Five Reasons to Source through Industrial Distribution

By William Moore, SKF USA, Inc. -- Industrial Distribution, 11/9/2006

Supply management professionals should keep in mind  proven  benefits of traditional industrial distribution supply sources. Here are five advantages of sourcing through distributors.
 
Thanks to new communications and information technologies including the Internet, your company has more ability than ever before to tap directly into remotely located sources of supply and replenishment. These channels have the potential in some cases to reduce the total costs of purchasing.

Even as new sources of supply emerge, however, your company’s supply management professionals should continue to value the merits of the traditional industrial distribution supply channel. Distributors offer a mix of products and capabilities that are unmatched by national Internet-only suppliers and direct-sell manufacturers.

As a channel management executive for a global manufacturer that sells through a network of authorized distributors, I have seen the benefits of industrial distribution firsthand. These benefits range from the basic proximity and accessibility to the complex the ability to mobilize resources and craft solutions to customer problems.

Many industrial distributors are competing effectively against Internet suppliers and direct-sell manufacturers by combining traditional concepts of customer service with the latest inventory management and supply strategies.

Among the major benefits of sourcing through distributors are the following:

1. Accessibility and personalized service. Industrial distributors are well positioned by proximity and business model to develop ongoing business relationships with the customers they serve.

Your company’s supply management team and other professionals are likely to receive frequent visits and personalized attention from the local distributor in your area or from the local branch of a large distributorship. Because of the close distributor-customer relationship, you can expect quick action in the event of rush orders or unexpected problems.

In contrast, direct-sell manufacturers, whose representatives must cover vast territories, are unable for economic reasons to offer such personalized service.

Also, your local distributor branch has a smaller roster of customers than large Internet suppliers and direct-sell manufacturers. Accordingly each customer accounts for a greater percentage of total distributor revenues further motivation for distributors to offer excellent service.

2. In-depth customer knowledge. Industrial distributors are more likely than Internet suppliers or direct-sell manufacturers to be familiar with your company’s business and the industrial sector in which it operates. Moreover, they often have technical experts on staff with specialized knowledge of major regional industries such as mining and oil production.

Consider the case of a Texas manufacturer of pumps for oil-industry applications. On a plant visit, three distributor officials happened to observe pallets loaded with standard ball bearings specified for the OEM’s new centrifugal pump. Based on their oil-industry experience, the officials immediately suspected that these bearings had been wrongly specified; the harsh application called instead for bearings with machined bronze cages.

After checking with colleagues and confirming their suspicions, the distributor’s executives notified the OEM’s engineering and purchasing departments. In response, the OEM switched over completely to the bronze-caged bearings, potentially averting numerous customer complaints and thousands of dollars in product warranty costs.  

3. Wide selection of products.  Industrial distributors offer a much wider selection of products and brands than any single Internet supplier or manufacturer. Their offerings typically include bearings, seals, lubricants, electric motors, condition monitoring devices, belts, safety equipment, and other parts and components. Distributors are also skilled at finding alternate sources of supply if the desired items are out of stock.

Having a single supply source for a variety of products streamlines your company’s supply chain and reduces the total number of vendors and transactions. There’s also a single point of accountability in the event of problems.

4. Ability to deliver the “right expertise at the right time.” 
Distributors are uniquely positioned to devise solutions and mobilize resources in a timely, cost-effective manner. They can leverage relationships with manufacturers in order to give customers access to advanced engineering services, including application engineering assistance, testing, failure analysis, and expert vibration and condition monitoring services.

Because distributors work closely with customers, they have insights into the repair cycle of equipment and can often anticipate future replenishment needs. They can then mobilize the resources necessary to satisfy these needs.

Take the case of an end-user that manufactures and repairs wind turbines. An industrial distributor familiar with the company’s business was able to estimate when many of the company’s wind turbines would be returning for reconditioning.

Before the projected date, the distributor consulted with an SKF wind turbine expert and developed a complete repair kit consisting of 10 bearings, as well as seals, lubricants and other essential components. The kits were inventoried by the distributor and shipped to the customer’s repair center before the turbines’ arrival. The turbines were then reconditioned and returned to service as quickly as possible, reducing the cost of downtime.     

5. Value-added logistical and shipping services.  Industrial distributors are more likely than Internet suppliers  to offer a host of value-added services, including inventory management, warehousing, just-in-time delivery and repackaging.

One important service is shipment consolidation. Industrial distributors often have stocking centers close to customer facilities in their territories. They can receive supplier shipments at these centers, consolidate a variety of items onto a single bar-coded pallet, and then ship the pallet to the customer on a prearranged schedule, reducing transaction-related costs.

Industrial distribution is a viable, cost-effective supply channel. Consult with your local distributor to discuss what advantages industrial distribution can bring to your company.

William Moore is senior vice president, Sales Development and Channel Management, SKF Service Division, based in Kulpsville, Pa. He can be contacted at William.C.Moore@skf.com. PH: 215-513-4851.