outside, these businesses may look like their competitors. Internally, they’re running with clearer visibility, less friction, and far tighter control.
And right now, that’s what separates those staying ahead from those constantly playing catch-up.
Read real examples of how these small UK&I distributors saved hours, gained better stock visibility and answer customers queries faster.
Thinking about moving to an ERP system but feeling nervous about the change? You’re not alone. Many small business owners hesitate, worried it will...
Discover how retail, trade and distribution SMEs can scale without adding complexity. Learn how modern ERP improves stock control, order workflows,...
Klipboard has customers in some 70 plus countries around the world.
Please select the Klipboard region you would like to visit.
