Breaking from the pack
Collaborating with distributors on technical training, delivery codes yields results
By R.D. Dick Locsmondy -- Industrial Distribution, 5/1/1998
Manufacturers of industrial components and systems struggle every day to maintain their competitiveness. They try to become more efficient by employing new production methods and by downsizing and/or re-engineering the organization. After tweaking every aspect of their manufacturing process, they turn to the distribution network to recover margin, improve timing and alter the logistics process.Some traditionally employed methods to accomplish this are multiple distribution, direct sales and forcing higher inventory stocking levels. The first reaction is: "How can I take it out of the distributor channel and put it into my pocket?" On the contrary, if the distributor was a large OEM instead, the manufacturer would suggest a team-like approach through value analysis, synchronized engineering and/or provided value.
What is wrong with this scenario? The manufacturer is not treating the distributor as a customer, nor does the manufacturer understand the distributor's needs.
During the recent restructuring of our company, my colleagues and I examined this issue and took a new consultative approach -- developing a distribution network based on channel distributors of choice. The time came for us to break away from the pack and redefine our interaction with these channel distributors, and ultimately with our customers. Our new strategy included a major consolidation and reduction to regional distributors, and to single-channel national warehouse distributors. We discovered that each channel had unique needs for innovative products, services, promotion and training to enable the distributor to compete and succeed in their markets. Our primary objective was to develop flexible processes within our company that could effectively create channel-specific opportunities.
As a manufacturer, let's look at four programs and how these key initiatives can rebuild your distributor relationship, performance and confidence:
* Encourage the distributor to seek customer applications that require engineering and design. Operating close to the marketplace injects a new life into the entire product development process.
* Concentrate on training the distributor sales force instead of making that routine monthly sales call to existing distributor customers. Ask yourself some questions if training is missing from your company's strategy. The more skills and training the distributor salesperson has, the better he or she will perform. Fewer mistakes will occur and productivity will increase.
* Develop delivery (sometimes termed "frequency'') codes for all of your saleable items. Why should both the distributor and manufacturer maintain high inventory levels on fast-moving parts? Instead, distributors should invest in items that are unique to their market segments. This strategy will increase the efficiency of the distributor and manufacturer, resulting in a shorter lead time and a timely delivery to the end user.
* Collaborate with the distributor on new ideas, solutions and applications. Based upon mutual trust, the manufacturer then may facilitate an openness to draw upon the knowledge base of an entire distribution network, thus devising solutions and custom applications for each individual member.
In addition, recognize the inherent power in today's information technology. Sophisticated, easily accessible databases allow distributors to track not only basic information, but also preferences and requirements, thereby laying down the foundation for competitiveness.
The question is, "How can we use this new technology to allow us to do things we are not already doing?" If the information can enhance or streamline or improve the distributor's ability to do business, then give the distributor complete and unconditional access. Why hold back information? Are we afraid our competition might find out something they already know?
This type of distribution network should be viewed as a natural evolution in the struggle to maintain competitiveness. Give your distributor customers more than they expect, and they will respond in kind!
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