Good news and bad news for distributors
By Jack Keough -- Industrial Distribution, 8/1/1999
THERE'S GOOD NEWS AND BAD NEWS for industrial distributors in Purchasing magazine's latest study on MRO distributors. First the good news: about 90 percent of the purchasing executives who responded to the survey rated their MRO distributors' performance as good or excellent. In addition, distributors were given high marks for their technical expertise -- but buyers said there was stillplenty of room for improvement. And, the respondents said that they were buying more products from distributors than they were just five years ago. All are good signs.
But that's only half the story. At the same time, these buyers said that distributors do not have a solid understanding of cost issues and aren't looking for ways to reduce the total transactional costs of bringing product to market.
The purchasing respondents listed quality, availability, service, total cost, and price as the main reasons for using MRO distributors. Some distributors might argue that price is always the main consideration by purchasing departments. But is that the case or do distributors make that the top concern? Last year, a buyer told me that distributors often focus on price rather than cost. "After meeting a distributor for only a few minutes, he was trying to switch me to go with his company rather than my existing distributor," the buyer said. "His only rationale was that he could get the product 'cheaper.' I told him I wasn't interested." A word of advice: focus on the customer and what his needs are rather than on the competition.
Purchasing departments today are looking to distributors to reduce the total cost of acquiring product. They're outsourcing more functions and that means that distributors have the opportunity to become an integral part of the customer's buying team. Quality products, just-in-time deliveries, special orders, and technical knowledge are becoming standard for many distributors and are no longer considered "value-added" services. Instead, distributors today must focus on the total supply chain and reduce the total cost of getting the product to the end user.
If you were to review many of the changes in recent years such as vendor managed inventory, electronic data interchange, and quality control programs, you'd find that most of them have come from customer demand. Customers in the future are going to be even more demanding as they look to you to provide cost-cutting solutions to their MRO procurement problems. Make sure you have the right answers.
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