Phil Samuels of KEO Cutters on the importance of inventory
Distributors who keep their shelves well-stocked are most likely to gain sales
By Phil Samuels -- Industrial Distribution, 11/1/2007 6:00:00 AM
A couple of years ago I was approached by one of the leading distributors in the industry at the Industrial Supply Assn. convention. The principal of this distributorship asked me a question that still lingers in my mind today.
After putting in two full days at the booth, he queried, “Phil, can you as a manufacturer establish any common elements to be found in distributors that are growing your business? Is there anything similar about the ones who are successful or the ones who aren’t?”
This question haunts me to this day for a variety of reasons.
My first reaction was that I can’t believe I don’t hear that question at every convention from a variety of distributors. My second reaction was that I had an answer without ever having thought about the question myself. My third reaction was why haven’t I asked that question of my distributors?
That’s the thing about a good question. It makes you think.
During my career I have been on both sides of the distribution channel—as a manufacturer and a distributor. I endorse the channel and recognize that each party has a role to play in order to service our mutual customers—the end users. The primary role of the distributor is to service their local market in the way that best serves the needs of the end user.
A portion of that service is to determine what inventory is necessary to support customers. Typically, customers will reflect the aptitude and abilities of the management and sales staff in a distributorship. If the CEO is an abrasives expert, for example, his customers will tend to require abrasives. If the leadership of the sales staff is oriented towards cutting tools, customers tend to need cutting tools and application knowledge.
Having said that, I believe it is folly for a manufacturer to try and “force” inventory on a distributor. The distributor’s bread and butter is how they are able to manage the inventory for their customers and seldom will a distributor fail to stock key items if they are reordered regularly by end users.
This presents a problem when I answer the question posed at the beginning of this article. Stopping and thinking for a just a moment, I concluded that distributors who support our line with inventory are growing and the ones who need me to drop ship are not. I will tell you that as a “niche” line, we don’t expect that every distributor will hold a lot of inventory on our behalf. However, it is evident that the absence of inventory is self-defeating when it comes to sales growth.
I am not sure if growing distributors “push” the inventory on their shelves, or if the orders are a result of having the inventory.
What I do know is that if distributors have inventory, they tend to sell it and have to reorder. But when they just assume the demand is not there, it becomes a self-fulfilling prophecy.
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