Distributors are taking a number of steps to deal with the continuing economic downturn. Some say they have further specialized their lines or they're adding lines to complement their existing ones, while others say they've found new markets they had previously overlooked.

These industrial distributors are faced with severe problems: pressure on margins, customers closing their facilities and supplier consolidation, according to INDUSTRIAL DISTRIBUTIONS 56th Annual Survey of Distributor Operations. The study is one of the largest in the industry, with input from nearly 600 owners and executives of industrial distributorships from across the country.

One interesting statistic from the survey shows that 21 percent of respondents are involved in functional compensation programs. These programs are policies through which manufacturers require specific activities, investments or performance levels in return for incremental discounts and rebates, explains Mark Dancer of Pembroke Consulting who wrote an overview of the study.

Distributors also note that 21 percent of their sales now come from the sale of services. When asked to identify services that are sold to a customer for a fee, distributors provided several examples. Fabrication leads the way at 43 percent. Other fee-based services include faster delivery (39 percent), setup/installation (35 percent), technical product support (33 percent), employee training (32 percent), storeroom/tool crib management (23 percent), and extended warranties (23 percent).

For too long, distributors have been giving away many of the services they provide. Think for a moment just how many "extra" services you provide for your customers. Some provide classes for maintenance personnel or help maintain machinery on the plant floor. One distributor recently told us he started charging for delivery. He said he's only received one complaint. In response, the distributor explained the new policy and the customer accepted that it was necessary to charge for shipping and handling.

Get paid for what you do. It can be an important addition to your bottom line.

jkeough@cahners.com Editor/Associate Publisher