There was a time when the owner of a distributorship asked his sales manager, "Could you sell this new line of cutting tools? Should we take it on?" The sales manager gave thumbs up or down, and the decision was made.

Today, there are many more considerations. Price competition, demands for higher product quality and proven cost savings, and arguments about the amount of stock distributors are required to keep on hand mean that evaluating new product lines involves more than just products.

Distributors evaluate vendors in terms of all-inclusive supply chain functions, including their ability to help reduce the costs of all parties in the transactional process. After all, distributors are selecting a company and all of its functions, not just its products. It is virtually impossible to separate a vendor, especially one that manufactures and warranties its products, from the product lines themselves.

Vendor evaluation is increasingly important, since end users demand to pay less for more productivity. In the case of small distributors, the vendor's role in supporting the sale of products is magnified because small distributors often take on lines to compete with larger distributors. Industrial distribution's 2002 Small Distributor Survey notes that over half of small distributors who responded will broaden product offerings to become more competitive.

In our 56th Annual Survey of Distributor Operations, 44 percent of respondents of all sizes said they plan to broaden their product base in the next year and 29 percent plan to further specialize their product lines. Thirty-six percent are recommending brands more often than they did two years ago, while only 11 percent are recommending brands less often.

Clearly, products and their fit in distributors' business objectives remain top priorities.

Specialty distributors are more likely to be concerned that potential new products are complementary to their present offerings, says Joe Andronaco, president of Corrosion Fluid Products Co. headquartered in Farmington Hills, Mich. Andronaco has a specific list of requirements for taking on a line.

Products must synergize with his company's current offerings, specifically, chemical process equipment. It's also important whether or not the factory will allow him to service their equipment at the customer's plant or at his store locations.

"We prefer to offer the services for the vendor, even doing warranty repairs for manufacturers," Andronaco says. "We bill the manufacturer our normal labor rates. This way, we are in customers' plants and build our credibility with the customer."

The product line in question must reinforce the image of the company, particularly for specialists with far fewer lines than mainline distributors.

"Identity in the marketplace is critical. Distributors must have a vision of the product's perceived value and recognition," he says.

The company handles piping, pumps, valves and hose for the pharmaceutical, chemical, steel, power, paper, agriculture and automotive industries. Andronaco wants his company to be perceived as "a symbol of chemical fluid handling excellence, where we handle a few great product lines and are known for that offering."

Andronaco follows these steps in his evaluation. Vendors must:

• Synergize with existing products
• Be a recognized name, preferably ranked #1 or #2 in the industry
• Offer an exclusive product in a given geographic territory, due to distributors' specification work and heavy stock commitments
• Offer lucrative profitability.

Andronaco is likely to turn down a product line that is not complementary to his other products.

"We have turned down lucrative products that we felt did not synergize with our existing product offering. We focus on products that complement, not cause confusion," he says.

All of the criteria Andronaco has set up over the years reinforce Corrosion Fluid's commitment to customer service.

"We value response time and availability ... [because] customers want immediate solutions," he says. "With consolidations and cost cutting, the distributor is the first line of defense for both the customer and manufacturer, provided the distributor has the proper resources."

Much larger companies than Corrosion Fluid Products have similar approaches to selecting new product lines and vendors. While the volume of products and worldwide locations must be taken into account, quality and availability are the main concerns for Applied Industrial Technologies, a multi-line distributor with a power transmission specialty.

Jack Simpson, director of power transmission components at AIT, follows a formal program of evaluation that includes consideration of product management issues, financial issues for both the vendor and AIT, and marketability. Like Andronaco, he determines the overall viability of the product line by a number of criteria.

"In terms of importance, I'd say quality is definitely the top concern. We have to provide the best products for our customers. Next is availability. Then training, which is becoming more important," Simpson says. "Training for our salespeople is a big evaluation criteria for us. In order to convey the benefits of products, we really need manufacturers to put together high-quality training programs."

Pricing and terms, and the vendor's outside sales force, come next on the list of importance. However, Simpson notes that these are general conditions and can vary by region and customer. Sometimes, a line is brought in because AIT has purchased another distributor. In that case, the continuing relationship with vendors often is due to that vendor's prevalence in a regional market.

At the same time, buying a distributor can be a reason to drop a line, or have it removed by the vendor, Simpson says. An important aspect of evaluating product lines is explaining to the customer why changes are necessary and how the prospective items will fill their needs.

A supplier's inability to supply products could be grounds for replacing the line. A fire that knocked out two-thirds of a manufacturer's capacity forced AIT to find alternatives, Simpson says.

"An act of God can happen, and we worked for quite a long time with the vendor, but that company is still struggling with its capabilities," he says.

Another factor to be considered is the technological capability of the vendor. According to Simpson, many of his products have matured in the market. A vendor that can create new products through manufacturing technology, and has the communication technology to service customers in the fastest time, has an upper hand.

"We must be able to send out our customers' problems and get solutions back," he says. "We sell solutions so our challenge is to get our manufacturers to supply more technically advanced solutions."

At Bearings & Drives, Inc. in Macon, Ga., the process of product evaluation starts with the general manager, Howard Gainey. A mid-sized specialty distributor with 29 branches, Bearings & Drives sells to industries using power transmission and bearing products.

Management put committees in place to determine product needs for customers and then evaluate vendors and products to fill those needs. The process is formal and success depends most of all on the people involved, Gainey says. Committees created a comprehensive vendor questionnaire to help the supplier identify the distributor's needs from the beginning.

"We have a vendor evaluation team consisting of each regional manager, the distribution center manager, vice president of the service division and myself," Gainey says. "The process begins when I evaluate a vendor on an initial visit to determine if the line would be a good fit for our company's vision."

Gainey presents the material to regional managers at a meeting and if they like what they see, the vendor is invited to give a more formal presentation including question-and-answer sessions.

Today, Gainey says, distributors cannot be all things to all customers. So, in choosing product lines, the more information gained, and potential problems rooted out early, the better.

He adds that the quality of goods has increased markedly in the last 10 years, so the prominence of vendor relationships with customers and distributors has become more important with each passing year.

"Most product ratings have improved, while precision machining and high technology design have improved quality," Gainey says. "Having too many product lines can affect your buying power, so we discovered that reducing vendors and partnering with preferred vendors will give you closer relationships and better deals for gaining market share together."

Gainey, like Andronaco and Simpson, puts quality of products and availability at the top of his list. Next, price and terms are important, followed by training.

"Training plays a very large part in the decision process. It is expected to be a part of the services offered by the manufacturer," Gainey says. "All people tend to sell what they are comfortable with, which is why we have the training."

How can distributors start the formal process of evaluation? Gainey says it basically comes down to people.

First, put teams in place to list the needs of your company and what you're looking for in a vendor, he instructs.

"Then, determine the type of industry that brings in the highest revenue and what lines you need to go after that business," he says. "Then, go out and do just that."