Economic reports seem to indicate that the industrial sector has finally turned the corner. It's been three long years and many challenging moments to grow revenues and return to profitability. In the first quarter of 2004, earnings for the manufacturers have been impressive, to sum it up in a word.

However, as manufacturers report strong earnings, a question looms on the horizon. Will distributors fall back into the trap of believing manufacturers are a source of incremental profits? Or have distributors heard what many industry professionals and end users are saying: Demonstrate your value differential and provide end users with the lowest overall cost and they will buy from you at a fair price.

The big are getting bigger. Right-sizing, outsourcing and more consolidation, on both the distributor and manufacturer side, are not going to stop anytime soon. There are still too many manufacturers and distributors vying for a shrinking end-user market.

We must each work harder to demonstrate how we are bringing more value to the end users we desire. A good question we should always strive to answer is why, based on all the competitive alternatives, should our mutual customers buy our products and services?

The correct product mix, partners, and charging for services while focusing on how to reduce supply chain costs, are what should be the drivers of distributor profitability.

Relying on the manufacturer to bear more of the cost burden will only beg the question, why should manufacturers not sell direct? Manufacturers who are committed to selling through distribution don't want to sell direct, yet at times feel compelled to do so.

As less loyalty to a company's brand becomes reality, as fewer and fewer of our products are stocked and we bear more of the overall costs, the manufacturer has little choice but to consider their distribution channels and how to grow revenues.

Many of us probably agree that we are experiencing a fundamental shift in our economy—from manufacture-driven to service-driven. This wholesale change in the way customers want to do business with us has had a profound impact these last three years.

In the case of manufacturers, the recession has forced us to change our business structures to match a global economy. We have re-tooled our practices and are launching new initiatives.

Like all companies, we have had to do more with less. We've realigned our field sales structure and spent less on marketing. We've invested more in technology to make up for staff reductions while trying to increase communications with our channel partners.

These hard decisions have led to increased profitability with only small increments of new revenue streams. We hope the same can be said of our distributor partners.

As the old saying goes, "Working together, we can achieve more success than we can achieve on our own."