By Bridget McCrea
With supply chain collaboration becoming a hot topic for even the most independent, self-sufficient organizations, it’s no wonder that more attention is being paid to the relationships between distributors and their suppliers. Much like the “perfect” marriage comprises two individuals who balance each other out, offset each other’s strengths and weaknesses, and even finish each other’s sentences – the right distributor-supplier combination is a true win-win alliance for both parties. Ignore the need for such cohesion and it won’t be long before you find yourself in divorce court (or in a business case that involves distributors and suppliers, looking for another, more compatible business partner).
In most cases, solid distributor-supplier relationships result in favorable pricing, generous terms, better product availability, and even buybacks. To take full advantage of these benefits, both sides of the equation work to nurture relationships with one another. After all, electrical distributors need quality products to sell and manufacturers need experts to get their creations out to a broad swath of customers. But rather than place orders with “just any supplier,” distributors should take the time to invest in forming and nurturing closer supplier relationships.
“Supplier relationships are typically undervalued as buy-side companies fail to see how a balanced relationship with their suppliers can benefit the buying company – it’s a give-and-take type of alliance,” writes Ivalua’s Paul Noël in Using Technology To Boost Supplier Relationships. He points to e-sourcing tools (which make it easy to compare suppliers), real-time communication channels, and payment processing platforms as three of the tech-based facilitators that distributors and suppliers can use to shore up their relationships.
Ultimately, Noël says companies have to “establish favorable relationships with their suppliers in order to ensure quality services and efficient processes. And suppliers who trust and respect their buyers are more willing to make the buyer a priority.”
Going from Short-Term to Long-Term
For the most part, forming short-term relationships isn’t difficult. But how does a distributor turn those alliances into long-term, mutually-beneficial arrangements? That’s the $25,000 question that’s become harder to answer in today’s constantly-changing business environment. “To maintain a true partnership, suppliers and distributors share information and agree upon marketing, sales and growth goals,” writes Maria Martyak in B2B Partnerships Improve Supply Chains.
“Despite the obvious benefits of sharing this type of information, many businesses are still hesitant to do so as they fear that the potential partner will attempt to take customers from them,” Martyak continues. “Rather, this relationship-style view could enhance their business and drive customer loyalty. Businesses that understand their partners well are better equipped to collaborate with them, help them thrive, and engage in a mutually-satisfying partnership.”
At Dakota Supply Group (DSG) in Fargo, N.D., John Gearman, electrical/automation segment manager, says the company values all of its supplier relationships. It does two official evaluations per year with its manufacturers’ representatives and also tries to meet with its local representatives at least a few times a year. During those meetings and evaluations, the distributor looks at what’s changed since the last meeting, how the year is progressing, what the distributor can do to assist, and so forth. Then, at the end of the year, DSG reviews the prior 12 months to “try to set the tone for the upcoming year,” says Gearman.
With 30 years of experience in the electrical industry under his belt, Gearman says the environment is a lot different than it was when he was starting out. He says industry consolidation has had a particularly significant impact on the way distributors and suppliers align with one another. “There have been a lot of rep changes in our area this past year alone,” says Gearman. “Concurrently, we’re growing as a company. Maintaining and nurturing those relationships gets even more difficult as you add geographic locations.”
To manage those challenges effectively, Gearman says the team at DSG focuses on good communication of expectations and goals of the relationships. “It’s basically about meeting on common ground,” says Gearman, “to figure out what we can reasonably accomplish together.”
It Won’t Happen Overnight
From Doug Borchers’ perspective, manufacturers are stretched much thinner than they ever have been in the past. “When I first got into distribution 18 years ago, I was face-to-face with regional managers and national sales managers,” says Borchers, vice president at Dickman Supply in Sidney, Oh. “That hasn’t happened in the last 6-7 years because suppliers really are stretched thin. When companies went through the recession, they just didn’t staff back up.”
According to Borchers, this “new” environment makes forming long-term partnerships with suppliers that much more difficult. “We’re not playing golf and eating lunch with these guys anymore; in fact, other than at a conference, I can’t tell you the last time I went to dinner with one of my manufacturers,” says Borchers. “People in our industry just don’t do those kinds of things anymore.” And while eradicating dinners may sounds like a frugal move, the reality is that these personal interactions go a long way in solidifying distributor-supplier marriages.
“Everyone just moves on so quickly that developing the trust and respect necessary for strong relationships is just very difficult,” says Borchers, who has had to work through a number of “rocky” relationship issues in the last few years. To get through these rough patches, he stresses that the problems are not personal in nature and that sometimes you just have to agree to disagree and move on.
“If you carry grudges through the rocky parts of the relationships, you start burning bridges and before you know it, you’ve burned them all,” says Borchers. “A better approach is to separate the business and personal aspects of the alliance and focus on what’s most important: building mutually-beneficial businesses that truly complement and support one another. When you can boil it down to that, everyone comes out a winner.”
McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at firstname.lastname@example.org or visit her website at www.expertghostwriter.net.
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