Teaming up to create value
Manufacturers should provide technical and inventory support for integrated supply contracts
By James E. Humphrey -- Industrial Distribution, 10/1/1999
Integrated supply is a powerful and growing marketing channel. In fact, experts show the integrated supply market grew from $700 million in 1994 to over $6 billion in 1998. By the year 2000 it is expected to reach $11 billion.As more distributors are being asked by their customers to partner in integrated supply agreements, distributors and manufacturers are being challenged to adapt quickly to meet new demands. These demands range from the procurement, inventory and material usage functions to the physical distribution of products within the customer's plant and a number of other logistics services.
To date, most integrated supply agreements have focused on reducing transaction costs, and many purchasing managers have been pleased with the cost control results of their agreements, particularly in the first year. But good strategies go beyond cost control. They include increased technical and product support.
Recently, customers have put pressure on distributors to offer more technical support and engineering assistance. They are also looking for quality assurance. In fact, customers are measuring the value of their integrated supply agreements by their distributor's ability to offer these services.
These demands make it imperative for distributors and manufacturers to work together to develop strategies that proactively leverage the manufacturers' product knowledge and quality control programs. This enhances the distributor's ability to service the contract.
Manufacturers' field sales and technical support personnel are in the unique position to help distributors be solutions providers. Because they know the entire manufacturing process and quality controls that have been put in place, from selection of raw materials to inspection of the finished product, they understand how those controls enhance or affect the product. This behind-the-scenes knowledge gives field sales and technical support personnel invaluable product expertise. Distributors should tap into this knowledge to offer their customers specific engineering assistance. They can offer design and application expertise, help in making changes to engineering drawings, and alternative designs and solutions for specific problems that may require customization.
Manufacturers can also help distributors with the challenges they face with inventory control in today's world of just-in-time manufacturing. There is a delicate balance for distributors of having enough product to meet a customer's JIT requirements, and getting caught with too much inventory. Manufacturers help achieve and maintain the right balance by working together to assess the requirements of the distributor's integrated supply contracts and recommending cost-effective inventory plans.
The key to implementing integrated supply agreements that benefit customers, distributors, and manufacturers is good communication. Each party should devise a plan for supporting the contract. The plan should include information about who provides sales and technical support, what the manufacturer must do to meet customer expectations for packaging and electronic identification, delivery and expectations.
As the integrated supply market continues to grow, so do the challenges it presents to distributors. Manufacturers should play a key role in helping distributors secure and manage those contracts. By being involved and discussing the customer's requirements early in the process, manufacturers can help distributors strengthen the relationship with the customer.
James E. Humphrey is president of Diamond Chain Co.
There are no other articles related to this article.Talkback
Related Content
Related Content
Sponsored Links
View All Blogs
