To partner or not to partner
Check a manufacturer's distribution strategy for detailed answers to your security concerns
By Jim Poehling -- Industrial Distribution, 11/1/1998
Distributor and manufacturer partnerships in today's marketplace can be more tenuous than a modern marriage, with about the same chance for long-term survival. Setting up a new distributor or taking on a new product line is expensive and time consuming. Training, inventory, conversion of end users and getting to know new organizations, processes and procedures requires time and money.Several things must happen before the distributor or manufacturer can even begin to evaluate potential partners. The first thing a distributor must do is determine his own company strategy. For example, an MRO distributor will likely have a different strategy than a production-only distributor. There are several questions to consider, too.
Will there be technical specialists on the payroll representing the manufacturer's product or will they rely on the manufacturer for his service? Does the manufacturer provide this type of service and resource? Is selective distribution a basic requirement when representing a manufacturer, or is the product a true commodity? Should a distributor represent a manufacturer's product selectively or does he want as many brands of that particular product he can get? Is the product line highly application-oriented so there will be a lot of up-front work before the order, and if so, what is the level of reward for this work? Does the manufacturer use catalog distributors, and if so, is there an issue with the open line strategy of products the distributor would like to represent?
Once these factors are on the table, a distributor should make a checklist based on his individual strategy needs. Only then can he begin looking at manufacturers and identifying those who could be potential partners.
The distributor's resounding question is, "How can I gain some sense of security that the partnership entered into today will endure?" Of course, there are no guarantees. However, a little up-front research and understanding of the manufacturer's industrial distribution strategy will provide significant insight to the feasibility of a long-term relationship.
What is an "industrial distribution strategy?" First, I'll tell you what it's not. It's not the statement, "We intend to sell our product through industrial distributors." An industrial distribution strategy is a living document that spells out to the distributor how the manufacturer intends to operate over a long period of time. It does not cover day-to-day decisions, but by its nature, precludes surprises when those decisions are made. That's another similarity to a modern marriage partnership.
Key areas that should be covered in any strategy statement include:
* Does the manufacturer intend to have an open-line policy, select or exclusive, and what is the definition of each? How, when or will additional distribution be added in your area? And if so, what are the criteria for these additions?
* How do the manufacturers expect you to represent their line? Do they expect to be the exclusive line for this type of product, be the lead line, or an equal player with a number of competitive others?
* What type of support can you expect -- will field technical support be provided? What about training, toll-free technical service, brand advertising, new product introductions, etc? Will these be available to all distributors or is there a qualifier?
* How committed is the manufacturer to industrial distribution? Will business ever be taken direct in the future, and if so, under what conditions?
There are so many individual tactical issues to be considered. However, don't make the mistake of confusing these with strategic direction. We may argue over squeezing the toothpaste from the end or middle of the tube, but as in a modern marriage, we'll still be together in the morning. The result may not be the same if after the nuptials you find out your spouse doesn't consider monogamy as essential to the partnership.
As the old saying goes, "Talk is cheap." If a manufacturer says he has an industrial distribution strategy but it's not in writing, then he doesn't have one. Ask for a copy of a published strategy to ensure what's being discussed is in fact policy.
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