Are Your Unhealthy Supplier Relationships Impacting Your Customers? Part II

By Bridget McCrea

Four ways to strengthen your distributor-relationship partnerships for the good of your customers.

Part I of this 2-part article series discussed Leaving Your Comfort Zone, New Insights to Strengthen the Critical Distributor-Manufacturer Partnership, a report that was recently published by the National Association of Wholesaler-Distributors (NAW). Working in tandem with Chicago Strategy Associates and the Kellogg Center for Global Marketing Practice of the Northwestern University’s Kellogg School of Management, NAW set out to develop a “fresh perspective on how manufacturer and distributor dynamics could be improved through broader adoption of forward-looking channel strategies, managerial policies, and best practices.”

From this exercise, NAW learned that in many instances, the supplier-distributor relationship isn’t as strong as it could be. And when those bonds are unsteady or unhealthy, the end customer is often the one that feels the biggest negative impacts.

“Designing, managing, and reaping the benefits of higher-performing distribution channel systems require street-level mobilization and activity, by both distributors and manufacturers alike,” NAW writes in the report. “We have observed that improved growth, profitability, brand equity, and market share follow when distribution partners develop and adhere to mutually beneficial action-driving policies—namely, those that drive coordinated action and improved results for all parties involved.”

Four Steps to Take Today
To help electrical distributors achieve those improved results, Rick Wilson, managing director at Chicago Strategy Associates, outlines four good strategies for establishing and cultivating strong distributor-supplier relationships:

1. Always do what’s best for the customer. This one should be self-explanatory, but many times distributors and suppliers get so caught up with their own priorities that they forget why they’re even working together in the first place. Wilson likes to remind people that business relationships are a lot like marriages, where the healthiest, most mindful couples can set their own issues aside and “do what’s best for the kids.” Well in this case, the kids are your customers. This shouldn’t be a difficult task, he says, because it’s clearly an area where both distributor and supplier overlap. As a starting point, Wilson tells distributors to pick one vendor and work hard to engage that partner and strategize with it—all in the best interest of the customer. Do some customer research, get a fresh perspective on things, and think outside of the box to find new ways to work together. “Go beyond lead times, bill rates, and pricing,” says Wilson. “It doesn’t take a 50-person strategy group at a $20 million distributor to get this done; it just takes some good strategizing and an alliance that’s focused on the customer.”
2. Figure out the industry’s biggest problems. One of the best ways to rise above commoditization—even in an industry that may be wallowing in it right now—is to solve your customers’ problems in a very effective and efficient manner. This virtually ensures that they’ll come back to you with even more pain points instead of jumping around from vendor to vendor. Your suppliers can play a key role in this exercise, says Wilson, who notes that some of the best distribution-centric innovations have come from field sales reps saying, “Hey, here’s a problem that I see end customers facing and no one else is solving right now.” And the best news is that it doesn’t take scale to figure out the industry’s biggest problems. In fact, “some of the scrappiest, most innovative and most interesting innovations in distribution come from smaller players that are closer to the market,” says Wilson, “and aren’t worried about preserving their legacies.” As with #1 above, he says the best first step is to partner with a specific vendor and work to reinvent that relationship around a specific customer problem (or, problems). Then, use that example as a template for other relationships. “Be as specific as possible and avoid being abstract and ‘big picture’ about it,” says Wilson, “otherwise you’ll get lost in the process and will never make any progress on the actual strategy.”
3. Adopt a “sharing” mindset. This is probably one of the biggest pills that distributors and manufacturers will have to swallow on the road to more harmonious alliances, and it’s one that’s going to take some time to digest and adhere to. The fact that more suppliers are “going direct” in the digital age makes sharing that much more challenging, but it’s something that has to happen, says Wilson. “We often hear distributors saying things like, ‘Well, we aren’t going to share our customer data with suppliers because then they’ll just go direct,'” he explains. “Or they’ll say, ‘If I do share my customer data with you, then you’re going to cut me out.'” Suppliers are equally as dubious on this point, says Wilson, with some being worried that a distributor will bring in another vendor who agrees to provide a spiff program. In the end, both sides decide not to share their data. Then the question becomes, how in the world can you utilize data analytics if you lack a complete picture of that data? “This is yet another example of how the collaboration between a distributor and supplier isn’t working in the best interest of the customer,” says Wilson. “And when you point that out to them, they all say, ‘Yeah, we should being doing that, but how do I know that they’re not going to share those insights with my competitor?'”
4. Strive for long-term gains over short-term wins. Today’s business world is filled with short-term promises that pay off quickly and then go away just as fast, but in the supplier-distributor realm it generally pays to strive for longer-term gains. “In most cases, the supplier-distributor relationship works because of a committed relationship that they have with one another,” says Wilson. That means when a shiny new vendor or distributor comes along and says, “Hey, I think I could get you a few orders in this market if you added me as a partner,” the committed partners don’t fall for it. Instead, they take a bigger-picture view of the situation and say to themselves, “As long as this relationship is working, and as long as we’re growing and profitable, why would we jeopardize our longer-term relationship?”

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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 bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.